TY - JOUR
T1 - Better lucky than good
T2 - The Simon-Ehrlich bet through the lens of financial economics
AU - Emmett, Ross B.
AU - Grabowski, Jesse
N1 - Publisher Copyright:
© 2021
PY - 2022/3
Y1 - 2022/3
N2 - In 1980, Julian Simon and Paul Ehrlich bet on the future of natural resource prices as a vehicle for their public debate about mankind's future. Simon ultimately won, and his victory has been used as evidence that innovation can offset material scarcity induced by human economic activity. But does the outcome of the bet truly suggest this? We recast the bet as a short-sale by Simon of Ehrlich's portfolio of assets, allowing us to carefully analyze the choices made in the bet, including the resources chosen and their amounts and the period of the bet, conditioned on the information available to each man in 1980. We also investigate the role of randomness in the outcome of the bet. We find that, with careful portfolio construction, Ehrlich should win this bet more often than not, validating the age-old adage that it's better to be lucky than good.
AB - In 1980, Julian Simon and Paul Ehrlich bet on the future of natural resource prices as a vehicle for their public debate about mankind's future. Simon ultimately won, and his victory has been used as evidence that innovation can offset material scarcity induced by human economic activity. But does the outcome of the bet truly suggest this? We recast the bet as a short-sale by Simon of Ehrlich's portfolio of assets, allowing us to carefully analyze the choices made in the bet, including the resources chosen and their amounts and the period of the bet, conditioned on the information available to each man in 1980. We also investigate the role of randomness in the outcome of the bet. We find that, with careful portfolio construction, Ehrlich should win this bet more often than not, validating the age-old adage that it's better to be lucky than good.
KW - Asset Allocation
KW - Julian Simon
KW - Non-renewable resource prices
KW - Paul Ehrlich
KW - Portfolio Performance
KW - Portfolio Selection
UR - http://www.scopus.com/inward/record.url?scp=85121748245&partnerID=8YFLogxK
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U2 - 10.1016/j.ecolecon.2021.107322
DO - 10.1016/j.ecolecon.2021.107322
M3 - Article
AN - SCOPUS:85121748245
SN - 0921-8009
VL - 193
JO - Ecological Economics
JF - Ecological Economics
M1 - 107322
ER -