X-Message-Number: 22017
From: "michaelprice" <>
References: <>
Subject: Julian Simon's Tricky Statistics
Date: Wed, 18 Jun 2003 00:51:37 +0100

James Swayze:

>>  Simon poses the question, how can we objectively measure 
>> raw-material scarcity?  His answer is to examine the 
>> wage-inflation-adjusted price of raw-materials.  (Not relative 
>> to retail-price inflation, which only measures *relative* scarcity/
>> availablity.)  Wage inflation adjusted prices measure how long 
>> an average worker must work to buy a unit some commodity,
>> including raw-materials.  The wage-adjusted prices of most 
>> (perhaps all) raw-materials (oil, electricity, coal, aluminium, iron 
>> etc) are presented and they all show an exponential decline with 
>> time, averaged over decades.  By this objective measure, then, 
>> we arrive at the astounding conclusion that raw-materials are 
>> growing less scarce with time, as new technologies evolve
>> to improve extraction and recycling techniques, along with the
>> development of alternatives (e.g. for oil read solar and 
>> thermonuclear energy).
>>
>>
> I don't wish to take a stance either way here. I can't, I haven't read
> the books in question.

That is a healthy position to adopt!

> However, at first glance at this statement I do
> have some questions. How subjective were these figures looked at?

Much of wage-price data is from the US Dept of Commerce, Bureau
of the Census, which should be objective enough for our purposes.
You will have to read the book to check out all his references, of course.

> I mean
> by this, how much minute detail was put into exactly what you mention
> about technology, etc. and measurements of the effect thereof on wage
> prices to arrive at an alleged objective calculation? Take coal for
> instance. It once took one hundred times more men at leat to mine it. It
> cost a great deal in man hours. However, due to inflation those hours
> were cheaper but exactly how cheaper is complicated. A lot of things
> affect the price of wages. Were the effects of politics, strikes,
> unionization, and yes indeed replacing men with machines all intricately
> calculated to arrive at "wage-adjusted prices"?

Wage-adjusted prices only require a knowledge of the price of a 
basket of goods and the average wage.  Now, granted, there is 
some subjectively in choosing the basket of goods -- indeed this is 
a much debated subject -- but we do not need to be sidelined by 
issues of unionisation, strikes, politics etc.

> If not then it seems a
> bit to simplistic of Simon to make such a statement. In fact the cost of
> wages has nothing whatsoever to do with a measurement of the surmised
> quantity of an unknown quantity of any given resource. How could it?

You misunderstand Simon's point in precisely the way that everyone does
upon first encountering it.  Of course there is no connection between
prices and physical resources -- but this is Simon's point.  You have to 
start thinking like an economist and think in terms of the *value* of 
resources.  It is the *value* of resources that increase as technology 
advances, extraction and recycling techniques improve and substitutes 
emerge.  E.g. when thermonuclear energy become profitable the value 
of the world's oceans, with their (heavy) hydrogen fuel, will become 
immense.

At the end of the day it *is* a simplistic argument, but that doesn't stop
it being correct.

Cheers,
Michael C Price
----------------------------------------
http://mcp.longevity-report.com
http://www.hedweb.com/manworld.htm

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