In 1980, there was a bet between Paul Ehrlich author of "The Population Bomb" and Julian Simon of the Cato Institute. Ehrlich represented the modern Malthusians who believe that the population explosion will place stress on the global economy and lead to modern shortages of commodities. Simon was an optimist who believed that innovation would be bale to find or create commodities and products so there would not be any shortages. Simon asked Ehrlich to pick a basket of five metals that he thought would increase in real terms. Simon would take the other side of the bet. Simon won the bet. There was no scarcity. They reran the bet in 1990 and now the basket is higher in real terms.
Will the high real prices continue into the future? This is the main focus of commodity trading and investing. Should you be a natural resource pessimist or optimist? How do you play the and transition?
Presented in the Economist August 6th 2011
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