The Simon Abundance Index, A New Way to Measure Availability of Resources: People as the “ultimate resource,” making other resources more plentiful

The Simon Abundance Index: A New Way to Measure Availability of Resources. Gale L. Pooley and Marian L. Tupy. Cato Policy Analysis No. 857, Dec 4, 2018. https://www.cato.org/publications/policy-analysis/simon-abundance-index-new-way-measure-availability-resources

Are we running out of resources? That’s been a hotly debated question since the publication of Paul Ehrlich’s The Population Bomb in 1968. The Stanford University biologist warned that population growth would result in the exhaustion of resources and a global catastrophe. University of Maryland economist Julian Simon, in contrast, argued that humans would innovate their way out of resource shortages. He believed that people were the “ultimate resource” that would make other resources more plentiful.

[...] Using the latest price data for 50 foundational commodities covering energy, food, materials, and metals, we propose a new way of measuring resource availability based on four concepts.

First, the time-price of commodities allows us to measure the cost of resources in terms of human labor. We find that, in terms of global average hourly income, commodity prices fell by 64.7 percent between 1980 and 2017. Second, the price elasticity of population (PEP) allows us to measure sensitivity of resource availability to population growth. We find that the time-price of commodities declined by 0.934 percent for every 1 percent increase in the world’s population over the same time period. Third, we develop the Simon Abundance Framework, which uses the PEP values to distinguish between different degrees of resource abundance, from decreasing abundance at one end to superabundance at the other end. Considering that the time-price of commodities decreased at a faster proportional rate than population increased, we find that humanity is experiencing superabundance. Fourth, we create the Simon Abundance Index, which uses the timeprice of commodities and change in global population to estimate overall resource abundance. We find that the planet’s resources became 379.6 percent more abundant between 1980 and 2017.

On the basis of our analysis of the relationship between resource availability and population growth, we forecast that the time-price of commodities could fall by a further 29 percent over the next 37 years. Much will depend on policies and institutions that nations pursue. For the time-price of commodities to decline and resource abundance to increase, it is necessary for market incentives and the price mechanism to endure. When prices of commodities temporarily increase, people have an incentive to use resources more efficiently, increase their supply, and develop cheaper substitutes.