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Pierre Desrochers and Joanna Szurmak (2018) Population Bombed- Exploding the Link Between Overpopulation and Climate Change, Global Warming Policy Foundation, London.



Review essay
128 Journal of Prices & Markets
Pierre Desrochers and Joanna Szurmak (2018) Population Bombed: Exploding the Link
Between Overpopulation and Climate Change, Global Warming Policy Foundation,
Glenn Fox
University of Guelph
I started my studies in agricultural science at the University of Guelph in September, 1973. Our
curriculum included a course called “Agricultural Science and Man.1” One of our professors had
a poster in his ofce. This poster contained a drawing of an island, dominated by dark shades and
colours. Faceless, identical human shapes covered the land. The crowded humans on the land
had pushed some less fortunate humans into the water. This poster was a visual representation
of the content of the course. Human population has crowded the earth to the point that survival
was at risk. The Population Bomb (Ehrlich, 1968), and The Limits to Growth (Meadows et al,
1972) served as unofcial textbooks. My professors treated these books with reverence. If there
was a debate about these ideas, none of it found its way into our classroom. The Ehrlichs and the
Meadows were describing the world as it would be. Some years later, I came across the work of
Julian Simon and learned that there was another perspective.
The rival factions in this debate have been given many labels, including the Optimists
and the Pessimists, the Biological perspective and the Economic perspective, the reexivists
1 Remember, it was the 70s. People used names like that for courses at that time.
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and the anti-reexivists, the conservationists and the technologists and the Survivalists and
the Cornucopians or Prometheans. Desrochers and Szurmak settle on calling the two sides
the pessimists and the optimists. They contribute on the optimist side of the debate, joining a
tradition which includes Simon (1981, 1990), (Lomborg (2001), Anderson (2004), Goklany
(2007), Ridley (2010) and Pinker (2011, 2018). Population Bombed is an important and
innovative contribution to this debate. The authors pose challenges to both sides, and, in the end,
sketch a path to resolution of this long intellectual feud.
Historical and pre-historical examples of social collapse have fascinated social theorists.
“Why did the X empire fail?” The population debate asks if what happened at these local or
regional scales can happen at a global scale. The rst phase of the population debate was about
the adequacy of food production relative to the size of the global human population. Then the
debate shifted to prospects of increasing natural resource scarcity as population growth and
economic progress proceeded. The next phase focussed on the pressure that economic growth put
on ecological systems. The current concern is the effect of economic and population growth on
climate. Desrochers and Szurmak trace the debate to Aristotle and Plato, but their emphasis is on
literature since Petty in 1682, Malthus in 1998 and Godwin in 1820.
Chapter 1 is important for readers who are familiar with the three earlier phases of
this debate but who may not be aware of the recent connections to climate. It also provides an
overview of the six chapters to follow.
Chapter 2 is a masterful summary of what the authors call the optimist and the pessimist
discourses. I thought that I was familiar with most of the contributions to this topic. But Pierre
and Joanna introduced me to many writers whose work was new to me. I was surprised to see the
number of contributions to this literature made by economists, mostly on the pessimist side.
Chapter 3 is empirical. The pessimists have developed models to make predictions
about pending social and environmental outcomes. The optimists have focussed on analysis
of historical trends. The pessimists’ predictions have anticipated social collapse as human
population surpassed their estimates of planetary carrying capacity. The optimists’ data show
favourable trends in measures of human well-being and in levels of environmental quality. They
conclude that past predictions of the pessimists have not come true.
Chapter 4 draws on Professor Desrochers’ previous work in industrial ecology,
particularly his research on the transformation of waste streams into commercial products in the
history of manufacturing. The chapter begins with a discussion of the Environmental Kuznets
Curve which describes the relationship between environmental quality and income per person.
According to this model, increases in income per person initially reduce environmental quality.
As income increases, however, this relationship peaks and then declines as income per person
increases. Increased efciency in the use of raw materials, including the transformation of waste
streams into product streams help explain the Kuznets curve. One of the critical elements of
the optimist perspective is that innovation, resource discovery, increases in capital stock and
other improvements in production practices push back the material limits that would otherwise
constrain growth in human population. This is a pivotal point of contention with the pessimist
130 Journal of Prices & Markets
view. The pessimist counterargument might be “So far so good doesn’t mean that disaster isn’t
waiting around the corner.” I will return to this point later in this review, but, at this point, let
me suggest that a more complete theoretical basis for the optimists’ claim would strengthen
the mostly empirical case that is made by the optimists. Here is where the Austrian economics
perspective can be helpful.
The thesis of chapter 5 is that the pessimists, having been unsuccessful with their
predictions of emerging natural resource scarcity or deteriorating indicators of environmental
quality, have moved the yardsticks to climate. Climate, according to this view, is a planetary
limit2 that is reaching a critical threshold. It is the capacity of the environment to serve as a
sink for by-products of human production and consumption that is the ultimate binding limit to
population growth.
Chapter 5 also includes an excellent critique of the IPAT identity, as well as calculations
of environmental footprint and recent attempts to measure planetary boundaries. The chapter
provides a synopsis of the soil erosion scare of the mid to late 20th century. I conducted research
on this topic at the beginning of my career at Guelph. The Canadian Senate Standing Committee
on Agriculture and Natural Resources released Soil at Risk in 1984. I joined the faculty at
Guelph in 1985 and my rst research grant nanced supported a project on the economics of
soil erosion. The Senate Committee report claimed that Canadian agriculture faced an imminent
crisis. Soil erosion was an immediate threat to the viability of agricultural production in Canada.
The research that my students and I and other agricultural economists in Canada and the United
States conducted found no evidence of a systemic threat to productivity from soil erosion3 in
North America. The remainder of chapter 5 discusses claims and counter-claims about the
relationship between population growth and climate change.
Chapter 6 draws on concepts from public choice theory and the sociology of science
literature to resolve a paradox: Why are authors in the pessimist camp so reluctant to change their
position based on the poor track record of their predictions? The chapter examines the economic
incentive structure of scientic research. The authors explain that, from a professorial point of
view, there is no such thing as a bad crisis. The bigger the crisis the bigger the research grants.
They invoke Ron Bailey’s theory of the iron triangle. Researchers need crises to justify research
funding. Media need crises to sell advertising space, in print media, and time in broadcast media.
And interest groups need crises for fundraising. Most people seem to be aware of the incentives
for propagating alarm for media and interest groups. But repeated public opinion surveys
measuring trust of occupational groups suggest that it is not common knowledge that professors
also respond to incentives. Chapter 6 peaks behind the curtain on the peer review process, which
many non-academics treat as synonymous with validation. The authors discuss the work of Ivan
Oransky and his colleagues which has documented widespread deviations between the ideal of
2 Rockstrom et al (2009), writing in the pessimist tradition, develop a model that adds 6 other planetary boundaries
to climate.
3 On the other hand, we found that soil erosion in Ontario did give rise to signicant o-farm eects in the form of
reduced water quality as displaced soil and nutrients from farms were transported downstream from erosion sites. his
of this debate.
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scientic objectivity and the actual practice of science.
Desrochers and Szurmak draw on recent ndings in the social psychology literature
that have identied cognitive limits and biases that inuence the way that people perceive and
interpret information. They use the concepts of illusion of understanding bias, conrmation
bias, motivated skepticism, naïve realism, the false consensus effect, groupthink and the role of
prestige to explain the reluctance of the pessimists to adjust their views when confronted by the
empirical trend analysis of the optimists. The chapter concludes with a discussion of what the
authors call “the epistemic culture of biology.” The authors contend that the disciplinary habits
which serve biologists well in their own eld fail them when they venture in to social science
Chapter 7 concludes the book. It also offers hope for reconciliation between the two silos
of belief described in earlier chapters. The authors ground their optimisms in the examples of
two potential role models: Ted Nordhaus and Adam Frank. Nordhaus has journeyed from the
pessimistic side to an understanding if not an embrace of the optimistic view. Frank, a biologist,
is described as a transformative optimist. This nal chapter suggests that some middle ground
exists4 in this debate.
Population Bombed is a book about rival belief systems. It is a book about ideology.
Most of the authors in this literature have viewed their contributions as empirical. “Here are
the facts.” “And here is what those facts mean.” “And these facts show that we should do X.”
But both sides appeal to the same world history, to the same facts. But people perceive facts
through lenses of belief, through ideology. I am using the word ideology in a non-pejorative
way. And I am offering it as a universal claim, as a characterization of human nature. Every
person has a belief system. Every person is ideological. People have beliefs about how society
is constituted and about how it came to be constituted. They also have beliefs about how society
should be constituted and about the means or the processes to be used to realize their normative
visions. This is what I mean by ideology. Jonathan Haigt (2012, p. 270) uses the term “moral
systems.” Christian Smith (2003) uses the term “moral matrixes.” Ideology, in the universal and
non-pejorative sense the I am using the word, is at the core of the debate that Desrochers and
Szurmak examine. Pessimists believe that the biological concept of carrying capacity applies
to the population of human beings and their habitat, earth. They are thinking metaphorically. A
breeding population of fruit ies in an enclosure with a xed food supply will grow rapidly and
then collapse when that food supply is exhausted. And so it will be with people and the earth.
The optimists believe either that there is a carrying capacity of earth, but that it is not proximate,
or, that the concept of carrying capacity does not apply to humans in the way that it applies to
fruit ies. The optimists claim one of two categorial differences between the biologists’ fruit
y experiment and the people/earth relationship. Either the carrying capacity of earth relative
to human needs is much larger than the capacity of the enclosure with the xed food supply is
relative to the growth of a population of fruit ies. Or, people are not like fruit ies.
4 Desrochers and Szurmak mention two other examples of migration between the two camps earlier in the book. One
is the transformation of Marxist views over time. Marx and Engels (Population Bombed, p. 36, p. 48) wrote from an
optimist perspective, but more recent Marxist literature has tended to adopt the pessimist view. And Bjorn Lomborg
started out with the intention of proving Julian Simon wrong, but ended up being persuaded by the data.
132 Journal of Prices & Markets
There are logical similarities in the positions of both sides of the population debate.
Both sides appeal to “if present trends continue” arguments. Both sides acknowledge scarcity
as a constraint to human action. Both sides invoke a trust proposition. The pessimists endorse a
trust of science and government proposition. The optimists endorse a trust of human adaptation
proposition. And there are important differences in the ways that each side uses trend arguments
and characterizes the scarcity constraint. As I mentioned earlier, some authors have labeled
the pessimist side in this debate the biologist or ecological perspective and the optimist side
the economist perspective. One way of thinking about ecology is as the study of how living
organisms adapt to scarcity. And economics is often seen as the study of how humans adapt
to scarcity. But there are important differences in the nature of the implied adaptations. Both
ecologists and economists accept that individual humans face scarcity in choosing among
alternative courses of action. We all have 168 hours per week of time to allocate among our
various activities. I can’t eat the sandwich that I made for lunch more than once. If I drink the
last cup from the teapot, I can’t have another cup unless I make more tea. Both sides in this
debate would treat those statements as trivially self-evident. But scarcity also manifests at a
community or aggregate level. Under the pessimist view in this debate, the actions of all humans
taken as a group face a collective scarcity that is not perceived by individuals. According to the
pessimist view, because individuals do not perceive this category of scarcity accurately, or maybe
even at all, they act as though it does not exist, as though it is not real.
This special category of scarcity is usually characterized in terms of carrying capacity.
There is are nite limits to the number of people that the material environment that constitutes
earth, can sustain. At one level, both sides believe this. The difference in beliefs has to do with
the proximity of these limits relative to current activities of humans. One side believes that these
limits are close, that individual humans are not able to perceive this and that the consequences of
transgression of the limits are non-linear, irreversible and severe. The other side believes either
that the limits are not close or, alternatively, that there will be warning signs will tell us when we
are approaching a limit and that these warning signs will encourage adaptation.
Both sides appeal to “if present trends continue” arguments. The optimists present data on
a range of human quality of life and ecological condition variables that show improving trends,
as least for nation states at or above the turning point on the Kuznets’ curve. The pessimists
develop estimates of habitat carrying capacity and present trend data that, if projected, will
exceed the estimated capacity level. The trust proposition of the pessimists is that the scientists
who have estimated the carrying capacities got it right, both in identifying the correct dimensions
of carrying capacity and calculating the critical levels of those capacities. They also invoke a
thrust proposition that governments and international agencies will faithfully and effectively
apply the recommendations of the scientists. The trust proposition of the optimists is that people
have found ways to adapt to changing conditions of scarcity in the past and that they will
continue to do so in the future.
The optimists’ trust proposition modies the biologists’ fruit y metaphor. It claims that
humans are qualitatively different from other animals. Matt Ridley ((2010, pp. 56-57) put it this
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There is strikingly little use of barter by any other animal species. There is sharing
within families, and there of food-for-sex exchange in many animals including
insects and apes, but there are not cases in which one animal gives an unrelated
animal one thing in exchange for a different thing.
The optimists also have a different conceptualization of natural resources than the pessimists do.
The pessimists argue, with full justication, that the matter that makes up the habitat of humans,
is nite. The organic and inorganic material of the earth is xed, as is the ow of solar radiation
that reaches the planet’s surface. Humans cannot consume more than the quantity of matter or the
ow of solar radiation. But this is not what the optimists have in mind when they speak of natural
resources. Only a small fraction of the organic and inorganic matter of the earth constitutes
natural resources. That fraction consists of the combinations of matter and solar radiation that
humans have gured out how to use to their advantage. Paul Romer (2015) discusses this
perspective in terms of combinations of elements. Using the number of elements5 in the periodic
table, Romer explains that there are 100x99 ways to combine any two elements. There are,
however, 100x99x98x97 ways to combine any 4 elements.6 His point is that the existing human
population has only explored a small fraction of the combinations of elements available in our
habitat. It is only the sub-set of those combinations that have been discovered to be useful by
humans that constitutes the class of natural resources. Romer’s conclusion is that “there have
been too few people on earth and too little time since we showed up to have tried more than a
miniscule fraction of all the possibilities.”
The optimists also differentiate humans from other animals on a dimension that they do
not articulate well. This is the dimension of the variation across individuals. Humans are more
varied than other animals. And instances of rare individuals with extreme attributes are important
to the optimists’ narrative. Through the process of voluntary exchange of unlike objects that
Ridley claims is uniquely human, these individuals with extreme attributes can have an impact
on large numbers of their fellow humans. Entrepreneurial alertness, creative destruction,
discovery, competition as a discovery procedure, the price system accelerate evolution and
adaptation. Simon and others in the optimist tradition emphasize the importance of exceptional,
creative individuals. And the larger the human population, the higher is the probability of an
exceptional individual being born. Exceptional individuals have exceptional ideas. And the
application of those exceptional ideas pushes back the carrying capacity constraint.
This journal publishes scholarship in the Austrian subjectivist tradition. What does
Population Bombed have to do with Austrian economics? Partisans in this debate, for the
most part, have not been adherents of the Austrian tradition. I think that there are at least 5
contributions that the Austrian perspective can make to this debate. The optimists maintain that
human innovation acts to relax the constraints imposed by a nite biophysical environment. But,
to the pessimists, this claim looks like a leap of faith. Historically, Austrian have made signicant
contributions to our understanding of entrepreneurial alertness and the division of labour that
5 Which he treats as 100 for illustrative purposes.
6 For a total of 94 million combinations.
134 Journal of Prices & Markets
could lower the faith threshold of the optimists’ trust proposition. This literature provides a
theoretical foundation for the optimist claim. It also provides an explanation of the paradoxical
Simon result of decreasing scarcity of natural resources as economic growth proceeds. Hayek’s
(1978) characterization of competition as a discovery procedure explains the role of the price
system as a testing ground for hypothesized innovations.
One of the central claims of the pessimists is that human society is getting perilously
close to thresholds of biophysical limits of the natural world and only the enlightened scientic
experts can see this. This is an important claim. And, if true, it requires serious examination of
alternatives to the existing situation. One of the alternatives that has been systematically ignored
or rejected by the pessimists is that the price system, which normally provides a social global
early warning system of impending scarcity. One of the most incisive criticisms of the Limits to
Growth analysis was that the systems dynamics model did not include a feedback mechanism in
the form of prices. A model of economic growth without prices is like a car without a gas gauge.
The driver has no indication that the ride is almost over. Economists are expected to talk about
the price system, but the Austrian perspective on the price system is of particular importance
in this context. Hayek (1945) differentiated between two types of human knowledge. He called
one type scientic knowledge and the second type “knowledge of the particular circumstances
of time and place.” Scientic knowledge is objective, mostly coherent and centralized. His
second category of knowledge is subjective, incoherent and distributed among the individual
members of society. He explains that what he calls “the marvel of the price system,” is that it can
transform knowledge of the particular circumstances of time and place into objective, socially
coordinating knowledge, in the form of prices. He used the example of tin to illustrate that,
because of the information that is embodied in prices, users of tin start looking for alternatives,
or cut back on consumption or start looking for new sources of tin. The “marvel,” according to
Hayek, is that people don’t have to understand the technical details of why or how tin became
more scarce. They learn from observing an increasing price that some type of limit is being
approached. Hayek did not maintain that this early warning system is perfectly prescient, even
though he has been falsely accused of holding this view. He did argue that the price system is a
necessary institution, in the sense that it alone can transform fragmented, sometimes subjective,
conicted knowledge which is not directly observable in any other way, into objective, if
imperfect, information in the form of prices.7 James Buchanan (1962) once argued that the
primary focus of economic research should be on discovering ways to extend voluntary exchange
relationships into realms where they do not currently exist. If there is a gap in our social early
warning system, as the pessimists maintain, it is at least worth considering how the price system
could be extended in the relevant dimensions to help us mobilize the knowledge that we need in
a way that prompts people to touch the brakes. But, as long as the pessimists embrace a blanket
condemnation of the price system as the reason for our headlong plunge into the abyss, I am not
Recent contributions to the Austrian economics literature on crony or political capitalism
also have the potential to help with the resolution of this debate. The pessimist side rejects
7 Hayek (1945) does not explain the institutional mechanism through which this knowledge transformation takes
place. Barnett (1992) provided the required explanation. Private property and freedom of contract serve as the legal
and institutional foundation of the process that Hayek described.
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private ownership of resources and the coordination of resource use through the price system and
idealizes collective ownership of the means of production. The optimist side idealizes individual
or voluntary group ownership. But actual human societies, now and historically, do not conform
to pure or ideal types. Actual human societies exhibit mixtures of ownership arrangements. If
ideology has framing effects, as current research in social psychology suggests, then protagonists
can interpret historical data in a way that is consistent with their world view, but which may be
subject to partiality. Pessimists look at western market economies and see them as ideal type
private property regimes They observe that environmental pathologies exist. Optimists look
at centrally planned or collectivist states and see them as collective ownership of the means of
production societies. They observe that environmental pathologies also exist (eg. Hill, 1992). A
more balanced perspective is that crony or political capitalism is endemic to many modern and
past societies, and that the causal interpretation of environmental and social pathologies is more
complex than either side in this debate tends to admit. Wolf’s (1979, 1980) set of diagnostic
categories, which includes market as well as non-market or policy failures, offers a more
balanced approach. If both sides in this debate interpreted actual historical economic and social
systems on a continuum and not as binary ideal type categories, this would be a step in the right
The Austrian contributions to the Economic Calculation Debate also can reinforce
the recent literature on crony capitalism. Broad calls on the pessimist side for fundamental
reorganization of the modern techno-capitalist economic system for treating the natural world
as a commons ignore the information and incentive problems that are associated with this
ownership structure. The proposed abolition of property rights would come at a cost. Property
rights can be the ally of sustainable resource management (Brubaker (1995), Anderson and
Leal (1992, 2001, 2015), Dales (1968), Bate (2001)). The abolition of private property makes it
impossible for the price system to transform the fragmented, subjective, conicted “knowledge
of the particular circumstances of time and place” into social coordinating objective knowledge
(Hayek, 1945, Barnett, 1992).
Intellectual courage will be required if the gap between the two contending solitudes is to
be closed. An emerging perspective in the Austrian environmental economics provides a template
for this type of courage. Dolan (2006), Adler (2009) and Dawson (2013) have proposed an
Austrian property rights approach to anthropogenic climate change. Their approach is theoretical,
encompassing economic and legal theory. And this approach is embryonic. But it is courageous
in that it takes as given that there is a scientic claim that human activities inuence climate and
it maintains that a decentralized property rights-based system could be used to resolve conicts
over competing claims to use of the atmosphere. This literature is likely to offend both sides in
this debate. It is therefore difcult for me not to like it. It is a template for progress in that it takes
the core ideas of both sides of the debate seriously and attempts to craft a logically and ethically
consistent approach to conict resolution. More generally, the emerging Austrian environmental
economics literature, with leading contributions by Rothbard (1982) and Roy Cordato (1992),
offers a distinct and useful conceptualization of environmental problems. Rothbard (1979) and
Cordato (2004) reject diagnoses of environmental problems based on efciency criteria and
suggest that we should see them as disagreements among people about how elements of the
136 Journal of Prices & Markets
natural world should be used. This implies that the path to solving environmental problems is
one of conict mediation, which is worth considering as an alternative to the polarization of
contending views in this debate.
Desrochers and Szurmak locate themselves in the optimist camp. But I think that they
challenge both sides in the hope that resolution can be achieved. For the optimists, their claim
that human innovation, discovery and ingenuity can forestall the natural limits and constraints
feared by the pessimists needs further elaboration to overcome the pessimists’ perception that
this is a leap of faith. The Austrian literature on entrepreneurial alertness and on the nature of
competition as a discovery procedure and the emerging Austrian environmental economics
literature have much to contribute to this project. The challenge to the pessimists is to take more
seriously the optimists’ perception of the trust in science and government proposition. They need
to consider a more realistic model of the relationship between science and politics. Their claim
that the institution of private property and voluntary cooperation within the price system needs to
be fundamentally reformed needs to be evaluated with a deeper appreciation of the information
and incentive problems that might arise under their proposed alternative. And, for both sides,
I would add the challenge of Buchanan’s proposal to seek to expand the scope of voluntary
exchange relationships among property owners,8 with a focus on the specic fears of under-
appreciated thresholds named by the pessimists.9
There is one point that Julian Simon made that seems to be underappreciated by both
sides in this debate. He conditioned his optimism on one specic feature of social organization.
He insisted that for the processes of innovation, discovery and adaptation to fulll their potential,
people had to be free. If people are not free, then Simon’s optimism evaporates.
8 Outside the world of Austrian economics, the Free Market Environmentalism literature pioneered by John Dale
(1968) and Terry Anderson and Donald Leal (1992, 2001, 2015) also occupies some fertile middle ground for the
reconciliation project.
9 Recent work by Aliakbari and McKitrick (2018) is an example of what I have in mind.
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A re we running out of resources? That's been a hotly debated question since the publication of Paul Ehrlich's The Population Bomb in 1968. The Stanford University biologist warned that population growth would result in the exhaustion of resources and a global catastrophe. University of Maryland economist Julian Simon, in contrast, argued that humans would innovate their way out of resource shortages. He believed that people were the "ultimate resource" that would make other resources more plentiful. In this paper, we revisit the main points of contention in the debate regarding availability of resources and their relationship with population growth. Using the latest price data for 50 foundational commodities covering energy, food, materials, and metals, we propose a new way of measuring resource availability based on four concepts. First, the time-price of commodities allows us to measure the cost of resources in terms of human labor. We find that, in terms of global average hourly income, commodity prices fell by 64.7 percent between 1980 and 2017. Second, the price elasticity of population (PEP) allows us to measure sensitivity of resource availability to population growth. We find that the time-price of commodities declined by 0.934 percent for every 1 percent increase in the world's population over the same time period. Third, we develop the Simon Abundance Framework, which uses the PEP values to distinguish between different degrees of resource abundance, from decreasing abundance at one end to superabundance at the other end. Considering that the time-price of commodities decreased at a faster proportional rate than population increased, we find that humanity is experiencing superabundance. Fourth, we create the Simon Abundance Index, which uses the time-price of commodities and change in global population to estimate overall resource abundance. We find that the planet's resources became 379.6 percent more abundant between 1980 and 2017. On the basis of our analysis of the relationship between resource availability and population growth, we forecast that the time-price of commodities could fall by a further 29 percent over the next 37 years. Much will depend on policies and institutions that nations pursue. For the time-price of commodities to decline and resource abundance to increase, it is necessary for market incentives and the price mechanism to endure. When prices of commodities temporarily increase, people have an incentive to use resources more efficiently, increase their supply, and develop cheaper substitutes.
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The aim of this paper is to outline and defend an Austrian policy response to climate change. A privatised climate change policy, based on Austrian welfare economics, is the only way to defend to the greatest possible degree the liberties both of fossil fuel users and people whose property rights will be violated if carbon emissions cause climate change. Neoclassical and ‘Post-Austrian’ analyses of climate change are both theoretically unsound and impractical, in requiring for their implementation a foundation in reliable scientific knowledge that is not available. Anthropogenic climate change is a putative interpersonal conflict rather than market failure. The use of fossil fuels should be subject to side-constraints designed to avoid the infringement of other people’s property rights. Tort litigation would protect these rights, where necessary. Litigation would also promote the public understanding and even the advancement of climate science.
Two forms of uncertainty in climate policy are the wide range of estimated marginal costs and uncertainty over credibility of rival information sources. We show how a recently-proposed solution to the first problem also helps address the second. The policy is an emissions tax tied to average temperatures, coupled with permits that exempt the emitter from paying the tax in a future year. It has been shown that the resulting tax path will be correlated with future marginal damages. It has been conjectured that the permit prices will yield unbiased forecasts of the climate, which, if true, would address the second uncertainty. We confirm the conjecture by describing a trading mechanism that converges on unbiased forecasts if traders are risk-neutral. Risk aversion slows down but does not prevent convergence. We also show that the forecasts are more likely to be sufficient statistics the stronger the consensus on climate science.
Along with the renewed interest in the Austrian school of economics over the last two decades, important advances have been made in applying its princples to concrete issues that typically face market economics. However, very little has been done in the area of externalities and the concept of social efficiency. The overarching purpose of this book is to establish a sound theoretical basis for further empirical and public policy analysis in the area of externalities. In order to do this, a general theory of welfare economics is required. The author offers an alternative to the conventional neoclassical welfare paradigm -- his construct does not include perfect competition or general equilibrium. After the author develops his theory of welfare economics, he interprets externalities in light of the theory and discusses policy remedies and directions for further research.