Abstract
Using economic reasoning, Julian Simon offered crucial insights into a range of pressing issues including the environment, immigration, and economic development. The main lesson from Simon’s scholarship is that the ultimate resource does not reside in the ground (natural resources), or even in the accumulated wisdom and knowledge in books and scientific journals (human capital), but in the imagination of people. Through their purposeful actions, people turn their thoughts and aspiration into a new reality that enables immense improvements in the human condition. In making this argument, Simon articulated the core ideas of Ludwig von Mises, F.A. Hayek, and Israel Kirzner regarding the discovery and use of knowledge in society, and the role of entrepreneurship as the prime mover of progress. This paper makes this intellectual connection clear.
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Notes
As Thomas Sowell (1980: 383) notes, “Freedom is not simply the right of intellectuals to circulate their merchandise. It is, above all, the right of ordinary people to find elbow room for themselves and a refuge from the rampaging presumptions of their ‘betters’.”
This episode represented an important methodological insight to Simon. “The ruling paradigm in the University of Chicago’s Economics Department and School of Business,” he states in his autobiography A Life Against the Grain (2002: 177), “considered business people to be rational self-maximizers. It was clear to me that this was nonsense, based on my own experience in the advertising business. This idea came to a sharp point years later in an interchange with Milton Friedman about airline oversales. If I had indeed assumed that airline industry executives were rational self-maximizers, I could never have put forth the scheme that I did.”
Simon’s views the controversial issues of birth control and abortion can be found in A Life Against the Grain (2002: 345-346) and can be summed up as a meta-choice about choosing. It is the individual and circumstances that guide the course of action, not a fixed rule that can never be violated.
Simon did not seek the approval of the elite, in fact, he challenged the elite. Regarding Paul Samuelson’s judgment on the economic system, he states: “this just shows how great talent can swear to nonsense when the nonsense is framed in the ‘difficult art’ (Samuelson’s phrase) of mathematical economics” (1996: 79, fn). Simon preferred more common-sense reasoning grounded in empirical observation conducted in a variety of styles. In A Life Against the Grain (2002: 331) he sides with Kenneth Boulding that the reason to become an economists is not to seek approval from one’s scientific peers, as Samuelson had argued, but because “there was an intellectual task ahead, of desperate importance for the welfare and even the survival of mankind.”
For an example of the allocation paradigm at work in the context of the economics of resource use, see Arrow et al. (2004).
For recent empirical evidence on the causal impact of immigration on innovation and dynamism in the United States, see Burchardi et al. (2020).
This is not to deny the intellectual discipline provided by allocation, maximization, equilibrium, and constraints. The issue is whether these factors are places in the analytical foreground or background (see Wagner 2010). The mainline tradition places these factors in the background while placing in the foreground the processes that enable people to move toward these outcomes.
David Warsh (2006) provides an introduction to Romer’s work and its emergence out of the allocation, maximization, equilibrium, and the constraints given by nature conversation, but he misses the stream of mainline economics from Adam Smith to F. A. Hayek that was conducting this very conversation as well. His treatment also neglects how the economics of ideas could be productively married with the economic history work of Deirdre McCloskey (2007, 2011, 2017) and Joel Mokyr (2012) to explain the “Great Enrichment” and the “Enlightened Economy.”
As Simon (2002) notes, “Concerning the label ‘conservative’: Along with Friedrich Hayek and Milton Friedman, I disavow the label ‘conservative’ … I am not in favor of any public attempts to conserve existing values or culture or ways life. Generally, I am against ‘controlling’ individuals and boundaries (such as borders). I do not worry about the loss of control by governments” (340-1).
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Acknowledgements
We would like to thank Yahya Alshamy, Peter Jacobsen, Deirdre McCloskey, and Louis Rouanet for useful comments and helpful suggestions on early versions of this paper.
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Boettke, P.J., Coyne, C.J. The economic logic behind the ultimate resource. Rev Austrian Econ 35, 303–314 (2022). https://doi.org/10.1007/s11138-022-00571-2
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DOI: https://doi.org/10.1007/s11138-022-00571-2
Keywords
- Economic development
- Environment
- Innovation
- Immigration
- Julian Simon
- Market process
- Population
- Ultimate resource