[CLIP] Gale Pooley: Why Resources Are Actually Becoming More Abundant

In the 1980s, there was this bet between Julian Simon and Paul Ehrlich. You remember, Paul Ehrlich had written this book in 1968 about the population bomb and said everything was going to blow up. And Julian Simon, this obscure economist, read the book and initially thought, well, you know, the theory seems reasonable. But he said, maybe I should look at the facts, the historical facts of what the relationship has been between population and resources. And as economists, we count things, but we really, the price of things really contains much more information than the quantity of things. So as he began to look at the price of things that were non-renewable, copper, chromium, iron, he noticed that these prices had all been decreasing, not increasing. So with that data, he developed this theory about how things become more abundant. It's because we've been increasing knowledge at a much faster rate. In economics, we've discovered lots of really useful things, but we made a couple of fundamental errors. And the first error, I call them the original sins of economics. The first original sin is that we conflated or we equated resources with atoms. We made the Thanos mistake. And we recognize that there are a fixed number of atoms on the planet. Atoms, in order to become a resource, you've got to add knowledge to atoms. It's knowledge that makes atoms valuable resources. Our wealth is really knowledge. It's not these physical atoms. That's the first mistake that we think was made. There's really this no limit to the ability for us to discover valuable new knowledge. And it's knowledge that we should be thinking about. And then the question is, well, where does knowledge come from? Growth, economic growth is learning. So when people have the opportunity to learn and cooperate with each other and share their new knowledge, that's how this value gets created and shared. And then the second sin was that we measured things in economics with money. Now the rest of science, there are seven units of measurement in science. Six of those units rely on time. Instead of using money, we should have used time to measure things. Time has all these features that make it much more valuable as a unit of measurement. So let me just jump in because the first part I think is easy to grasp. The second part isn't necessarily obvious. Well, think about this. We buy things with money, but we really pay for them with our time. And so that says there's really two prices. There's the money price, but there's also a time price. Money prices are expressed in dollars and cents, but time prices are expressed in hours and minutes. And it's pretty simple to calculate a time price. What is the money price and divide that by your hourly income? So if something costs 20, a pizza costs $20 and I'm earning $20 an hour, that pizza, the time price is one hour or 60 minutes. So then the question becomes, as you look at the time price of things in your life, how does that compare to the time price of that item 10 years ago? What did your parents pay for that thing? Not the money price, the time price. And that was really what Mary and I began to kind of explore is the time price of all of these different commodities. We were really asking this question, if Julian Simon was alive today, would he win that bet today? Two criticisms of the bet was it only covered five items. Simon let Ehrlich pick the five items and he picked chromium, copper, nickel, tin and tungsten and the bet was over a 10 year period. It was from 1980 to 1990. And they put $1,000 on the table and the loser was going to have to pay the winner. Percentage change in the real inflation adjusted prices. Well, in 1990, Paul Ehrlich writes a check to Julian Simon for $576.07. The real price of these five commodities had fallen by an average of 36%. Well, how could that have happened? Decade was the decade that had the largest increase of human beings on the planet. Over 850 million people were added to the planet. So you increase population, but this abundance of resources is increasing at a faster rate. How could that happen? That's not necessarily obvious. I'm going to get you to jump in here, right? Because yes, the price went down, but that doesn't mean there's more actual resource. One thing that we think about is if you try to measure engineers, biologists, I know you're a biology major, but biologists, engineers, accountants, when you ask them how much you have, they will go out and count the thing and divide it by your consumption rate and say, well, you've got 10 items here and you're consuming two a year. So you've got five years left. Well, economists don't think in, I mean, quantities are important, but prices are much more important because it's the price of something that tells you it's relative scarcity. It's the price that contains all that information from everybody who's buying and selling. This represents how scarce or how abundant this particular item is. So we look at prices. Prices have much more information and consequently, they are a much better indicator of what people sense is happening to this flow of resources. It's not the stock that counts, it's the flow. How much can you produce tomorrow? It's not how much you have, it's how much you can create tomorrow and that shows up in an economy in the form of prices. So we think in prices instead of quantities. That's the first step. And then the second step is what price should you use? Should you use the money price? Well, time has a number of advantages over money. The first thing is that when you have an innovation, we have new knowledge, it shows up both in the price but it also shows up in people's hourly income. And so a time price is looking at both those numbers and looking at the relationship between those two numbers. When we get CPI numbers, you know, all the inflation rates gone up, that tells you how much more expensive that item's become but it doesn't tell you about affordability. You've got to ask this other fundamental economic question, compared to what? Well, the price went up 10% but if your income went up 15%, it's actually the time price is going down. Your life is becoming more abundant because it takes you less time to devote to be able to have this thing. So scarcity is really about what we want. Abundance is about what we have because scarcity is a function of, you know, what are my wants? They're really infinite. So we live in this scarce world compared to what I would love to have, I'd like to have. But abundance looks at what do you have today and how much time did it take you to earn the money to buy that thing compared to how much time did it take you yesterday? The second advantage is time prices transcend all of this contention and subjectivity with the CPI. You don't have to worry about that. You can go completely around that and not worry about trying to make all of these adjustments. The third advantage of a time price is you can go to any country at any time and look at any good or service, any product or service and calculate the time price. I can go to Paris in 1850, figure out what the time price was for a loaf of bread. So it lets you make these comparisons across time and across products. You don't have to worry about making currency adjustments. Just say what was the money price and what was hourly income? The next benefit is that time is this universal constant of the seven measurements that we use in science. Six of them are a function of time. Economics needs to be like the rest of science and use time to measure things. It's constant but it has a flow and every one of us on the planet have this sense of what an hour is. And the last benefit is that we have this perfect quality of time. We all get 24 hours a day.