In the late 1960s, I was a pretty rabid environmentalist. I had read Paul Ehrlich's "The Population Bomb" and was concerned that finally the Malthusian promise of overpopulation was coming to fruition. I was distressed by the imminent destruction of so many natural resources, including things like Lake Erie. And I clearly had a lot to learn about economics.
A couple of years later, The Club of Rome published "The Limits to Growth" in which they used computer-generated extrapolations to show the world was in big trouble. I had known two of the four authors of the book, Dennis and Donna Meadows when we were undergraduates at Carleton College; they were respectively one and two years ahead of me there. I remembered them as brilliant people, and so I was concerned that I couldn't understand and didn't believe their book.
When Robert Solow visited UWO during my first year teaching there, he pointed out a glaring error in "The Limits to Growth": it contained no accounting for prices and responses to prices. Apparently, Carleton College economics professors had failed to drive home an essential thesis of economics: People respond to incentives. Demand curves are downward-sloping and supply curves are upward-sloping.
Julian Simon saw the same problem with Ehrlich's book. Paul Sabin has described what ensued in The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth's Future. Jonathan Last has an excellent review of the book [via Cafe Hayek]. I'm sure I'm quoting too much from that review here, but it is hard to know what to cut:
Mr. Ehrlich, a biologist specializing in butterflies, became famous in the 1970s after publishing "The Population Bomb" (1968), in which he updated the 19th-century projections of Thomas Malthus—people were overbreeding, the supply of food and resources couldn't possibly keep up—and dialed the calamity to 11. Within a few short years, hundreds of millions of people would starve to death as civilization unraveled. Or so predicted Mr. Ehrlich. "The Population Bomb" was reprinted 22 times in the first three years alone, and its author would appear as Johnny Carson's guest on "The Tonight Show" at least 20 times, becoming a national figure and an influential player in Democratic politics. Mr. Ehrlich's ideas attracted a remarkable number of passionate adherents. They also attracted the scornful criticism of a little-known economist named Julian Simon.
... Mr. Ehrlich believed that the laws of nature that governed insects also applied to humans, that natural constraints created cycles of population booms and busts. Simon believed that man's rational powers—and the economies man constructed—made those laws nearly obsolete.
So in 1980 Simon made Mr. Ehrlich a bet. If Mr. Ehrlich's predictions about overpopulation and the depletion of resources were correct, Simon said, then over the next decade the prices of commodities would rise as they became more scarce. Simon contended that, because markets spur innovation and create efficiencies, commodity prices would fall. He proposed that each party put up $1,000 to purchase a basket of five commodities. If the prices of these went down, Mr. Ehrlich would pay Simon the difference between the 1980 and 1990 prices. If the prices went up, Simon would pay. This meant that Mr. Ehrlich's exposure was limited while Simon's was theoretically infinite.
Simon even allowed Mr. Ehrlich to rig the terms of the bet in his favor: Mr. Ehrlich was allowed to select the five commodities that would be the yardstick. Consulting two colleagues, John Holdren and John Harte, Mr. Ehrlich chose chromium, copper, nickel, tin and tungsten, each of which his team supposed was especially likely to become scarce. ...
... In October 1990, Mr. Ehrlich mailed a check for $576.07 to Simon. Mr. Sabin diplomatically reports that "there was no note." Although world population had increased by 800 million during the term of the wager, the prices for the five metals had decreased by more than 50%. And they did so for precisely the reasons Simon predicted—technological innovation and conservation spurred on by the market.
Mr. Ehrlich was more than a sore loser. In 1995, he told this paper: "If Simon disappeared from the face of the Earth, that would be great for humanity." (Simon would die in 1998.) This comment wasn't out of character. "The Bet" is filled chockablock with Mr. Ehrlich's outbursts—calling those who disagree with him "idiots," "fools," "morons," "clowns" and worse. His righteous zeal is matched by both his viciousness in disagreement and his utter imperviousness to contrary evidence. For example, he has criticized the scientists behind the historic Green Revolution in agriculture—men like Norman Borlaug, who fed poor people the world over through the creation of scientific farming—as "narrow-minded colleagues who are proposing idiotic panaceas to solve the food problem." [Emphasis added]
Mr. Sabin's portrait of Mr. Ehrlich suggests that he is among the more pernicious figures in the last century of American public life. As Mr. Sabin shows, he pushed an authoritarian vision of America, proposing "luxury taxes" on items such as diapers and bottles and refusing to rule out the use of coercive force in order to prevent Americans from having children. ...
At heart, "The Bet" is about not just a conflict of men; it is about a conflict of disciplines, pitting ecologists against economists. Mr. Sabin cautiously posits that neither side has been completely vindicated by the events of the past 40 years. But this may be charity on his part: While not everything Simon predicted has come to pass, in the main he has been vindicated.