Why We Rarely Run Out of Anything: Boomsters vs. Doomsters

Economists and environmentalists often end up with a slightly different angle on global warming. Which group does a better job of predicting environmental problems?

It’s not a zero-sum question: economists and environmentalists often engage in debates that leave both groups smarter. Here I look at some of the leading environmentalists and economists to see how the arguments between them have played out. In a ten round bout, round one has gone to the economists, mainly because of environmentalist beliefs that are easily testable and disproven. During the past decade however, our best environmentalists have become much more economically savvy (and I include Dan Kammen in this group, despite my quibble with him below).

This post looks at two economists (Simon and Lomborg) and two environmentalists (Ehrlich and Kammen). The first of each pair was prominent in the last decades of the 20th century, the other pair are active today. I make heavy use of work done by New York Times Science writer John Tierney. Tierney is bit of a contrarian who once described his two working principles as:

“1. Just because an idea appeals to a lot of people doesn’t mean it’s wrong. 2. But that’s a good working theory.”

His article on the (lousy) economics of recycling for example, set a record for New York Times hate mail.

Now for the Boomsters vs the Doomsters.

Dan Kammen

In April of 2006, oil crossed $70/barrel for the first time. I happened to attend a talk by Dan Kammen, a first-rate environmentalist at UC Berkeley. Noting that oil prices had just hit a new high, Kammen asked the crowd of well-fed East Bay liberals how many of us thought that prices would go down again. Only two hands went up, mine and that of a friend sitting next to me who is a banker. I raised my paw with a bit of an attitude, since a bet that a natural resource that is owned by somebody will never become truly scarce is easy money, in my experience.

Kammen looked at me and smugly announced to the crowd of a hundred or so: “you must work for the Bush administration”. I hadn’t the heart to tell him that I was the only person in the room who had been appointed to high office by his hero, Bill Clinton (although my banker pal had worked in the Reagan administration, so Kammen’s guess wasn’t completely wrong — but his economics was).

Kammen gave an excellent talk on, among other things, how the steps California has taken to conserve energy use have made us a pretty good example for the rest of the US.

Within nine months however, oil was back down to $50/barrel. (Oil prices today are back to where they were then. The price will go down again. And up. And down. Left alone for a decade, it will drift down in real terms, but to promote the market for oil alternatives and to price the externalities (pollution), I’d tax carbon heavily. Then again, I can bike to work).

The exchange with Kammen brought to mind John Tierney’s column that ran in the Science section of the New York Times a decade ago. Tierney asked whether environmentalists or economists have a better record of predicting environmental disasters. It was not a serious contest: at that point, economists had won hands down. He introduced the public to the work of Danish economist Eric (Bjorn) Lomborg, whose work I have profiled several times on this blog. Years earlier, he had written  about the time a famous economist and a famous environmentalist put their money where their mouth was and bet on whether the world actually runs out of stuff.

Bjorn Lomborg

Lomborg does not trivialize the problem of global warming, nor does he ignore the cost – especially the opportunity cost – of various proposed solutions. He starts by trying to dimension the challenge of global warming accurately.

“Since record-keeping began in the 19th century, the sea level in New York has been rising about a foot per century, which happens to be about the same increase estimated to occur over the next century by the Intergovernmental Panel on Climate Change. The temperature has also risen as New York has been covered with asphalt and concrete, creating an “urban heat island” that’s estimated to have raised nighttime temperatures by 7 degrees Fahrenheit. The warming that has already occurred locally is on the same scale as what’s expected globally in the next century.

The effect of the rising temperatures is more complicated to gauge. Hotter summer weather can indeed be fatal, as Al Gore likes us to remind audiences by citing the 35,000 deaths attributed to the 2003 heat wave in Europe. But there are a couple of confounding factors explained in Lomborg’s new book, “Cool It: The Skeptical Environmentalist’s Guide to Global Warming.”

The first is that winter can be deadlier than summer. About seven times more deaths in Europe are attributed annually to cold weather (which aggravates circulatory and respiratory illness) than to hot weather, Dr. Lomborg notes, pointing to studies showing that a warmer planet would mean fewer temperature-related deaths in Europe and worldwide.

The second factor is that the weather matters a lot less than how people respond to it. Just because there are hotter summers in New York doesn’t mean that more people die — in fact, just the reverse has occurred. Researchers led by Robert Davis, a climatologist at the University of Virginia, concluded that the number of heat-related deaths in New York in the 1990s was only a third as high as in the 1960s. The main reason is simple: air-conditioning.

Lomborg acknowledges that global warming is real and a serious challenge. He observes however, that rich countries are the only ones with a chance at developing comprehensive solutions to global warming, so anything that keeps countries from getting rich effectively worsens our environmental problems. Lomborg …agrees that global warming is real and will do more harm than good. He advocates a carbon tax and a treaty forcing nations to budget hefty increases for research into low-carbon energy technologies.

But the best strategy, he says, is to make the rest of the world as rich as New York, so that people elsewhere can afford to do things like shore up their coastlines and buy air conditioners. He calls Kyoto-style treaties to cut greenhouse-gas emissions a mistake because they cost too much and do too little too late. Even if the United States were to join in the Kyoto treaty, he notes, the cuts in emissions would merely postpone the projected rise in sea level by four years: from 2100 to 2104.

“We could spend all that money to cut emissions and end up with more land flooded next century because people would be poorer,” Dr. Lomborg said as we surveyed Manhattan’s expanded shoreline. “Wealth is a more important factor than sea-level rise in protecting you from the sea. You can draw maps showing 100 million people flooded out of their homes from global warming, but look at what’s happened here in New York. It’s the same story in Denmark and Holland — we’ve been gaining land as the sea rises.”

This approach does not win him many friends among environmentalists. His best-known book “The Skeptical Environmentalist”, like “Cool It” warned against “feel good” strategies (including Kyoto emissions cuts) that accomplish little other than letting politicians make promises they don’t have to keep. As the head of the Copenhagen Consensus, a group of top-notch economists from around the world, he published the little-read “How to Spend $50 billion to Make the World a Better Place”. It turns out that none of the money would be well-spent on global warming: humans can accomplish much more for each dollar spent addressing things that are killing people now, such as malaria, AIDS, and polluted water. He is very focused on cost-effective solutions and notes, for example, that planting more greenery and painting roofs and streets white could more than offset the impact of global warming in many cities.

The debate between smart, intelligent environmental researchers like Dan Kammen and environmental economists like Bjorn Lomborg is productive, since the less intuitive argument wins consistently. Tierney explained why. His explanation is good, so I quote him at length:

In 1980 an ecologist and an economist chose a refreshingly unacademic way to resolve their differences. They bet $1,000. Specifically, the bet was over the future price of five metals, but at stake was much more — a view of the planet’s ultimate limits, a vision of humanity’s destiny… They promised to abide by the results exactly 10 years later — in October 1990 — and to pay up out of their own pockets.

Paul Ehrlich

The bettors, who have never met in all the years they have been excoriating each other, are both 58-year-old professors who grew up in the Newark suburbs. The ecologist, Paul R. Ehrlich, has been one of the world’s better-known scientists since publishing “The Population Bomb” in 1968. More than three million copies were sold, and he became perhaps the only author ever interviewed for an hour on “The Tonight Show.”

When he is not teaching at Stanford University or studying butterflies in the Rockies, Ehrlich can generally be found on a plane on his way to give a lecture, collect an award or appear in an occasional spot on the “Today” show. This summer he won a five-year MacArthur Foundation grant for $345,000, and in September he went to Stockholm to share half of the $240,000 Crafoord Prize, the ecologist’s version of the Nobel. His many personal successes haven’t changed his position in the debate over humanity’s fate. He is the pessimist.

The economist, Julian L. Simon of the University of Maryland, often speaks of himself as an outcast, which isn’t quite true. His books carry jacket blurbs from Nobel laureate economists, and his views have helped shape policy in Washington for the past decade. But Simon has certainly never enjoyed Ehrlich’s academic success or popular appeal.

On the first Earth Day in 1970, while Ehrlich was in the national news helping to launch the environmental movement, Simon sat in a college auditorium listening as a zoologist, to great applause, denounced him as a reactionary whose work “lacks scholarship or substance.” Simon took revenge, first by throwing a drink in his critic’s face at a faculty party and then by becoming the scourge of the environmental movement. When he unveiled his happy vision of beneficent technology and human progress in Science magazine in 1980, it attracted one of the largest batches of angry letters in the journal’s history.

…Simon believes that today’s world is merely the best so far.population growth constitutes not a crisis but, in the long run, a boon that will ultimately mean a cleaner environment, a healthier humanity and more abundant supplies of food and raw materials for everyone Tomorrow’s will be better still, because it will have more people producing more bright ideas. He argues that . And this progress can go on indefinitely because — “incredible as it may seem at first,” he wrote in his 1980 article — the planet’s resources are actually not finite. Simon also found room in the article to criticize, among others, Ehrlich, Barry Commoner, Newsweek, the National Wildlife Federation and the secretary general of the United Nations. It was titled “Resources, Population, Environment: An Oversupply of False Bad News.”

An irate Ehrlich wondered how the article had passed peer review at America’s leading scientific journal. “Could the editors have found someone to review Simon’s manuscript who had to take off his shoes to count to 20?” Ehrlich asked in a rebuttal written with his wife, Anne, also an ecologist at Stanford. They provided the simple arithmetic: the planet’s resources had to be divided among a population that was then growing at the unprecedented rate of 75 million people a year. The Ehrlichs called Simon the leader of a “space-age cargo cult” of economists convinced that new resources would miraculously fall from the heavens.

For years the Ehrlichs had been trying to explain the ecological concept of “carrying capacity” to these economists. They had been warning that population growth was outstripping the earth’s supplies of food, fresh water and minerals. But they couldn’t get the economists to listen. “To explain to one of them the inevitability of no growth in the material sector, or . . . that commodities must become expensive,” the Ehrlichs wrote, “would be like attempting to explain odd-day-even-day gas distribution to a cranberry.”

Ehrlich decided to put his money where his mouth was by responding to an open challenge issued by Simon to all Malthusians. Simon offered to let anyone pick any natural resource — grain, oil, coal, timber, metals — and any future date. If the resource really were to become scarcer as the world’s population grew, then its price should rise. Simon wanted to bet that the price would instead decline by the appointed date. Ehrlich derisively announced that he would “accept Simon’s astonishing offer before other greedy people jump in.” He then formed a consortium with John Harte and John P. Holdren, colleagues at the University of California at Berkeley specializing in energy and resource questions.

In October 1980 the Ehrlich group bet $1,000 on five metals — chrome, copper, nickel, tin and tungsten — in quantities that each cost $200 in the current market. A futures contract was drawn up obligating Simon to sell Ehrlich, Harte and Holdren these same quantities of the metals 10 years later, but at 1980 prices. If the 1990 combined prices turned out to be higher than $1,000, Simon would pay them the difference in cash. If prices fell, they would pay him. The contract was signed, and Ehrlich and Simon went on attacking each other throughout the 1980’s. During that decade the world’s population grew by more than 800 million, the greatest increase in history, and the store of metals buried in the earth’s crust did not get any larger.

Population Outgrows Food, Scientists Warn the World — Front-page headline in The New York Times, Sept. 15, 1948, over an article about the “dark outlook for the human race” due to “overpopulation and the dwindling of natural resources.”

No Room in the Lifeboats — Headline in The New York Times Magazine, April 16, 1978, over an article warning that “the cost of natural resources is going up” as increasing population ushers in the “Age of Scarcity.”

The earth has limited resources, and if we don’t recycle them we use them up. — Meredith Baxter-Birney, who played the mother on the “Family Ties” television show, in a recent Greenpeace public-service message showing the family sorting garbage in the living room.

IT IS SUCH AN OBVIOUS proposition in a finite world: things run out…The idea shapes our personal actions when we bundle newspapers to avoid running out of wood for paper and land for garbage dumps. It affects our national policies when we send soldiers into the Persian Gulf to prevent Saddam Hussein from getting a “stranglehold” on the dwindling supplies of oil. It is the fear Paul Ehrlich raised in 1974: “What will we do when the pumps run dry?”

Julian Simon

The counterargument is not nearly as intuitively convincing. It has generally consisted of a simple question: Why haven’t things run out yet? The ones asking this question now tend to be economists, which is a switch, since their predecessors were the ones who initiated the modern preoccupation with resource scarcity. Economics was first called “the dismal science” in the last century because of Malthus’s predictions of mass starvation….

In the mid-60’s, Ehrlich started giving public lectures about the population problem. One caught the attention of David Brower, then executive director of the Sierra Club, who led him to Ballantine Books. Rushing to publish his message in time for the 1968 Presidential election, Ehrlich produced what may be the all-time ecological best seller, “The Population Bomb.”..

“The Population Bomb” began: “The battle to feed all of humanity is over. In the 1970’s the world will undergo famines — hundreds of millions of people are going to starve to death.” Ehrlich wrote that “nothing can prevent a substantial increase in the world death rate” and that America’s “vast agricultural surpluses are gone.”

Six years later, in a book he wrote with his wife, “The End of Affluence,” he raised the death toll. The book told of a “nutritional disaster that seems likely to overtake humanity in the 1970’s (or, at the latest, the 1980’s). Due to a combination of ignorance, greed and callousness, a situation has been created that could lead to a billion or more people starving to death.” The book predicted that “before 1985 mankind will enter a genuine age of scarcity” in which “the accessible supplies of many key minerals will be nearing depletion.”

Shortages would be felt in America as well as the rest of the world. “One general prediction can be made with confidence: the cost of feeding yourself and your family will continue to increase. There may be minor fluctuations in food prices, but the overall trend will be up.”

Ehrlich was right about one thing: the world’s population did grow. It is now 5.3 billion, 1.8 billion larger than when he published “The Population Bomb.” Yet somehow the average person is healthier, wealthier and better fed than in 1968. The predicted rise in the world death rate has yet to materialize — infant mortality has declined and life expectancy has increased, most dramatically in the third world. There have been famines in countries afflicted by war, drought and disastrous agricultural policies, but the number of people affected by famines has been declining steadily during the past three decades. In fact, the number is much lower than it was during the same decades of the last century, even though the world’s population is much larger.

Experts argue about how much hunger remains in the world, but they generally agree that the average person in the third world is better nourished today than in 1968. Food production has increased faster than population since the publication of “The Population Bomb”.

Julian Simon remembers his first glimpse of Paul Ehrlich as being one of the more frustrating moments of his life. It was during the Earth Day furor two decades ago. Simon was sitting at home in Urbana, Ill., Ehrlich was on “The Tonight Show” and Johnny Carson was enthralled. “Carson, the most unimpressable of people, had this look of stupefied admiration,” Simon recalls. “He’d throw out a question about population growth and Ehrlich would start out by saying, ‘Well, it’s really very simple, Johnny.’ Now the one thing I knew in those days about population was that nothing about it is simple.

But what could I do? Go talk to five people? Here was a guy reaching a vast audience, leading this juggernaut of environmentalist hysteria, and I felt utterly helpless.” (Simon) had started out as a Malthusian. After studying psychology at Harvard University and receiving a doctorate in business economics from the University of Chicago, he joined the faculty at the University of Illinois in 1963. He was an expert in mail-order marketing — his book on the topic sold 200,000 copies, more than any he has written since — and was looking for something else to do when he heard the grim predictions about overpopulation. In the late 1960’s he began publishing papers on using marketing tools and economic incentives to persuade women to have fewer babies.

But then he came across work by economists showing that countries with rapid population growth were not suffering more than other countries. In fact, many were doing better. He also came across a book, “Scarcity and Growth,” published in 1963 with the help of Resources for the Future, a conservation group dominated by economists. The book was a revelation to him… The authors, Harold J. Barnett and Chandler Morse, tracked the price of natural resources back to 1870 and found that the price of virtually everything had fallen. The average worker today could buy more coal with an hour’s pay than he could… in the last century, just as he could buy more metals and more food. Things were actually getting less scarce as population grew.

The evidence inspired the boomster view of history, which was then refined by Simon and others, like Charles Maurice and Charles W. Smithson. These economists, then at Texas A & M University, looked back at 10,000 years of resource crises and saw a pattern: things did sometimes become scarce, but people responded with innovations. They found new supplies or practiced conservation. They managed to recycle without the benefit of government policies or moral exhortations from Greenpeace.

Stone Age tribes in areas short of flint learned to resharpen their tools instead of discarding them as tribes did in flint-rich areas. Often the temporary scarcity led to a much better substitute. The Greeks’ great transition from the Bronze Age to the Iron Age 3,000 years ago, according to Maurice and Smithson, was inspired by a disruption of trade due to wars in the eastern Mediterranean. The disruption produced a shortage of the tin needed to make bronze, and the Greeks responded to the bronze crisis by starting to use iron. Similarly, timber shortages in 16th-century Britain ushered in the age of coal; the scarcity of whale oil around 1850 led to the first oil well in 1859. Temporary shortages do occur, but Cornucopians argue that as long as government doesn’t interfere — by mandating conservation or setting the sort of price controls that produced America’s gas lines of the 1970’s — people will find alternatives that turn out to be better.

“Natural resources are not finite. Yes, you read correctly,” Simon wrote in his 1981 manifesto, “The Ultimate Resource.” The title referred to human ingenuity, which Simon believed could go on indefinitely expanding the planet’s carrying capacity. This idea marked the crucial difference between Simon and Ehrlich, and between economists and ecologists: the view of the world not as an closed ecosystem but as an flexible marketplace. The concept of carrying capacity might make sense in discussing Ehrlich’s butterflies or Vogt’s “Gadarene swine,” but Simon rejected animal analogies. He liked to quote the 19th-century economist Henry George: “Both the jayhawk and the man eat chickens, but the more jayhawks, the fewer chickens, while the more men, the more chickens.”

Of course, men can also produce more pollution than jayhawks, and Simon conceded that the marketplace did need some regulation. But he insisted that environmental crises were being exaggerated. He and another leading boomster, Herman Kahn, edited a book in 1984, “The Resourceful Earth,” rebutting the gloomy forecasts of the Government’s “Global 2000 Report” prepared under President Carter. Their book was replete with graphs showing that, by most measures, America’s air and water had been getting cleaner for decades, thanks partly to greater affluence (richer societies can afford to pay for pollution controls like sewage treatment) and partly to the progress of technology (the pollution from cars today in New York City is nothing compared to the soot from coal-burning furnaces and the solid waste from horses at the turn of the century).

Simon asserted that innovations would take care of new forms of pollution, and he set about disputing the various alarming estimates of tropical deforestation, species extinction, eroding topsoil, paved-over farmland and declining fisheries. “As soon as one predicted disaster doesn’t occur, the doomsayers skip to another,” Simon complains. “There’s nothing wrong with worrying about new problems — we need problems so we can come up with solutions that leave us better off than if they’d never come up in the first place. But why don’t the doomsayers see that, in the aggregate, things are getting better? Why do they always think we’re at a turning point — or at the end of the road? They deny our creative powers for solutions. It’s only because we used those powers so well in the past that we can afford to worry about things like losing species and wetlands. Until we got so rich and healthy and productive at agriculture, a wetland was a swamp with malarial mosquitoes that you had to drain so you could have cropland to feed your family.”

Simon’s fiercest battle has been against Paul Ehrlich’s idea that the world has too many people. The two have never debated directly — Ehrlich has always refused, saying that Simon is a “fringe character” — but they have lambasted each other in scholarly journal articles with titles like “An Economist in Wonderland” and “Paul Ehrlich Saying It Is So Doesn’t Make It So.” Simon acknowledges that rising population causes short-term problems, because it means more children to feed and raise. But he maintains that there are long-term benefits when those children become productive, resourceful adults. He has supported making abortion and family-planning services available to women to give them more freedom, but he has vehemently opposed programs that tell people how many children to have. He attacked Ehrlich for suggesting that governments should consider using coercion to limit family size and for endorsing the startling idea that the United States should consider cutting off food aid to countries that refuse to control population growth.

Reading this debate today, when advanced nations are alarmed at the acute problem of population depletion, should settle a lot of debates. Under all foreseeable demographic scenarios (and population demographics is not always easy to foresee) the planet’s population will top out at about 10 billion and start to decline. Ehrlich(whose audience consists disproportionately of people in prosperous countries who have a quasi-religious emotional need to believe that things are getting worse) should have written a book called The Population Implosion. Concludes Tierney in 1990:

Among academics, Simon seems to be gaining in the debate. Many scientists are still uncomfortable with his sweeping optimism about the future — there is no guarantee, after all, that past trends will continue — and most population experts are not sure that the current rate of population growth in the third world is going to bring the long-term benefits predicted by Simon. But the consensus has been shifting against Ehrlich’s idea of population growth as the great evil. Simon’s work helped prompt the National Academy of Sciences to prepare a 1986 report, which noted that there was no clear evidence that population growth makes countries poorer. It concluded that slower population growth would probably benefit third world countries, but argued that other factors, like a country’s economic structure and political institutions, were much more important to social well-being. The report opposed the notion of using government coercion to control family size. It noted that most experts expected the world food situation to continue improving, and it concluded that, for the foreseeable future, “the scarcity of exhaustible resources is at most a minor constraint on economic growth.”

But Simon is still far behind when it comes to winning over the general public. This past Earth Day he did not fare much better than he did in 1970. Ehrlich was still the one all over national television. In the weeks leading up to Earth Day in April, Ehrlich did spots for the “Today” show and appeared on other programs promoting his new book, “The Population Explosion,” which declares that “the population bomb has detonated.” At the big Earth Day rally in Washington, Ehrlich was one of the many Malthusians warning that this was humanity’s last chance to save the planet. The crowd of more than 200,000 applauded heartily after Ehrlich told them that population growth could produce a world in which their grandchildren would endure food riots in the streets of America.

The bet was settled this fall without ceremony. Ehrlich did not even bother to write a letter. He simply mailed Simon a sheet of calculations about metal prices — along with a check for $576.07. Simon wrote back a thank-you note, adding that he would be willing to raise the wager to as much as $20,000, pinned to any other resources and to any other year in the future. Each of the five metals chosen by Ehrlich’s group, when adjusted for inflation since 1980, had declined in price. The drop was so sharp, in fact, that Simon would have come out slightly ahead overall even without the inflation adjustment called for in the bet.

Prices fell for the same …reasons they had fallen in previous decades — entrepreneurship and continuing technological improvements. Prospectors found new lodes, such as the nickel mines around the world that ended a Canadian company’s near monopoly of the market. Thanks to computers, new machines and new chemical processes, there were more efficient ways to extract and refine the ores for chrome and the other metals. For many uses, the metals were replaced by cheaper materials, notably plastics, which became less expensive as the price of oil declined (even during this year’s crisis in the Persian Gulf, the real cost of oil remained lower than in 1980). Telephone calls went through satellites and fiber-optic lines instead of copper wires. Ceramics replaced tungsten in cutting tools.

Cans were made of aluminum instead of tin, and Vogt’s fears about America going to war over tin remained unrealized. The most newsworthy event in the 1980’s concerning that metal was the collapse of the international tin cartel, which gave up trying to set prices in 1985 when the market became inundated with excess supplies.

Is there a lesson here for the future? “Absolutely not,” said Ehrlich in an interview. Nevertheless, he has no plans to take up Simon’s new offer: “The bet doesn’t mean anything. Julian Simon is like the guy who jumps off the Empire State Building and says how great things are going so far as he passes the 10th floor. I still think the price of those metals will go up eventually, but that’s a minor point. The resource that worries me the most is the declining capacity of our planet to buffer itself against human impacts. Look at the new problems that have come up: the ozone hole, acid rain, global warming. It’s true that we’ve kept up food production — I underestimated how badly we’d keep on depleting our topsoil and ground water — but I have no doubt that sometime in the next century food will be scarce enough that prices are really going to be high even in the United States. If we get climate change and let the ecological systems keep running downhill, we could have a gigantic population crash.”

Simon was not surprised to hear about Ehrlich’s reaction. “Paul Ehrlich has never been able to learn from past experience,” he said, then launched into the Cornucopian line on the greenhouse crisis — how, even in the unlikely event that doomsayers are right about global warming, humanity will find some way to avert climate change or adapt, and everyone will emerge the better for it. But Simon did not get far into his argument before another cheery thought occurred to him. He stopped and smiled. “So Ehrlich is talking about a population crash,” he said. “That sounds like an even better way to make money. I’ll give him heavy odds on that one.”

Simon neither made that bet nor lived to see Ehrlich exposed for the misnamed pseudo-scientist that he has always been. Simon died in 1992.

This post first appeared in JamSideDown under a different title. Thanks to John Tierney for his writeup of the Simon-Ehrlich bet and of Bjorn Lomborg. The Times keeps an archive of Tierney’s columns here.