Simon Won The Bet: Borlaug and Reagan Made It Possible

The time and freedom to innovate are keys to creating prosperity.

In 1990 Julian Simon won $576.07 on a 10-year bet with Paul Ehrlich on the inflation-adjusted prices of five basic metals. Real prices fell by 36 percent during a decade that also witnessed the largest increase in global population. A 36 percent decrease in price means you can now get 56 percent more for the same amount of money. From 1980 to 1990, global population increased by 19 percent or 850 million people. Global resource abundance can be measured as personal resource abundance multiplied by population. From 1980 to 1990 the global resource abundance of these five metals increased by 85.6 percent ((1.56 x 1.19) - 1). Every one percent increase in population corresponded to a a 2.95 percent increase in global resource abundance of these metals. (56% ÷ 19%).

While Simon had a deep understanding of the historical facts and the relationship between freedom and resources, he didn’t actually have much to do with this astonishing increase in abundance. It was accomplished by millions of entrepreneurs and the freedom to innovate. Two of these key figures were Ronald Reagan and Norman Borlaug.

Ronald Reagan The freedom to innovate found a new birth in 1981 when Ronald Reagan became president. His efforts to remove government price controls on energy, lower income tax rates, reduce regulation, and advance a vision of human freedom and opportunity dramatically changed the U.S. and the world.

Reagan’s vision of using innovation and entrepreneurship to defeat the USSR freed millions of people in Russia and Eastern Europe from the dystopia of communism.

Free markets and entrepreneurs energized the world under Reagan. The nominal price of oil fell from $28.82 a barrel in January of 1981 to $13.80 a barrel in January of 1989. During this same period nominal blue-collar hourly compensation (wages and benefits) increased from $9.12 an hour to $13.58 an hour. This would suggest that the time price of a barrel of oil decreased by 68 percent from 3.16 hours in 1981 to 1.02 hours in 1989. For the time it took to earn the money to buy one barrel in 1981 you would get 3.12 barrels in 1989. Oil abundance increased by 212 percent.

Norman Borlaug During the 1940s the Iowa-born crop scientist Norman Borlaug toiled in the fields of Mexico with intense focus trying to develop a new wheat variety that could resist stem rust fungus. After meticulously planting and observing 110,000 plants, he found 4 that indicated resistance. He then cross-bred these seeds with 8,156 combination over seven years until he finally discovered one that produced a high yield, fungus resistance, short-stem wheat. By 1963, 95 percent of Mexico’s wheat was Borlaug’s variety and Mexico’s wheat harvest grew six times larger than it had been when he first set foot in the country nineteen years earlier.

In the 1960s he shifted his focus to India. In 1966 India was on the verge of mass starvation. After introducing Borlaug’s wheat, productivity increased by almost 50 percent in 1968. By 1974, wheat harvests had tripled and India became a net exporter of the crop.

In 1970, Borlaug was awarded the Nobel Peace Prize for his accomplishments. PBS recently aired a program on the life of Borlaug. Please watch the story of this incredible human being.

Borlaug gave the world two things: food and time. Abundant affordable food allowed people much more time to devote to learning and creating and discovering new valuable knowledge. New knowledge shows up both in the products and services we enjoy every day and higher incomes. When we add knowledge to atoms we make them more valuable and more abundant.

Julian Simon took home the check, but we all enjoy the benefits of entrepreneurial creativity. We can encourage this growth in abundance by advancing human freedom and respecting everyone’s potential to create and contribute.

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You can learn more about these economic facts and ideas in our new book, Superabundance, available at Amazon. Jordan Peterson calls it a “profoundly optimistic book.”

Gale Pooley is a Senior Fellow at the Discovery Institute and a board member at Human Progress.