Resources in general have become cheaper in inflation-adjusted terms — as well as relative to the cost of labor — over the last four decades. That’s all the more remarkable considering that the world’s population has massively expanded over the same time period.
Resource depletion has been a hotly debated topic 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. “Since natural resources are finite,” he noted some years later, “consumption obviously must ‘inevitably lead to depletion and scarcity’ … Petroleum is a textbook example of such a resource.” The late University of Maryland economist Julian Simon disagreed. In his 1981 book The Ultimate Resource, Simon argued that humans were intelligent beings, capable of innovating their way out of shortages. And so we have. Fracking, to give just one example, has enabled us to tap previously inaccessible oil reserves, thus turning the United States into a fossil-fuel super-power.
Marian Tupy and Gale Pooley's findings in a recently published paper, titled The Simon Abundance Index, confirms Simon’s thesis. They revisited the debate by looking at 50 foundational commodities covering energy, food, materials, and metals. Between 1980 and 2017, the real price of commodities fell by 36 percent on average. Also, due to productivity gains, the price of labor increases faster than inflation. Commodities that took 60 minutes of work to buy in 1980 took only 21 minutes of work to buy in 2017. Put differently, the time-price of commodities fell by 64.7 percent.
Listen to our editor, Marian L. Tupy, discussing his new study on the new Institute for Energy Research podcast here.