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01 / 05
The Most Important Check in Economics

Blog Post | Mineral Production

The Most Important Check in Economics

The Simon–Ehrlich wager and why predictions of resource scarcity keep getting it wrong.

Summary: A famous bet between Julian Simon and Paul Ehrlich illustrates two ways of thinking about resources and human ingenuity. Ehrlich thought of resources as a fixed pie, while Simon believed that human beings would find ways to make resources more abundant. As Simon predicted, thanks to markets and human ingenuity, the resource prices that Simon and Ehrlich bet on fell over a decade.


One of the most important checks ever written in economics was for $576.07.

It arrived in the mailbox of Julian Simon, the University of Maryland economist and Cato Institute senior fellow, on an October morning in 1990. The envelope was plain. There was no return address. Inside was a check from Paul Ehrlich. Ehrlich, who died last week, was the Stanford biologist and author of the bestselling 1968 book The Population Bomb.

That small check settled one of the great arguments of the modern age.

Ehrlich had spent years warning that population growth would outrun the Earth’s resources, bring rising scarcity, and push humanity toward disaster. Simon believed the opposite. He argued that more people did not simply mean more mouths to feed. It also meant more minds to think, invent, and solve problems.

The dispute became so bitter that Simon proposed a bet.

“Pick any raw material,” he told Ehrlich, “and choose any future date. I’ll bet the price will go down.”

Ehrlich accepted. He and two colleagues selected five metals: copper, chromium, nickel, tin, and tungsten. They priced a basket of those commodities on Sept. 29, 1980, and agreed to compare the inflation-adjusted price 10 years later. If the real price rose, Simon would pay Ehrlich. If it fell, Ehrlich would pay Simon.

Ehrlich was certain that population growth would make resources scarcer and therefore more expensive. Simon was certain that human beings would find ways to make resources more abundant.

By Sept. 29, 1990, the world’s population had increased by about 850 million people, a rise of 19 percent. If the doomsayers were right, that should have pushed prices sharply upward.

It did not.

Inflation over the decade was 57 percent. Yet the nominal price of the five-metal basket barely budged, rising from $1,000 to $1,004. In real terms, the basket’s price fell by about 36 percent. Ehrlich mailed Simon the difference: $576.07.

That check mattered because it exposed a mistake that still poisons public debate.

The mistake is to think that natural resources are fixed gifts of nature and that economic life is therefore a grim contest over a pile that can only shrink as population grows. That view sounds sober. It is, in fact, blind to the central truth of human progress.

Resources are not simply things lying in the ground. Resources are matter plus knowledge.

Oil was once a nuisance that seeped into farmland and polluted water. A barrel of oil in the Stone Age was worthless. A barrel of oil in an industrial civilization could heat homes, move trucks, power factories, and feed chemical industries.

Nature gives us atoms. Human beings give those atoms value.

That is why Simon understood something Ehrlich missed. The ultimate resource is not copper or farmland. It is the human mind. More precisely, it is the human mind set free to experiment, trade, specialize, and innovate.

Freedom matters here. People do not solve problems automatically. They solve them when they are allowed to respond to scarcity with invention and enterprise. High prices invite substitution. Competition rewards efficiency. Property rights encourage investment. Markets spread information no planner can gather. Free people learn to do more with less.

This is not a fairy tale in which every problem solves itself. Pollution is real. Bad policy is real. Governments can strangle innovation, distort prices, and lock societies into waste and stagnation. Progress, in other words, is not guaranteed.

But the lesson of the Simon-Ehrlich bet is that the burden of proof belongs to the prophets of permanent scarcity. Time and again, they have underestimated human creativity and overestimated the world’s physical limits.

That is as true today as it was in 1980.

We hear that energy is running out, that growth must stop, that the planet cannot support prosperity for billions, and that human wants must be cut down to fit a closed and exhausted world. This language changes with the decade, but the instinct behind it is old. It treats people as liabilities. It imagines the future as a rationing exercise.

Simon offered a better vision. Human beings are not just consumers of resources. They are producers of ideas. They are creators of substitutes, technologies, and entirely new forms of wealth. They do not merely divide a pie. They learn how to bake bigger pies from ingredients earlier generations did not know they had.

The real contest, then, is not between population and resources. It is between two ways of seeing humanity.

One view sees every additional person as another claimant on scarcity. The other sees every additional person as a possible problem-solver, inventor, entrepreneur, scientist, or worker whose efforts can make life better for everyone else.

The check for $576.07 settled the bet. But the larger wager remains open.

Don’t bet against human beings, especially when they are free.

MIT News | Mineral Production

Researchers Develop Technique to Get Lithium Out of Rocks

“Extracting lithium from hard rock today is an energy- and waste-intensive process that is often far more expensive than getting lithium from brine water, which also has major environmental drawbacks. Currently, lithium hard rock extraction involves baking the rock at over 1,000 Celsius and chemically leaching it to extract lithium. The rest of the rock is discarded.

Now, a team of researchers from MIT and elsewhere has developed a low-temperature process for extracting battery-grade lithium from the most common type of lithium-bearing mineral. The process uses a liquid reagent to dissolve the rock into the useful forms of its constituent parts: not just battery-ready lithium salts, but also smelter-grade alumina and cement-ready silica. After the minerals are extracted, the solvent and reagent can be recovered and used again so waste levels approach zero.

The researchers estimate the closed-loop process is half the cost of traditional lithium hard rock extraction and could make it cost-competitive with extracting lithium from brine water.

A paper describing the process was published today in Science. The researchers have already begun commercializing the technology through an MIT spinout, Rock Zero.”

From MIT News.

Pacific Northwest National Laboratory | Mineral Production

AI Speeds Recovery of Critical Minerals from Industrial Waste

“A research team at the Department of Energy’s Pacific Northwest National Laboratory has deployed AI agents with the potential to accelerate the recovery of critical minerals from real-world industrial waste in days instead of the months or years required for manual experimentation…

To demonstrate the value of the system, the research team tested three different industrial wastes: two different kinds of spent magnets and wastewater from oil and gas extraction.

The scientists fed a description of what was in the waste to specially designed AI agents. The agents then evaluated the value, concentration, and potential product purity after a separation procedure, before making a technical and economic recovery recommendation. In the trial runs, the AI agents recommended recovery of the element magnesium from wastewater produced during oil and gas extraction, of neodymium and praseodymium from magnet waste, and of samarium, a rare-earth element critical to high-performance aerospace magnets and nuclear reactors. 

Such feedstock evaluations traditionally take months of analysis and preliminary lab protocol preparation. 

Instead, within a day, the AI agents used published scientific literature to develop a plan for 96 simultaneous experiments, including recipes for all chemicals used for separation, their order of addition, and timing steps. A liquid-handling robot then executed the orders. 

For these initial experiments, human operators prepared the completed experimental samples for final chemical analysis. But the resulting data were automatically evaluated by AI for any necessary refinements, and if needed, a second round of 96 experiments to optimize purity and yield.”

From Pacific Northwest National Laboratory.

United States Geological Survey | Mineral Production

Lithium in Eastern States Could Replace Imports for a Century

“The southern Appalachians hold an estimated 1.43 million metric tons of lithium oxide, concentrated in the Carolinas, and the northern Appalachians hold an estimated 900,000 metric tons, concentrated in Maine and New Hampshire, according to estimates in a new USGS scientific paper published in Natural Resources Research. The lithium is present in pegmatites, large-grained rocks similar to granite.

‘This research shows that the Appalachians contain enough lithium to help meet the nation’s growing needs – a major contribution to U.S. mineral security, at a time when global lithium demand is rising rapidly,’ said USGS Director Ned Mamula. ‘USGS mineral science is the leading edge in the effort to restore America’s mineral independence by mapping our nation’s mineral resources. Everything else follows on the science: permitting reform and other policy changes to support investment in clean, responsible mining to 21st century standards, and mining workforce training for new American jobs. The United States was the dominant world producer of lithium three decades ago, and this research highlights the abundant potential to reclaim our mineral independence.'”

From United States Geological Survey.

Live Science | Mineral Production

Countries May Race to Harvest Antarctica’s Huge Mineral Caches

“A warming climate could expose a Pennsylvania-sized chunk of ice-free land in Antarctica by 2300, which could drastically reshape Antarctic geopolitics as well as the continent’s geography.

A study published in Nature Climate Change is the first to incorporate glacial isostatic adjustment — how land beneath heavy ice sheets uplifts after the ice retreats — into projections of ice-free land emergence in Antarctica. The results reveal that climate change could expose potentially valuable mineral resources that may spur renegotiations of the international treaties that currently govern Antarctica…

Within the area that Lucas and the research team projected would be ice-free by 2300 lie known or suspected deposits of copper, gold, silver, iron, and platinum — critical minerals used in manufacturing and valuable metals in and of themselves. In particular, the study found the largest land emergence in Antarctica is likely to occur over territories claimed by Argentina, Chile, and the United Kingdom and contains a range of mineral deposits, including copper, gold, silver, and iron.”

From Live Science.