The Encyclopedia of Libertarianism

Simon, Julian (1932-1998)

Julian Simon was one of the most underappreciated economists of the 20th century. Born in New Jersey, Simon earned his BA in experimental psychology from Harvard University and, in 1961, his PhD from the University of Chicago’s Graduate School of Business. He died on February 8, 1998.

Although Simon wrote on an unusually wide range of topics—including statistical methods and mental depression—Simon’s greatest contribution to economics is his refinement of the idea that humans are “the ultimate resource.” Simon argued there are no resources without human creativity to figure out how to use them and human effort to actually do so.

Petroleum, for example, is certainly not, by its nature, a resource. If it were, Native Americans would long ago have put it to good use. But they did not. Petroleum did not become a resource until creative people determined how it could be used to satisfy some human desires and other people determined how it could be cost-effectively extracted from the ground.

An implication of this realization, that humans are “the ultimate resource,” leads to the conclusion that a high and growing population—at least in societies with sufficient freedom to allow individuals to experiment and create—is desirable.

Simon, of course, understood that human beings, unlike tungsten and petroleum, also consume goods and services. The question thus arises in free societies whether greater numbers of human beings produce more than they consume or whether their consumption outruns their production. Most people simply assume that humans are net consumers—an assumption that explains the common hysteria over immigration and population growth that has seized so many people. But Simon, having carefully analyzed the data, found that growing human populations in free societies produce net increases in resource supplies. His books presenting much of these data are The Ultimate Resource (1981), The Ultimate Resource 2 (1996), The State of Humanity (1995), and Population Matters (1990).

Population researcher Paul Ehrlich found Simon’s optimism about population growth to be so absurd that he famously accepted a bet offered by Simon in 1980. Ehrlich had authored The Population Bomb, a book foretelling disaster from population growth. 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 resources more efficiently. The surest measure of this increased supply would be lower inflation-adjusted resource prices.

Convinced that higher population would prove a curse, Ehrlich accepted the $1,000 bet. He chose 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. The prices of September 1990 were compared to those of September 1980, and Simon won convincingly. The real price of each of these five resources fell over the course of that decade, indicating that their supplies grew despite—or because of—growing human population.

Julian Simon’s legacy is profound. Free people are net producers—they are “the ultimate resource.” Thus, controls on production, creativity, and industry designed to “conserve” resources are likely to have the opposite effect in the long term. Simon’s work demonstrates that those people who value continued abundance for future generations should support the free market, which rewards both efficiency and creativity in developing new resources.

 

Further Readings

Simon, Julian. The State of Humanity. Hoboken, NJ: Wiley-Blackwell, 1996.

———. The Ultimate Resource. Princeton, NJ: Princeton University Press, 1983.

———. The Ultimate Resource 2. Princeton, NJ: Princeton University Press, 1998.

Originally published .