The 1980 Bet on Five Metals That Settled the Great Scarcity Debate

Most people who predict the end of the world never have to pay for being wrong. They get a book tour. One of them, in 1980, was offered a bet, and he took it, and ten years later he mailed a check to the other side of the argument. That is the rarest thing in public life: a prediction that got graded.

The story is worth telling for its own sake, because it is a good yarn. It is worth telling again because the argument behind it has not gone away. Every few years a new generation announces that we are running out of something, and the prescription is always the same: fewer people, less prosperity, more control by those who made the forecast. Let me walk you through what happened when someone put money on the other side.

The prophecy

In 1968, Stanford biologist Paul Ehrlich published The Population Bomb. Its thesis was that humanity had outgrown the planet's capacity to feed it, that mass famine was coming within years, and that drastic measures were the only answer. The book was a bestseller and a landmark. Its opening claim was that hundreds of millions of people would starve to death in the 1970s, and it floated coercive remedies for population growth. I am summarizing, not quoting, and you can read the book itself to judge the language.

The prediction failed. Famine did kill people in the following decades, and those deaths were tragedies, but they came mostly from war, politics and misgovernment, not from a planet that could not feed its people. The decisive event was the Green Revolution, led by the agronomist Norman Borlaug, who developed high-yield, disease-resistant wheat and helped it spread to places such as Mexico, India and Pakistan. Borlaug received the Nobel Peace Prize in 1970. Food output grew faster than population. The "bomb" went off as a harvest.

The other side

The man who challenged the doomsayers was Julian Simon, an economist who taught at the University of Maryland and later at other universities. Simon had started out worrying about overpopulation himself and changed his mind after looking at the data. In 1981 he published The Ultimate Resource, and the title is the thesis. The ultimate resource is people: their ingenuity, their ability to solve problems and substitute one thing for another. A mouth to feed is also a mind to put to work.

His argument went like this. First, scarcity shows up as a price. Second, a high price tells people to do four things at once: use less, find more, recycle, and invent a substitute. Third, in the long run those responses tend to bring the price back down, and sometimes lower than before. Fourth, since the supply of human talent grows with population, more people tend to mean more solutions, not fewer. He backed this with long-run price series for raw materials, which, adjusted for inflation, tended to fall over time rather than rise.

That was a direct contradiction of what the population alarmists said, and Simon, being a man of his convictions, was willing to say it with money.

The wager

In 1980 Simon offered a public bet. If Ehrlich believed that resources were getting scarcer, he should be willing to bet that their prices would rise. Ehrlich accepted, and with two colleagues, John Harte and John Holdren, chose five metals: chromium, copper, nickel, tin and tungsten. Holdren later served as science adviser to President Obama, which is a matter of public record.

The terms were simple. The bet was for $1,000 worth of the metals, $200 of each, at the prices of September 1980. If, after ten years, the inflation-adjusted prices had gone up, Simon would pay the difference. If the prices had gone down, Ehrlich and his colleagues would pay the difference. No one had to buy a single ounce of metal. The bet used the prices on paper.

It is worth pausing at how fair the setup was. Ehrlich picked the metals. He had the choice of what to bet on, and he chose five that he thought would rise. Simon did not rig the game. The prices were public. The period was ten years, enough time for the scarcity story to prove itself. And the adjustment for inflation meant that a rise in the nominal price caused only by a falling dollar would not count as scarcity.

The settlement

The bet ended in October 1990. All five metals were cheaper in inflation-adjusted terms than in 1980. Ehrlich and his partners mailed Simon a check. The amount commonly reported is $576.07, which was the difference in the prices over the decade. They did not concede the argument. Ehrlich later wrote that he saw renewable resources as better indicators of scarcity than metal prices, and that one cheap decade of metals did not refute the worry behind the bet.

Now stop. I do not want you to hear a victory lap. The check was small. The lesson was not. Ehrlich had picked the metals he thought would rise, in a decade he thought would prove his point, and the market disagreed. That tells you something about how reliable the predicting is when the predictor is smart, famous and sure.

Why the prices fell

The reasons are the interesting part, and each one is an example of ingenuity at work.

• Substitution. One explanation commonly given for tin's fall is the growing use of aluminum, a more abundant and cheaper material. When a metal gets expensive, someone finds a different one. Nobody had to order it.
• Efficiency. When a metal is dear, engineers find ways to use less of it for the same job.
• Supply responses. High prices in the late 1970s encouraged exploration and the opening of new mines and processing capacity. Higher prices are a signal to find more.
• The calendar. Some defenders of Ehrlich argue that part of the drop reflects an oil-driven price spike in 1980 and a recession in 1990, which is a fair point against reading the entire result as a triumph of technology, and I will return to it below.

You can read this as luck, or you can read it as a demonstration of the mechanism Simon described. I think the second reading is closer to the truth, and I will argue it in a moment. But let me do the fair thing first.

The strongest objection

Here is the objection, put as a thoughtful critic would put it. One: a single ten-year bet on five metals is a small sample. Two: the result depends on the decade. Ehrlich's side could point out that if the bet had been made at a different time, for example one covering 2002 to 2012, it would have gone badly for Simon, since metal prices rose sharply in those years. Three: even if prices tend to fall, that does not show that any specific resource is unlimited. A mine is finite. A deposit is finite. At some level, the earth is a closed system.

That is a fair objection, and I am not going to wave it away. A bet is not a proof. Simon himself did not claim that every price would fall in every decade. His claim was about the long run and about the direction of the trend, and that the trend was shaped by human responses, not by the physical stock.

Here is my answer, in numbered form.

1. The question is not whether a deposit is finite. It is whether the supply of the service we want is. We do not want tin. We want to keep food from spoiling and to carry a signal across an ocean. A thing that does the job more cheaply is a better answer than a thing that is merely more abundant. When one material gives way to another, the supply of the first becomes less important, and the thing we cared about can get cheaper.
2. A price spike is not a refutation. It is the mechanism working. When metal prices rose in the 2000s, the textbook response is more exploration, more recycling and more substitution. A rise that provokes a response is not evidence of a wall. It is evidence of a signal.
3. The long-run record favors Simon's direction. Inflation-adjusted prices for many commodities have fallen over long periods, even as the world's population and consumption grew many times over. The forecasts of exhaustion have a long record of failing, as Running Out of Oil Was Forecast for a Century, So Why Hasn't It Happened shows for oil.
4. The alternative requires a planner to know what we will need. To say that a resource is scarce and must be rationed is to claim to know the supply, the demand and every possible substitute. No one knows that. The price system, imperfect as it is, collects information from millions of people who each know a small piece.

The bet did not prove that nothing will ever run short. It showed that forecasting scarcity is much harder than people think, and that the people who forecast it tend to underrate the response of people who need what is scarce.

The Founding connection

Why does a conservative care about a wager over metals? Because the argument underneath it is about whether free people can solve their own problems. The Declaration of Independence says that "all men are created equal" and are endowed with the right to "Life, Liberty and the pursuit of Happiness." The pursuit is an activity. It assumes a person with a mind, who may use it. Simon's economics is that assumption, carried out at the scale of a society.

The other view of the world holds that people are mouths, that their number is the problem, and that someone wiser must manage them. It is an old view, and it has led, again and again, to policies that treat human beings as a burden on the planet and not as the planet's best resource. A conservative, a believer in the dignity of the individual and the family, should be suspicious of any theory in which the fix is fewer people and more supervisors.

That is a values claim, not a fact claim, and I will stand on it. The factual claim is separate: that in the periods and markets we can measure, human ingenuity has repeatedly outrun the predicted limits.

What this means for energy and minerals

The Simon argument is not an excuse for complacency. Resources do get tight, prices do spike and countries do get squeezed. The 1970s oil shocks were real, and so are the supply chains that today route key materials through a small number of places. The lesson of the wager is not "relax." The lesson is that the right response to a shortage is usually to let the price do its work and to remove the obstacles that stop the response.

The most important obstacles are political. A country with metals in the ground that will not let anyone dig is making itself scarce by choice. A permit that takes a decade is a scarcity created in a government office. For a live example, see China Refines the Minerals Behind Every Battery, and America Let It Happen, where the question is not whether the minerals exist but whether we allow ourselves to produce and refine them. For a reminder of how many everyday things come out of one barrel of crude, see Lipstick, Aspirin and Asphalt, Everything a Barrel of Crude Oil Becomes. For the moral stakes of cheap energy for people who still lack it, Hundreds of Millions Still Cook Over Wood, and That Is a Moral Question. And for another case where a price signal was drowned out by a rule, How Fuel Economy Rules Killed the Small Pickup and Supersized the SUV.

What Simon got wrong, and what he got right

A fair account has to admit that Simon was not infallible and that the matter is not closed. His reasoning about long-run trends does not guarantee any particular outcome, and critics have pointed out environmental costs, such as pollution and the loss of species, that do not show up in the price of a metal. Those are real issues, and they belong in the debate. The answer to them is not to abandon the price system but to price what it leaves out, through clear property rights and liability rules, and to deal with real harms by the law. That, too, is a conservative idea: the common law, which makes polluters answer for damage, is older than any agency.

What he got right is the main point. The people who said we were on the edge of exhaustion were wrong about food, wrong about the particular metals they chose and wrong about the logic of scarcity. And they did not pay for it, until a bet forced a check.

The case in brief

1. In The Population Bomb (1968) Paul Ehrlich predicted mass famine and resource exhaustion, and the Green Revolution under Norman Borlaug helped prove the famine forecast wrong.
2. Julian Simon argued in The Ultimate Resource (1981) that scarcity shows up as a price, and a high price triggers conservation, new supply and substitutes, so human ingenuity tends to push prices down over time.
3. In 1980 Simon and Ehrlich bet on chromium, copper, nickel, tin and tungsten; in 1990 all five were cheaper in inflation-adjusted terms, and Ehrlich's side mailed a check.
4. The fair objection is that one decade is a small sample and prices rose in other periods, but a price rise is a signal that provokes a response, and the long-run record favors Simon's direction.
5. The lesson for policy is to let prices work, price real harms through law, and remove the political obstacles that make resources scarce by choice.

What you can do: Pull up the inflation-adjusted price history of a commodity you care about on a government data site, such as the U.S. Geological Survey's mineral statistics, and compare it to the forecasts made about it.