Published 23 August 2005, the Ludwig von Mises Institute article by Pierre Lemieux discusses the actual decline of resource prices–including “scarce” resources–and the reason: advances in human ingenuity. This supports our basic proposition on this web site, that the single best investment that could be made to create a prosperous world at peace is to give the five billion poor free access to the Internet so as to nurture and harvest their brainpower.
Mises Daily: Tuesday, August 23, 2005 by Pierre Lemieux
Until his death in 1997, economist Julian Simon predicted a continuous decline in resource prices. In 1980, he made a famous bet with environmentalist Paul Ehrlich. Simon’s bet was that a $1,000 basket of any five metals chosen by Ehrlich would be worth less (in constant dollars) 10 years later. Ehrlich lost. In 1990, the value of the basket at current market prices was down more than 50%. Ehrlich had to send a $576.07 check to Simon, representing the drop in the basket value. In fact, the prices of all the metals chosen by Ehrlich had fallen.
In his challenging 1981 book The Ultimate Resource, Simon showed that resource prices had generally decreased over time. The relative price of oil (in terms of other goods) has fallen by perhaps as much as two-thirds between the 1860s and today. During the same period, the price of oil in terms of salaries has decreased by more than 90%.