The Ultimate Resource
Encyclopedia
The Ultimate Resource is a 1981 book written by Julian Lincoln Simon
challenging the notion that humanity was running out of natural resource
s. It was revised in 1996 as The Ultimate Resource 2.
on why there is no resource crisis
is that as a particular resource becomes more scarce, its price
rises; this rise of price creates an incentive for people to discover more of the resource, ration and recycle it and, eventually, develop substitutes. The “ultimate resource” is not any particular physical object but the capacity for humans to invent and adapt.
. Simon usually measures prices in wage adjusted terms, since this is a measure of how much labor is required to purchase a fixed amount of a particular resource. Since prices for most raw materials (e.g. copper
) have fallen between 1800 and 1990 (adjusting for wages and adjusting for inflation
), Simon argues that this indicates that those materials have become less scarce.
context, it is not appropriate for economy-wide forecasting; there exist undiscovered sources, sources not yet economically feasible to extract, sources not yet technologically
feasible to extract, and misconceived resources that could prove useful but are not yet worth trying to discover.
To counter the problems of engineering forecasting, Simon proposes economic forecasting, which proceeds in three steps in order to capture, in part, the unknowns the engineering method leaves out (p 27):
The ever-decreasing prices, in wage-adjusted terms, indicate decreasing scarcity, in that it takes less time for the average worker to earn the money required to purchase a set amount of some commodity suggest, Simon claims, an enduring trend of increased availability that will not cease in the foreseeable future, despite continued population growth.
brought on by a crisis of resources. Simon lists several past unfounded environmental
fears in order to back his claim that modern fears are nothing new and will also be disproven.
Some of the “crises” he notes are a shortage of tin
in the 13th century BCE; disappearing forest
s in Greece
in 550 BCE and in England
in the 16th century to 18th century CE
; food
in 1798; coal
in Great Britain in the 19th century; oil
since the 1850s; and various metal
s since the 1970s.
Ehrlich was the author of a popular book, The Population Bomb
, which argued that mankind was facing a demographic catastrophe with the rate of population growth quickly outstripping growth in the supply of food and resources. Simon was highly skeptical of such claims.
Simon had Ehrlich choose five of several commodity metals. Ehrlich chose 5 metals: copper, chromium, nickel, tin, and tungsten. Simon bet that their prices would go down. Ehrlich bet they would go up.
The basket of goods, costing $1,000 in 1980, fell in price by over 57% over the following decade. As a result, in October 1990, Paul Ehrlich mailed Julian Simon a check for $576.07 to settle the wager in Simon's favor.
, the easier the society will raise its living standards and lower resource scarcity. People, on average, add to a civilization more than they take away. People are the ultimate resource.
Julian Lincoln Simon
Julian Lincoln Simon was a professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute at the time of his death, after previously serving as a longtime business professor at the University of Illinois at Urbana-Champaign.Simon wrote many books and...
challenging the notion that humanity was running out of natural resource
Natural resource
Natural resources occur naturally within environments that exist relatively undisturbed by mankind, in a natural form. A natural resource is often characterized by amounts of biodiversity and geodiversity existent in various ecosystems....
s. It was revised in 1996 as The Ultimate Resource 2.
Overview
The overarching thesisThesis
A dissertation or thesis is a document submitted in support of candidature for an academic degree or professional qualification presenting the author's research and findings...
on why there is no resource crisis
Crisis
A crisis is any event that is, or expected to lead to, an unstable and dangerous situation affecting an individual, group, community or whole society...
is that as a particular resource becomes more scarce, its price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
rises; this rise of price creates an incentive for people to discover more of the resource, ration and recycle it and, eventually, develop substitutes. The “ultimate resource” is not any particular physical object but the capacity for humans to invent and adapt.
Scarcity
The work opens with an explanation of scarcity, noting its relation to price; high prices denote relative scarcity and low prices indicate abundanceAbundance
Abundance may refer to:In science and technology:* Abundance , the opposite of scarcities* Abundance , growing food with plentiful resources that will not run out -- sunshine, CO2, and waste or brine water....
. Simon usually measures prices in wage adjusted terms, since this is a measure of how much labor is required to purchase a fixed amount of a particular resource. Since prices for most raw materials (e.g. copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
) have fallen between 1800 and 1990 (adjusting for wages and adjusting for inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
), Simon argues that this indicates that those materials have become less scarce.
Forecasting
Simon makes a distinction between "engineering” and “economic” forecasting. Engineering forecasting consists of estimating the amount of known physical amount of resources, extrapolates the rate of use from current use and subtracts one from the other. Simon argues that these simple analyses are often wrong. While focusing only on proven resources is helpful in a businessBusiness
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
context, it is not appropriate for economy-wide forecasting; there exist undiscovered sources, sources not yet economically feasible to extract, sources not yet technologically
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
feasible to extract, and misconceived resources that could prove useful but are not yet worth trying to discover.
To counter the problems of engineering forecasting, Simon proposes economic forecasting, which proceeds in three steps in order to capture, in part, the unknowns the engineering method leaves out (p 27):
Infinite resources
Perhaps the most controversial claim in the book is that natural resources are infinite. Simon argues not that there is an infinite physical amount of, say, copper, but for human purposes that amount should be treated as infinite because it is not bounded or limited in any economic sense, because:- known reserves are of uncertain amounts
- new reserves may become available, either through discovery or via the development of new extraction techniques
- recycling
- more efficient utilization of existing reserves (e.g. "It takes much less copper now to pass a given message than a hundred years ago." [The Ultimate Resource 2, 1996, footnote, page 62])
- development of economic equivalents, e.g. optic fibre in the case of copper for telecommunications
The ever-decreasing prices, in wage-adjusted terms, indicate decreasing scarcity, in that it takes less time for the average worker to earn the money required to purchase a set amount of some commodity suggest, Simon claims, an enduring trend of increased availability that will not cease in the foreseeable future, despite continued population growth.
Evidence
A plurality of the book consists of chapters showcasing the economics of one resource or another and proposing why this resource is, for human purposes, infinite.Historical precedent
Simon argues that for thousands of years, people have always worried about the end of civilizationCivilization
Civilization is a sometimes controversial term that has been used in several related ways. Primarily, the term has been used to refer to the material and instrumental side of human cultures that are complex in terms of technology, science, and division of labor. Such civilizations are generally...
brought on by a crisis of resources. Simon lists several past unfounded environmental
Environmentalism
Environmentalism is a broad philosophy, ideology and social movement regarding concerns for environmental conservation and improvement of the health of the environment, particularly as the measure for this health seeks to incorporate the concerns of non-human elements...
fears in order to back his claim that modern fears are nothing new and will also be disproven.
Some of the “crises” he notes are a shortage of tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
in the 13th century BCE; disappearing forest
Forest
A forest, also referred to as a wood or the woods, is an area with a high density of trees. As with cities, depending where you are in the world, what is considered a forest may vary significantly in size and have various classification according to how and what of the forest is composed...
s in Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
in 550 BCE and in England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
in the 16th century to 18th century CE
Common Era
Common Era ,abbreviated as CE, is an alternative designation for the calendar era originally introduced by Dionysius Exiguus in the 6th century, traditionally identified with Anno Domini .Dates before the year 1 CE are indicated by the usage of BCE, short for Before the Common Era Common Era...
; food
Food
Food is any substance consumed to provide nutritional support for the body. It is usually of plant or animal origin, and contains essential nutrients, such as carbohydrates, fats, proteins, vitamins, or minerals...
in 1798; coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
in Great Britain in the 19th century; oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
since the 1850s; and various metal
Metal
A metal , is an element, compound, or alloy that is a good conductor of both electricity and heat. Metals are usually malleable and shiny, that is they reflect most of incident light...
s since the 1970s.
Simon–Ehrlich wager
Based on preliminary research for The Ultimate Resource, Julian L. Simon and Paul Ehrlich entered in a famous wager in 1980, betting on a mutually agreed upon measure of resource scarcity over the decade leading up to 1990.Ehrlich was the author of a popular book, The Population Bomb
The Population Bomb
The Population Bomb was a best-selling book written by Paul R. Ehrlich and his wife, Anne Ehrlich , in 1968. It warned of the mass starvation of humans in the 1970s and 1980s due to overpopulation, as well as other major societal upheavals, and advocated immediate action to limit population growth...
, which argued that mankind was facing a demographic catastrophe with the rate of population growth quickly outstripping growth in the supply of food and resources. Simon was highly skeptical of such claims.
Simon had Ehrlich choose five of several commodity metals. Ehrlich chose 5 metals: copper, chromium, nickel, tin, and tungsten. Simon bet that their prices would go down. Ehrlich bet they would go up.
The basket of goods, costing $1,000 in 1980, fell in price by over 57% over the following decade. As a result, in October 1990, Paul Ehrlich mailed Julian Simon a check for $576.07 to settle the wager in Simon's favor.
Population
A large section of the book is dedicated to showing how population growth ultimately creates more resources. The basic argument echoes the overarching thesis: as resources become more scarce, the price rises, creating an incentive to adapt. The more a society has to invent and innovate, ceteris paribusCeteris paribus
or is a Latin phrase, literally translated as "with other things the same," or "all other things being equal or held constant." It is an example of an ablative absolute and is commonly rendered in English as "all other things being equal." A prediction, or a statement about causal or logical...
, the easier the society will raise its living standards and lower resource scarcity. People, on average, add to a civilization more than they take away. People are the ultimate resource.