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The ultimate scholar

| Wednesday, Feb. 13, 2008

Last Friday, Feb. 8, marked the 10th anniversary of the death of the great economist Julian Simon. Although he never received the professional or popular acclaim of economists such as Milton Friedman, Paul Samuelson or F.A. Hayek, Simon's insights and work rank with those of history's greatest social scientists.

Simon's most important contribution was to crystallize and explain an insight that even the best economists before him only glimpsed -- namely, that human beings in free societies are "the ultimate resource." Nothing -- not oil, not land, not gold, not microchips, nothing -- is as valuable to the material well-being of people as is human creativity and effort.

Indeed, there are no resources without human creativity to figure out how to use them and human effort actually to do so. Recognizing the truth of this insight renders silly the familiar term "natural resources."

No resources are "natural."

Take petroleum. What makes it a "resource"• It's certainly not a resource naturally. If it were, American Indians would long ago have put it to good use. But they didn't. I suspect that for Pennsylvania's native population in, say, the year 1300, the dark, thick, smelly stuff that bubbled up in watering holes was regarded as a nuisance.

Petroleum didn't become a resource until human beings creatively figured out how to use it to satisfy some human desires and other human beings figured out how to extract it cost-effectively from the ground.

Or take land. For at least 80 percent of Homo sapiens' time on earth, land was merely something to trod and hunt upon. Land had no special value as a resource until about 10,000 years ago when someone figured out how to cultivate soil and to plant, tend and harvest crops. Only then did land achieve the kind of status and value that we associate with a resource.

The same, of course, is true for magnesium, iron ore, bauxite, feldspar, trees, New York harbor -- you name the "natural resource" and you'll realize that it is a resource only because human beings creatively determined how to use it productively.

An important implication of this realization that humans are "the ultimate resource" is that high and growing population -- in societies with sufficient freedom to allow individuals to experiment and create -- is desirable. If human creativity and effort are not only resources, but also the ultimate resource, surely it's foolish to lament large and growing supplies of it.

Focusing analytical rigor and empirical investigation on this issue was among Julian Simon's many talents. He, of course, understood that human beings -- unlike tungsten and petroleum -- also consume goods and services. So the question then arises: In free societies, do greater numbers of human beings produce more than they consume, or does their consumption outrun their production?

Most people simply assume that humans are net consumers -- an assumption that explains the ease with which hysteria over population growth takes hold. But Simon -- ever the careful scholar -- said, "Let's look at the facts." And when he looked at the facts he found that growing human populations in free societies produce net increases in resource supplies. Whether coming in the form of immigration or through reductions in mortality, growing populations in free countries is hugely beneficial.

This conclusion is so at odds with conventional wisdom that it is difficult for many people to see its validity. Stanford University's Paul Ehrlich -- author of "The Population Bomb," foretelling disaster from population growth -- found Simon's optimism about population growth to be so absurd that he famously accepted a bet offered by Simon in 1980.

The essence of Simon's position in the bet was that, despite the population growth that was sure to occur during the 1980s, the effective supply of natural resources would increase during this decade because human beings would figure out how to find, extract and use such resources more efficiently.

And the surest measure of this increased supply would be lower inflation-adjusted prices of resources.

Convinced that higher population is a curse, Ehrlich accepted the $1,000 bet. He chose (for Simon gave Ehrlich the choice of which resources to bet on) a bundle of copper, chromium, nickel, tin and tungsten and bet Simon that the real price of this bundle of resources would be higher in 1990 than in 1980.

In 1990 the prices in September of that year were compared to the prices of these resources in September 1980. Simon won convincingly. The real price of each of these five resources had fallen over the course of that decade, indicating that their supplies had grown even though human population had also grown by more than 800 million during that same time.

Julian Simon's legacy is profound. Free people are net producers. No economist has had a greater impact upon my own way of looking at the world than has Julian Simon. After 10 years, I still miss the wisdom and genuine kindness that flowed regularly from this remarkable man.

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