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View Full Version : Simon vs. Ehrlich or Cornucopians vs. Malthusians



c1ue
01-25-12, 11:39 AM
Paul Kedrosky wrote an article where he tries to argue that <s>Malthus</s>Paul Ehrlich was actually right but unlucky when he made his famous bet with Julian Simon in 1980.

The bet was whether the prices of 5 commodities would increase or fall vs. 1990.

It is a bet in which Ehrlich was crushed, one of many many areas which Ehrlich made big loud pronouncements which turned out to be just plain wrong.

Kedrosky then attempts to show that Ehrlich was actually right if you look at the 2000s decade.

Of course besides the little problem is that of Kedrowski applying Simon's 1980 bet to a situation where not only is Simon dead (he died in 1998), but assuming Simon would act the same way given a very different environment vs. 1980.

Here's Kedrosky's justification: that in fixed dollar values, the prices of the said commodities are higher in the 2000s:

http://paul.kedrosky.com/archives/2010/02/re-litigating_t.html


http://paul.kedrosky.com/WindowsLiveWriter/RelitigatingtheSimonEhrlichBet_636D/all-dates_thumb.png (http://paul.kedrosky.com/WindowsLiveWriter/RelitigatingtheSimonEhrlichBet_636D/all-dates_2.png)



Of course what are some of the missing components?

The switch of the US off the gold standard is one prime example - there is a clear trend associated with US dollar devaluation vs. commodity prices in the late '60s to mid '70s era.

But, this article is a prime example again of bad economics.

The price of the commodities frankly is not useful in and of itself.

A better view is the price of commodities vs. relative GDP - the reason being that the affordability of said commodities has some relationship to the expense of said commodities vs. the overall economy.

A $1 cost in a $1 trillion GDP world is much more expensive than a $3 cost in a $15 trillion GDP world.

Here are the prices of said commodities vs. GDP:

http://wattsupwiththat.com/2012/01/25/the-simon-erlich-wager-at-seven-billion-people/#more-55285



http://i90.photobucket.com/albums/k247/dhm1353/USGS2.png (http://i90.photobucket.com/albums/k247/dhm1353/USGS2.png)

The same article also looks at production of said commodities:



http://i90.photobucket.com/albums/k247/dhm1353/USGS3.png (http://i90.photobucket.com/albums/k247/dhm1353/USGS3.png)

Note the left side scale is logarithmic - the production of these commodities has gone up exponentially.

Certainly at some point the Malthuses and Ehrlich's will be right, but we're not there yet.

In the meantime underlying bias continues to spit out worthless economic pronouncements.