| | There was a famous bet made in 1980 after the liberal Paul Ehrlich claimed that an increase in world population would cause greater scarcity in basic natural resources, such as copper, chromium, nickel, tin, and tungsten. A "classical" (conservative) economist, Julian Simon, predicted that people would seek and find substitutes for scarce resources, such as other materials, and that this would prevent greater scarcity and higher prices. The wager was that the liberal Ehrlich predicted that the price of these metals (also called "commodities") copper, chromium, nickel, tin, and tungsten would increase in price by 1990; the conservative Simon predicted their prices would not increase. | | There was a famous bet made in 1980 after the liberal Paul Ehrlich claimed that an increase in world population would cause greater scarcity in basic natural resources, such as copper, chromium, nickel, tin, and tungsten. A "classical" (conservative) economist, Julian Simon, predicted that people would seek and find substitutes for scarce resources, such as other materials, and that this would prevent greater scarcity and higher prices. The wager was that the liberal Ehrlich predicted that the price of these metals (also called "commodities") copper, chromium, nickel, tin, and tungsten would increase in price by 1990; the conservative Simon predicted their prices would not increase. |
| − | The classical economist Simon won the bet: the price of three of the five metals fell over that period and, when the price was adjusted for inflation, all five metals declined in their real prices. In the case of tin, its price fell from $8.72 a pound in 1980 to only $3.88 a pound in 1990. This was true even though the world's population increased by 800 million during that period. | + | The classical economist Simon won the bet: the price of three of the five metals fell over that period and, when the price was adjusted for the effects of inflation,<ref>Inflation tends to cause the prices of everything to increase over time, such that a candy bar that costs $1 today may have cost only 10 cents in the 1950s. When comparing prices from different time periods, it is necessary to "adjust for inflation" to compare their "real" cost in the value of money at the particular time.</ref> all five metals declined in their real prices. In the case of tin, its price fell from $8.72 a pound in 1980 to only $3.88 a pound in 1990. This was true even though the world's population increased by 800 million during that period. |
| | Free market competition handles issues of scarcity extremely well, because it can find lower-cost substitutes over time, which drives down the costs to the public. For example, cheaper and better plastic was used instead of these metals during that period. | | Free market competition handles issues of scarcity extremely well, because it can find lower-cost substitutes over time, which drives down the costs to the public. For example, cheaper and better plastic was used instead of these metals during that period. |