The Julian Simon Supply Curve

by Don Boudreaux on March 22, 2022

in Archived writings, Economics, Growth, Innovation

In this just-published paper – available here to read free of charge – I explain how one of Julian Simon’s most important insights might be incorporated into an ECON 101 course. Here’s my opening:

Very few ideas shift paradigms. Yet what’s remarkable about many paradigm-shifting ideas is how simple they are revealed to be once they come to be widely understood and incorporated even into introductory textbooks. Consider a few chronologically listed examples:

  • – Adam Smith explaining that money is not wealth.
  • – David Ricardo explaining that specialization according to comparative advantage is mutually advantageous.
  • – Charles Darwin’s theory of evolution through natural selection.
  • – William Stanley Jevons, Carl Menger, and Leon Walras identifying economic value as being determined by the subjective evaluation of the importance of the ‘marginal’ unit.
  • – Ronald Coase pointing out that externalities are always bilateral.
  • – Richard Dawkins explaining that the truly selfish creature in nature isn’t the organism – the individual human, horse, housefly, or hyacinth – but, instead, each of the genes out of which each organism is built.

Each of these ideas, once grasped, is simplicity itself. And it’s not terribly difficult to grasp any of these ideas. Even the principle of comparative advantage – often described as counter-intuitive – becomes intuitive when explained correctly.

Julian Simon’s identification of the human mind as “the ultimate resource” is one such paradigm-shifting idea, or at least potentially so. This idea is at once so pro- found as to be paradigm-shifting, yet it’s also simplicity itself.

Of course nothing – no raw material, no labor service, no unit of time, not even land – is useful unless and until some human being figures out not only how to use it technologically, but also how to make its use worthwhile economically. While nature has mashed atoms together in countless varieties and forms, nothing formed by nature becomes a resource until it is transformed into one by the creative human mind.

Once you grasp Simon’s insight, you can never again see the world in the same way that you saw it before your enlightenment.

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