FRIDAY GRAPH: A CLIMATE-CHANGE DOOMSAYER BET

 Don Boudreaux masterfully continues the Julian Simon tradition in his WSJ article “More Weather Deaths? Wanna Bet?”, according to Mark Perry in his blog Carpe Diem:

Writing recently in the Washington Post, environmental guru Bill McKibben asserted that the number and severity of recent weather events, such as the tornado in Joplin,Mo., are too great not to be the result of fossil-fuel induced climate change. He suggested that governments’ failure to reduce emissions of greenhouse gases will result in more violent weather and weather-related deaths in the future. And pointing to the tragedy in Joplin, Mr McKibben summarily dismissed the idea that, if climate change really is occurring, human beings can successfully adapt to it.

“There’s one problem with this global-warming chicken little-ism”, Perry writes.  “It has little to do with reality. National Weather Service data on weather-related fatalities since 1940 show that the risks of Americans being killed by violent weather have fallen significantly over the past 70 years.”

Perry notes that:

The annual number of deaths caused by tornadoes, floods and hurricanes, naturally, varies. For example, the number of persons killed by these weather events in 1972 was 703 while the number killed in 1988 was 72. But amid this variance is a clear trend: the number of weather-related fatalities, especially since 1980, has dropped dramatically.

For the 30-year span of 1980-2009, the average annual number of Americans killed by tornadoes, floods and hurricanes was 194 – fully one-third fewer deaths each year than during the 1940-1979 period. The average annual number of deaths for the years 1980-2009 falls even further, to 160 from 194, if we exclude the deaths attributed to Hurricane Katrina, most of which were caused by a levee that breached on the day after the storm struck land

This decline in the absolute number of deaths caused by tornadoes, floods and hurricanes is even more impressive considering that the population of the United States more than doubled over these years – to 308 million in 2010 from 132 million in 1940.

 

 This is Don Boudreaux’s bet:

“So confident am I that the number of deaths from violent storms will continue to decline that I challenge Mr. McKibben – or Al Gore, Paul Krugman, or any other climate-change doomsayer – to put his wealth where his words are. I’ll bet $10,000 that the average annual number of Americans killed by tornadoes, floods and hurricanes will fall over the next 20 years. Specifically, I’ll bet that the average annual number of Americans killed by these violent weather events from 2011 through 2030 will be lower than it was from 1991 through 2010.

“If environmentalists really are convinced that climate change inevitably makes life on Earth more lethal, this bet for them is a no-brainer. They can position themselves to earn a cool 10 grand while demonstrating to a still-skeptical American public the seriousness of their convictions. But if no one accepts my bet, what would that fact say about how seriously Americans should treat climate-change doomsaying? Do I have any takers?”

 

 

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Economic Wagers and the ‘Ultimate Resource’

A recent article in the New York Times by John Tierney about a current ‘energy cornucopia’ and his winning of a bet on energy resources has brought back to light the famous Simon-Ehrlich wager of 1980 – and sparked a mini-furore in the economic blogosphere and a possible third bet of a similar vein.

Bet 1

Convinced claims made by environmental doom-monger Paul Ehrlich that population growth would quickly outrun the supply of food and natural resources were false, Julian Simon had Ehrlich choose five commodity metals: Simon bet that their prices would go down in real terms, Ehrlich bet they would go up.

The chosen commodities, collectively costing $1,000 in 1980, fell in price by over 57% over the following decade. In October 1990 Ehrlich mailed Simon a cheque for $576.07.

Bet 2

Then in 2005, following in the footsteps of his friend and mentor Julian Simon, John Tierney accepted a bet for $5000 with Matthew Simmons (a former member of the US Council of Foreign Relations and author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy) that the average price of oil for the year 2010 would be less than $200 per barrel.

Tierney and Julian Simon’s widow Rita (who was so happy to see her husband’s tradition carried on that she shared half the bet) were sent their winnings on January 1 this year.

Bet 3?

Since Tierney’s article was published, economist Donald Boudreaux has been trying to organise terms for a third bet in a similar vein with Brad DeLong after DeLong foolishly nominated Tierney, Boudreaux and Mark Perry for the ‘stupidest man alive’ following Boudreaux and Perry’s support of the Tierney article.

No bet

In a comment on a blog I wrote titled Has the ‘Peak Oil’ Drama Peaked?, Steve W wrote that he had challenged Jeannette Fitzsimons to a bet along the Simon-Ehrlich lines during a debate… and that she refused.

The ‘ultimate resource’

Amusing and instructive as it may be, if you put all the gambling to one side it is the ‘ultimate resource’ principle that Julian Simon himself developed in his 1981 book of the same name that is the key to these arguments.

It is a principle that I subscribe to – that humans’ capacity to invent and adapt will overcome scarcity of natural resources.

One way of looking at the basic economics behind the principle is that as a resource becomes scarce, its price will rise. This creates an incentive for people to exercise intelligence and creativity to discover more of the resource, economise on its use and develop substitutes.

In a broader context, it is the ultimate resource because it is limitless – we are constantly discovering solutions to problems once thought insurmountable – and it will never run out.

Mark Perry puts it well:

…the “ultimate resource,” i.e. the human mind, human capital, human ingenuity, and human innovation, are infinitely abundant, and will meet, address and overcome any scarcity in natural resources. The bottom line as I understand Julian Simon is this: we’ll never run out of the ultimate resource. And that is why limited or finite supplies of natural resources have never, and will never, result in any significant binding constraints or limits on human progress, economic growth, or the continual increases in our standard of living, wealth and abundance.

It is also a positive way to think. We live in an age (or perhaps it has always been this way) where people lurch from one fearful impending doomsday scenario to another. If it’s not the ‘silent spring’ or the Y2K catastrophe, it’s ‘peak oil’, ‘acid rain’ or ‘global warming’.

It is reassuring that the historical record shows that humans can and do overcome the obstacles we face.

And of course the ‘ultimate resource’ has countless applications beyond oil and metals.

Consider the amazing work of the American genetic scientist and Nobel Laureate Dr Norman Borlaug who created a high-yield dwarf variety of disease-resistant wheat which, when coupled with modern agricultural techniques, solved the India-Pakistan food crisis of the mid-1960s; turned Mexico into a major wheat exporter; dramatically improved the lot of many other developing nations; and was eventually credited with saving over 1 billion people from dying of starvation.

This was a triumph of the ‘ultimate resource’.