If you're looking for further evidence that the world is recovering from the disruptions of pandemic policy, the Simon Abundance Index provides just that. After a brief retreat, the index once again portrays a world of cheaper commodities that contribute to human prosperity. Born from a famous 1980 bet between economist Julian Simon and doomsayer Paul Ehrlich, the index stands as testimony for Simon's belief that the greatest resource is human ingenuity—although government intervention is perfectly capable of screwing up a good thing.
"After a sharp downturn between 2021 and 2022, which was caused by the COVID-19 pandemic, government lockdowns and accompanying monetary expansion, and the Russian invasion of Ukraine, the SAI is making a strong recovery," according to Marian L. Tupy of the Cato Institute. "Since 1980, resource abundance has been increasing at a much faster rate than population."
A Contrast to the Fears of Doomsayers
The index was born in the days of worries over population growth and the strain more people would place on the world's resources. The Limits to Growth, published by the Club of Rome in 1972, famously predicted that nonrenewable natural resources including copper and aluminum would start running out in a matter of years, hiking prices and curtailing availability. "Population growth and the law of increasing costs could rapidly drive the system to the point where all available resources were devoted to producing food," insisted the authors.
"In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now," warned Paul Ehrlich, author of The Population Bomb (1968).
Policymakers took the doomsayers' warnings seriously. China implemented a one-child policy that was coercively enforced and hobbles the country to this day, even after its repeal. Governments from India to Mexico imposed forced sterilization policies.
"'The Population Bomb' made dire predictions—and triggered a wave of repression around the world," Charles Mann noted in 2018 for Smithsonian magazine.
Innovation Is the Greatest Resource
Simon initially agreed with Ehrlich and friends that population was a problem. But he researched the issue and dramatically changed his mind on the relationship between people and prosperity.
"Humankind has evolved into creators and problem-solvers to an extent that people's constructive behavior has outweighed their destructive behavior, as evidenced by our increasing life expectancy and richness of consumption," Simon wrote in 1984 for Reason. "And in recent centuries and decades, this positive net balance has been increasing rather than decreasing."
That's because, he continued, "humankind has evolved culturally (and perhaps also genetically) in such a manner that our patterns of behavior—social rules and customs being a crucial part of these patterns—predispose us to deal successfully with resource scarcity. That is, over the centuries, these evolved patterns have given us greater rather than less command over resources."
Gambling on Abundance
The result of his changed views was a challenge issued to and accepted by Paul Ehrlich. In October 1980, they drew up a futures contract by which Simon agreed to sell Ehrlich, in 1990, the same quantities that could be purchased for $1,000 in 1980 of five metals: copper, chromium, nickel, tin, and tungsten. If the combined value was above $1,000 at the end of the bet, Simon would pay the difference. If it was below $1,000, Ehrlich would make up the difference to Simon. In October 1990, Ehrlich mailed Simon a check; the price of the metals, which were selected by Ehrlich, had fallen by more than a third after inflation.
Of course, resource prices and innovation evolve naturally, not in straight lines. Different time periods might have produced different results for that bet. But Simon's main contention—that humans tend to innovate their way around resource constraints—continues to hold, as documented by the Simon Abundance Index, which tracks the availability and cost of many more commodities than the five included in the original 1980 bet.
"The Simon Abundance Index (SAI) quantifies and measures the relationship between resources and population," notes the 2024 edition of the index. "The SAI converts the relative abundance of 50 basic commodities and the global population into a single value. The index started in 1980 with a base value of 100. In 2023, the SAI stood at 609.4, indicating that resources have become 509.4 percent more abundant over the past 43 years. All 50 commodities were more abundant in 2023 than in 1980."
Policy-Driven Backsliding
Growth in abundance is occasionally interrupted. There was major backsliding (increased commodity costs) during the Great Recession, which was largely caused by federal efforts to encourage mortgage issuance no matter what, and in response to the economic disruptions of pandemic lockdowns. Tracked commodities are 509.4 percent more abundant now than in 1980, but they were 518.98 percent more abundant in 2019, before any of us had heard of COVID-19 or suffered a stay-at-home order.
As it turns out, even the blessings of human innovation can be kneecapped by the mandates and intrusions of government officials. It should come as no surprise that the brief retreat in resource abundance coincides with an interruption of the decades-long global march away from crushing poverty and towards prosperity. More people lived below the poverty line in 2022 (712 million) than in 2019 (689 million), even as "resource abundance fell by 3.55 percent in 2022."
But we appear to have turned the corner, with abundance once again increasing. "For the time required to earn the money to buy one unit of this commodity basket in 1980, you would get 3.38 units in 2023," according to index authors Tupy and Gale Pooley of Brigham Young University-Hawaii. And contrary to the doomsayers, that happened as the human population increased from 4.4 billion to more than 8 billion. That represents improved access to everything from food to energy, with lamb increasing in abundance by a whopping 675.1 percent since 1980 (the most in the basket of commodities), while coal became 30.7 percent more abundant (the least improvement over that time).
A world of greater abundance in resources means a world in which people are better nourished, better clothed, warmer in the winter, cooler in the summer, and more prosperous. It's a world in which human ingenuity is set free to make the human race happier, healthier, and wealthier.
Well, it's a world of abundance and prosperity unless politicians screw it up. Again.
The post Julian Simon Was Right: Ingenuity Leads to Abundance appeared first on Reason.com.
