Working Papers

Matt Ridley’s Rational Optimism

Matt Ridley discovers Julian Simon:

Furthermore it is possible, indeed probable, that by 2110 humanity will be much much better off than it is today and so will the ecology of our planet. This view — which I shall call rational optimism — may not be fashionable but it is compelling.

Rational optimism holds that the world will pull out of its economic and ecological crises because of the way that markets in goods, services and ideas allow human beings to exchange and specialise for the betterment of all. But a constant drumbeat of pessimism usually drowns out this sort of talk. Indeed, if you dare to say the world is going to go on getting better, you are considered embarrassingly mad.

If, on the other hand, you say catastrophe is imminent, you can expect a MacArthur Foundation genius award…

The more human beings diversified as consumers and specialised as producers, and the more they exchanged goods and services, the better off they became. And the good news is there is no inevitable end to this process.

As more people are drawn into the global division of labour and more people specialise and exchange, we will all become wealthier. Along the way, moreover, there is no reason why we cannot solve the problems that beset us — economic crashes, population explosions, climate change, terrorism, poverty, Aids, depression, obesity.

posted on 17 May 2010 by skirchner in Economics

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Its possible, maybe probable, that humanity will be better off in 2110 in economic terms.  Its extremely unlikely that the ecology of our planet will be better off unless there is a 180 degree turn in trends established since the industrial revolution.  Take any measure of the change in the health of the planet since 1750 and they are all markedly worse.  That is undeniable.

I strongly recommend you read Callum Roberts Unnatural History of the Sea.  We can argue about climate change, resource depletion, deforestation etc forever, but if there’s one place where the Simonites have no answer, its the world’s fisheries.  In many places the fish are simply gone.  Decades after fishing bans were introduced the fisheries haven’t recovered, ecosystems have permanently changed.  No amount of human ingenuity can change this.

Related question: If you believe that the price of commodities always declines in the long term, then surely Australia’s destiny as a quarry for Asia is fraught with danger?  The RBA routinely forecasts our terms-of-trade heading north on a straight line to infinity, yet I’m certain the economists making these same forecasts are disciples of Julian Simon.

Posted by .(JavaScript must be enabled to view this email address)  on  05/17  at  02:13 PM

“No amount of human ingenuity can change this.”

Property rights in fisheries already has.

“RBA routinely forecasts our terms-of-trade heading north on a straight line to infinity.”

Not really.  Official sector forecasts generally show a flattening out, albeit at a higher level.

Most economists are not disciples of Julian Simon, which is why they believe in things like scarcity rents in resources. Most economists have probably never heard of Simon.

The long-run decline prices will be driven in part by increased output, so Australia wins either way.

Posted by skirchner  on  05/17  at  03:51 PM

Can you please provide an example where property rights in fisheries has resulted in a complete recovery in fish stocks to pre-industrial levels, or even mid-20th century levels?

The northern cod fishery famously collapsed in the early 1990s.  A total ban on cod fishing has now been in place for almost 20 years and there has been no recovery in fish stocks.  How do property rights reverse this situation?

Not that I’m against property rights in fisheries, but many (most?) of the world’s fisheries are too far gone for property rights to have much of an impact.

As for commodities, if prices decline in the long run, but that’s offset by increased output, it makes for a much less profitable enterprise.  Billions in new investment will be required to develop new mines for lower grade, less accessible ore.  Australia may still “win” but we wouldn’t be getting the huge boost to national income we get from surging terms-of-trade.

Posted by .(JavaScript must be enabled to view this email address)  on  05/17  at  04:19 PM

If things are getting better, what is a secular do-gooder to do? The threat of catastrophe is needed to give their lives purpose. There is no Neo without a Smith.

Posted by .(JavaScript must be enabled to view this email address)  on  05/17  at  10:28 PM

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