In the New York Times over the last few days two of the paper’s opinion-ish sorts — Paul Krugman and John Tierney — take opposite views on oil prices and the nature of resources. The funny thing: the economist (Krugman) takes the science view, and the scientist (Tierney) takes the cornuccopian economist view.
Here’s Krugman on resource limits and the recent rise in oil prices:
In particular, today, as in 2007-2008, the primary driving force behind rising commodity prices isn’t demand from the United States. It’s demand from China and other emerging economies. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies.
And those supplies aren’t keeping pace. Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived. True, alternative sources, like oil from Canada’s tar sands, have continued to grow. But these alternative sources come at relatively high cost, both monetary and environmental.
And here is Tierney channeling Julian Simon in having won a bet with the recently deceased Matt Simmons on oil prices:
The past year the price has rebounded, but the average for 2010 has been just under $80, which is the equivalent of about $71 in 2005 dollars — a little higher than the $65 at the time of our bet, but far below the $200 threshold set by Mr. Simmons.
What lesson do we draw from this? I’d hoped to let Mr. Simmons give his view, but I’m very sorry to report that he died in August, at the age of 67. The colleagues handling his affairs reviewed the numbers last week and declared that Mr. Simmons’s $5,000 [bet] should be awarded to me and to Rita Simon on Jan. 1, but Mr. Simmons still had his defenders.
I spoke at TED this year about the errors of the famous Simon/Ehrlich bet — in short, Simon won because of a fortunate start date, with later dates being uniform losers; Ehrlich foolishly bet on genera at the end of a commodity cycle — and it is entertaining to see the same debate playing out again, with all the same rationales.
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