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The Simon–Ehrlich wager was a 1980 scientific wager between business professor Julian Simon and biologist
Paul Ehrlich Paul Ehrlich (; 14 March 1854 – 20 August 1915) was a Nobel Prize-winning German physician and scientist who worked in the fields of hematology, immunology and antimicrobial chemotherapy. Among his foremost achievements were finding a cure fo ...
, betting on a mutually agreed-upon measure of
resource ''Resource'' refers to all the materials available in our environment which are Technology, technologically accessible, Economics, economically feasible and Culture, culturally Sustainability, sustainable and help us to satisfy our needs and want ...
scarcity In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ...
over the decade leading up to
1990 Important events of 1990 include the Reunification of Germany and the unification of Yemen, the formal beginning of the Human Genome Project (finished in 2003), the launch of the Hubble Space Telescope, the separation of Namibia from South ...
. The widely followed contest originated in the pages of '' Social Science Quarterly'', where Simon challenged Ehrlich to put his money where his mouth was. In response to Ehrlich's published claim that "If I were a
gambler Gambling (also known as betting or gaming) is the wagering of something of value ("the stakes") on a random event with the intent of winning something else of value, where instances of strategy are discounted. Gambling thus requires three ele ...
, I would take
even money Even money is a wagering proposition with even odds - the bettor stands to lose or win the same amount of money. Beyond gambling Gambling (also known as betting or gaming) is the wagering of something of Value (economics), value ("the stake ...
that
England England is a Countries of the United Kingdom, country that is part of the United Kingdom. It is located on the island of Great Britain, of which it covers about 62%, and List of islands of England, more than 100 smaller adjacent islands. It ...
will not exist in the year
2000 2000 was designated as the International Year for the Culture of Peace and the World Mathematics, Mathematical Year. Popular culture holds the year 2000 as the first year of the 21st century and the 3rd millennium, because of a tende ...
", Simon offered to take that bet, or, more realistically, "to stake US$10,000 ... on my belief that the cost of non-government-controlled raw materials (including grain and oil) will not rise in the long run". Simon challenged Ehrlich to choose any
raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials/Intermediate goods that are feedstock for future finished ...
he wanted and a date more than a year away, and he would wager on the inflation-adjusted prices decreasing as opposed to increasing. Ehrlich chose
copper Copper is a chemical element; it has symbol Cu (from Latin ) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pinkish-orang ...
,
chromium Chromium is a chemical element; it has Symbol (chemistry), symbol Cr and atomic number 24. It is the first element in Group 6 element, group 6. It is a steely-grey, Luster (mineralogy), lustrous, hard, and brittle transition metal. Chromium ...
,
nickel Nickel is a chemical element; it has symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel is a hard and ductile transition metal. Pure nickel is chemically reactive, but large pieces are slo ...
,
tin Tin is a chemical element; it has symbol Sn () and atomic number 50. A silvery-colored metal, tin is soft enough to be cut with little force, and a bar of tin can be bent by hand with little effort. When bent, a bar of tin makes a sound, the ...
, and
tungsten Tungsten (also called wolfram) is a chemical element; it has symbol W and atomic number 74. It is a metal found naturally on Earth almost exclusively in compounds with other elements. It was identified as a distinct element in 1781 and first ...
. The bet was formalized on September 29, 1980, with September 29, 1990, as the payoff date. Ehrlich lost the bet, as all five commodities that were bet on declined in price from 1980 through 1990, the wager period.


Background

In 1968, Ehrlich published '' The Population Bomb'', which argued that mankind was facing a demographic catastrophe with the rate of population growth quickly outstripping growth in the supply of food and resources. Simon was highly skeptical of such claims, so he proposed a wager, telling Ehrlich to select any raw material he wanted and select "any date more than a year away," and Simon would bet that the commodity's price on that date would be lower than what it was at the time of the wager. Ehrlich and his colleagues picked five metals that they thought would undergo big price increases: chromium, copper, nickel, tin, and tungsten. Then, on paper, they bought $200 worth of each, for a total bet of $1,000, using the prices on September 29, 1980, as an index. They designated September 29, 1990, 10 years hence, as the payoff date. If the inflation-adjusted prices of the various metals rose in the interim, Simon would pay Ehrlich the combined difference. If the prices fell, Ehrlich et al. would pay Simon. Between 1980 and 1990, the world's population grew by more than 800 million, the largest increase in one decade in all of history. But by September 1990, the price of each of Ehrlich's selected metals had fallen. Chromium, which had sold for $3.90 a pound in 1980 (), was down to $3.70 in 1990 (). Tin, which was $8.72 a pound in 1980 (), was down to $3.88 a decade later (). As a result, in October 1990, Paul Ehrlich mailed Julian Simon a check for $576.07 () to settle the wager in Simon's favor.


Analysis

Julian Simon won because the price of three of the five metals went down in nominal terms and all five of the metals fell in price in inflation-adjusted terms, with both tin and tungsten falling by more than half. In his book ''Betrayal of Science and Reason'', Ehrlich wrote that Simon asserted "that humanity would never run out of anything". Ehrlich added that he and fellow scientists viewed
renewable resources A renewable resource (also known as a flow resource) is a natural resource which will replenish to replace the portion depleted by usage and consumption, either through natural reproduction or other recurring processes in a finite amount of ti ...
as more important indicators of the state of planet Earth, but that he decided to go along with the bet anyway. Afterward, Simon offered to raise the wager to $20,000 and to use any resources at any time that Ehrlich preferred. Ehrlich countered with a challenge to bet that temperatures would increase in the future. The two were unable to reach an agreement on the terms of a second wager before Simon died. Some observers have argued that Ehrlich could have won if the bet had been for a different period, or if the start date had been different. Ehrlich wrote that the five metals in question had increased in price between the years 1950 and 1975. Asset manager Jeremy Grantham wrote that if the Simon-Ehrlich wager had been for a longer period (from 1980 to 2011), then Simon would have lost on four of the five metals. Economist Mark J. Perry noted that for an even longer period of time, from 1934 to 2013, the inflation-adjusted price of the Dow Jones-AIG Commodities Index showed "an overall significant downward trend" and concluded that Simon was "more right than lucky".


The proposed second wager

Understanding that Simon wanted to bet again, Ehrlich and climatologist Stephen Schneider counter-offered, challenging Simon to bet on 15 current trends, betting $1,000 that each will get worse (as in the previous wager) over a ten-year future period. The bets were: * The three years 2002–2004 will, on average, be warmer than 1992–1994. * There will be more
carbon dioxide Carbon dioxide is a chemical compound with the chemical formula . It is made up of molecules that each have one carbon atom covalent bond, covalently double bonded to two oxygen atoms. It is found in a gas state at room temperature and at norma ...
in the
atmosphere An atmosphere () is a layer of gases that envelop an astronomical object, held in place by the gravity of the object. A planet retains an atmosphere when the gravity is great and the temperature of the atmosphere is low. A stellar atmosph ...
in 2004 than in 1994. * There will be more
nitrous oxide Nitrous oxide (dinitrogen oxide or dinitrogen monoxide), commonly known as laughing gas, nitrous, or factitious air, among others, is a chemical compound, an Nitrogen oxide, oxide of nitrogen with the Chemical formula, formula . At room te ...
in the atmosphere in 2004 than 1994. * The concentration of
ozone Ozone () (or trioxygen) is an Inorganic compound, inorganic molecule with the chemical formula . It is a pale blue gas with a distinctively pungent smell. It is an allotrope of oxygen that is much less stable than the diatomic allotrope , break ...
in the lower atmosphere (the
troposphere The troposphere is the lowest layer of the atmosphere of Earth. It contains 80% of the total mass of the Atmosphere, planetary atmosphere and 99% of the total mass of water vapor and aerosols, and is where most weather phenomena occur. From the ...
) will be greater than in 1994. * Emissions of the air pollutant
sulfur dioxide Sulfur dioxide (IUPAC-recommended spelling) or sulphur dioxide (traditional Commonwealth English) is the chemical compound with the formula . It is a colorless gas with a pungent smell that is responsible for the odor of burnt matches. It is r ...
in
Asia Asia ( , ) is the largest continent in the world by both land area and population. It covers an area of more than 44 million square kilometres, about 30% of Earth's total land area and 8% of Earth's total surface area. The continent, which ...
will be significantly greater in 2004 than in 1994. * There will be less fertile cropland per person in 2004 than in 1994. * There will be less
agricultural Agriculture encompasses crop and livestock production, aquaculture, and forestry for food and non-food products. Agriculture was a key factor in the rise of sedentary human civilization, whereby farming of domesticated species created f ...
soil per person in 2004 than 1994. * There will be on average less
rice Rice is a cereal grain and in its Domestication, domesticated form is the staple food of over half of the world's population, particularly in Asia and Africa. Rice is the seed of the grass species ''Oryza sativa'' (Asian rice)—or, much l ...
and
wheat Wheat is a group of wild and crop domestication, domesticated Poaceae, grasses of the genus ''Triticum'' (). They are Agriculture, cultivated for their cereal grains, which are staple foods around the world. Well-known Taxonomy of wheat, whe ...
grown per person in 2002–2004 than in 1992–1994. * In
developing nations A developing country is a sovereign state with a less-developed industrial base and a lower Human Development Index (HDI) relative to developed countries. However, this definition is not universally agreed upon. There is also no clear agreemen ...
there will be less
firewood Firewood is any wooden material that is gathered and used for fuel. Generally, firewood is not heavily processed, and is in some sort of firelog, recognizable log or branch form, compared to other forms of wood fuel like pellet fuel, pellets. ...
available per person in 2004 than in 1994. * The remaining area of virgin tropical moist
forest A forest is an ecosystem characterized by a dense ecological community, community of trees. Hundreds of definitions of forest are used throughout the world, incorporating factors such as tree density, tree height, land use, legal standing, ...
s will be significantly smaller in 2004 than in 1994. * The
ocean The ocean is the body of salt water that covers approximately 70.8% of Earth. The ocean is conventionally divided into large bodies of water, which are also referred to as ''oceans'' (the Pacific, Atlantic, Indian Ocean, Indian, Southern Ocean ...
ic
fishery Fishery can mean either the enterprise of raising or harvesting fish and other aquatic life or, more commonly, the site where such enterprise takes place ( a.k.a., fishing grounds). Commercial fisheries include wild fisheries and fish far ...
harvest per person will continue its downward trend and, thus, in 2004, will be smaller than in 1994. * There will be fewer
plant Plants are the eukaryotes that form the Kingdom (biology), kingdom Plantae; they are predominantly Photosynthesis, photosynthetic. This means that they obtain their energy from sunlight, using chloroplasts derived from endosymbiosis with c ...
and
animal Animals are multicellular, eukaryotic organisms in the Biology, biological Kingdom (biology), kingdom Animalia (). With few exceptions, animals heterotroph, consume organic material, Cellular respiration#Aerobic respiration, breathe oxygen, ...
species A species () is often defined as the largest group of organisms in which any two individuals of the appropriate sexes or mating types can produce fertile offspring, typically by sexual reproduction. It is the basic unit of Taxonomy (biology), ...
still extant in 2004 than in 1994. * More people will die of
AIDS The HIV, human immunodeficiency virus (HIV) is a retrovirus that attacks the immune system. Without treatment, it can lead to a spectrum of conditions including acquired immunodeficiency syndrome (AIDS). It is a Preventive healthcare, pr ...
in 2004 than in 1994. * Between 1994 and 2004, sperm cell counts of human males will continue to decline, and reproductive disorders will continue to increase. * The gap in wealth between the richest 10% of humanity and the poorest 10% will be greater in 2004 than in 1994. Simon declined Ehrlich and Schneider's offer to bet, and used the following analogy to explain why he did so: In his 1981 book '' The Ultimate Resource'', Simon noted that not all decreases in resources or increases in unwanted effects correspond to overall decreases in human wellbeing. Hence, there can be an "optimal level of pollution", which accepts some increases in certain kinds of pollution in a way that increases overall wellbeing while acknowledging that any increase in pollution is nevertheless a cost that must be considered in any such calculation. Simon's theory of resource development actually predicts some of the aforementioned trends, which do not in and of themselves even qualify as costs (unlike pollution). E.g., he pointed out that, due to increased efficiency, the amount of cropland required and actually used to grow food for each person has decreased over time and is likely to continue to do so . The same might potentially be true of decreased reliance on firewood in developing countries and per capita use of specific food sources like rice, wheat, and fish if economic development makes a diverse range of alternative foods available. Some have also proven false, e.g., the amount of ozone in the lower atmosphere has decreased from 1994 to 2004. If Simon had taken the bet, he would have lost on 11 out of 15 trends.


Other wagers

In 1996, Simon bet $1,000 with David South, professor of the Auburn University School of Forestry, that the inflation-adjusted price of timber would decrease in the following five years. Simon paid out early on the bet in 1997 (before his death in 1998) based on his expectation that prices would remain above 1996 levels (which they did). In 1999, when ''
The Economist ''The Economist'' is a British newspaper published weekly in printed magazine format and daily on Electronic publishing, digital platforms. It publishes stories on topics that include economics, business, geopolitics, technology and culture. M ...
'' headlined an article entitled, "$5 a barrel oil soon?" and with oil trading in the $12/barrel range, David South offered $1,000 to any economist who would bet with him that the
price of oil The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC ...
would be greater than $12/barrel in 2010. No economist took him up on the offer. However, in October 2000, Zagros Madjd-Sadjadi, an economist with The University of the West Indies, bet $1,000 with David South that the inflation-adjusted price of oil would decrease to an inflation-adjusted price of $25 by 2010 (down from what was then $30/barrel). Madjd-Sadjadi paid South an inflation-adjusted $1,242 in January 2010. The price of oil at the time was $81/barrel.


See also

* Long Bet Project *
Malthusian catastrophe Malthusianism is a theory that population growth is potentially exponential, according to the Malthusian growth model, while the growth of the food supply or other resources is linear, which eventually reduces living standards to the point of tr ...
* Oil price increases since 2003 *
Peak oil Peak oil is the point when global oil production reaches its maximum rate, after which it will begin to decline irreversibly. The main concern is that global transportation relies heavily on gasoline and diesel. Adoption of electric vehicles ...
* Richard Rainwater * Simmons–Tierney bet * Scientific wager


References


Further reading

* Sabin, Paul (2013), ''The Bet'' (
Yale University Press Yale University Press is the university press of Yale University. It was founded in 1908 by George Parmly Day and Clarence Day, grandsons of Benjamin Day, and became a department of Yale University in 1961, but it remains financially and ope ...
). * Desrochers, Pierre and Vincent Geloso,
Snatching the Wrong Conclusions from the Jaws of Defeat: A Historical/Resourceship Perspective on Paul Sabin's The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth's Future (Yale University Press, 2013), Part 2: The Wager: Protagonists and Lessons
" ''New Perspectives on Political Economy'', vol. 12, no. 1-2 (2016), pp. 42–64. * Desrochers, Pierre and Vincent Geloso,
Snatching the Wrong Conclusions from the Jaws of Defeat: A Historical/Resourceship Perspective on Paul Sabin's The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth's Future (Yale University Press, 2013). Part 1: The Missing History of Thought: Depletionism vs Resourceship
" ''New Perspectives on Political Economy'', vol. 12, no. 1-2 (2016), pp. 5–41.


External links



{{DEFAULTSORT:Simon-Ehrlich Wager Energy economics Wagers 1980 establishments 1990 disestablishments