COMMENTARY: Place your bets on humanity

Stanford biologist Paul Ehrlich passed away in March at age 93. Fortunately, he lived long enough to see his most famous predictions proven wrong. In 1968, he and his wife, Anne, wrote the bestselling “The Population Bomb,” a book that opened with a startling claim: “The battle to feed all of humanity is over. In the 1970s, hundreds of millions of people will starve to death.”

Ehrlich had to be happy to see this estimate prove at least 53 times larger than the real tragedy (3.76 million people did succumb to famine). Today, despite 4.76 billion more of us on the planet, the average person’s caloric intake is 30 percent greater than when “The Population Bomb” was published. Moreover, the feat required half as many farmers per person, and, beginning around 2000, a declining share of land dedicated to agriculture.

Other Ehrlich claims — that baby boomers wouldn’t live past 50, that the United States would be rationing water by 1971 and food by 1980, that England had a 50 percent chance of existing in the year 2000 — were so outlandish that they eventually inspired one of social science’s most famous bets.

In 1980, University of Maryland economist Julian Simon challenged Ehrlich to choose any five raw materials and any date more than one year in the future.

If $1,000, adjusted for inflation, would buy more of these materials, Simon would pay Ehrlich the difference. If not, Ehrlich would pay Simon. Ten years later, Mrs. Ehrlich wrote a check for $576.07.

Despite the largest one-decade global population increase in history, all five materials were cheaper in 1990. The bet vividly illustrates how we, ever-more productive humans, raise living standards even in the face of massive growth in the demand for resources.

Another bet — this one never consummated — sheds light on how such an economic miracle is possible.

Some economists attribute large differences in productivity, and therefore living standards, to “institutions.” These are the rules that govern our interactions: Can you own and use productive private property? Work in whatever field you choose? Enter a contract with whomever you want on whatever terms you want? Trade freely with others?

In short, the institutionalist view is that Ehrlich’s prognostications proved wrong because he underestimated the power of people, under free institutions that embrace our ingenuity, to solve some of life’s most pressing problems.

Jeffrey Sachs, a well-known development economist who once advised post-communist governments on free-market reforms, nonetheless shares at least some of Ehrlich’s skepticism of the power of institutions. In 2015, economist Tyler Cowen summarized Sachs’ position this way: “Go back to 1960 and choose any measure of institutional quality you want. Then see how well it predicts cross-national growth since then.”

One of us — Lawson, the lead author of the Fraser Institute’s Economic Freedom of the World, a widely used measure of institutional quality — proposed a bet.

The index doesn’t quite reach back to 1960, but it measures the degree to which residents of different countries are allowed to make their own economic choices. Lawson offered to bet up to 10 people $100 each that incomes in the top 20 countries (specifically, those with the highest combined score and growth since 1970) would, on average, grow at least 1 percentage point faster per year than those in the bottom 20 between 2015 and 2035.

No one took the bet. And they were wise not to.

Ten years in, things are looking pretty good for free institutions. On average, incomes in countries with high and growing levels of economic freedom have grown by 2.24 percent yearly. Incomes in countries with low and deteriorating freedom grew only 0.79 percent.

At these rates, incomes will double in just over three decades in the free countries. It will take nearly nine decades for the least free.

Sachs is right insofar as institutions aren’t the only things that matter. In May 2015, an enormous oil deposit was discovered in Guyana — one of the unfree countries — and since then, it has been on a tear, growing at about 19 percent annually. Policymakers can’t move mountains or oil deposits.

What they can do is permit citizens more economic freedom. It’s a strong bet that when they do, people will prosper.

Robert Lawson is the director of the Bridwell Institute for Economic Freedom in the Cox School of Business at Southern Methodist University. Matthew D. Mitchell is a senior fellow with the Center for Human Freedom at the Fraser Institute and a senior affiliated scholar with the Mercatus Center at George Mason University. They are among the co-authors of the Economic Freedom of the World Index. They wrote this for InsideSources.com.