It will surprise no-one that the bet’s payoff was highly dependent on its start date...Here's how the bet would have turned out since:
Simon was right but fairly lucky. There is nothing wrong with being lucky, of course, but compulsive Simon/Ehrlich-citers need to be reminded that it is no law of nature (let alone of rickety old economics) that commodity prices (inflation-adjusted or otherwise) trend inexorably downward, even over a decade.
Via MR, and by the way, I am a bit confused by Alex Tabarrok's take - he seems to say that Ehrlich was betting on "scarcity", but instead the "value" of commodities has since gone up as developing countries got richer, increasing demand. He is the economics professor, but isn't the cardinal precept of economics that scarcity and value are fundamentally linked?Update: Or not... Mark Perry responds:
I'm not so sure that Simon was just lucky. If Simon's position was that natural resources and commodities become generally more abundant over long periods time, reflected in falling real prices, I think he was more right than lucky, as the graph above demonstrates.
Stated differently, if Simon was really betting that inflation-adjusted prices of a basket of commodity prices have a significantly negative slope over long periods of time, and Ehrlich was betting that the slope of that line was significantly positive, I think Simon wins the bet.
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