Julian Simon and John Tierney Were Just Lucky, He Guesses

Michael Giberson

Cornucopian views on resources are back in the news a bit due to John Tierney’s column at the New York Times in which he reports the settling of a wager on oil prices entered into in 2005 with oil industry analyst/peak oil proponent Matt Simmons. In brief, Simmons bet Tierney oil prices would average $200 bbl (in 2005$) during 2010, oil prices were substantially lower than that in 2010, and Tierney won the bet.

But of course that bet, and the results of the more famous related bet between Julian Simon and Paul Erhlich, don’t settle arguments. Money may change hands, but there is no end to disputation.

At The Oil Drum, David Murphy writes: “Lucky Economists, Unlucky Scientists?”  Murphy makes a number of useful points as he stumbles toward some sort of conclusion that will help him protect his preexisting pessimistic views.  Curiously, the conclusion he comes to is that Ehrlich and Simmons and Simon and Tierney must all be foolish idiots, or at least that is the implication:

The bets made by Ehrlich and Simon as well as Simmons and Tierney were faulty because they assumed ceteris paribus conditions; that all other conditions aside from the one on which the bet is made (depletion in these cases) will not influence prices. In the real world, however, there are a number of factors that influence price. As a result, it is incorrect for Tierney to claim that his victory, or that of Simon, is a validation of the economists’ viewpoint on the price of commodities. The economists were lucky, and the scientists unlucky.

Murphy wants us to believe that these four gentlemen assumed that nothing else in the world would change over the five (Simmons-Tierney) or ten (Simon-Ehrlich) years of the wagers? C’mon, these aren’t a bunch of schoolboys betting their lunch money. Somehow I think we need to give them a little more credit than that.

Sure, two guys settling a public bet doesn’t establish what understanding of the nature of the world and society is most reflective of reality. But claiming that folks with opposing views are “just lucky” doesn’t seem like a useful way to advance understanding of the world, either.