Back when I was studying environmental philosophy in grad school, one of my required reading assignments was the essay entitled “More People, Greater Wealth, More Resources, Happier Environment,” by Julian L. Simon. Simon is largely considered to be a free market environmental optimist. He opposed government environmental regulations, arguing instead that free market forces would push human creativity to respond to the natural scarcity of environmental resources by discovering and inventing even more resources. Simon Writes, “the plain fact is that, given some time to adjust to shortages, the resource base does not remain fixed. People create more resources of all kinds.”
Simon argues that the explosion in world population since the advent of modern medicine is not a cause to be concerned about the depletion of our scarce environmental resources. While on the surface it may appear that having more mouths to feed and more bodies to clothe and shelter would result in a greater strain on our natural resources, Simon argues that human ingenuity responds by creating more resources to feed those mouths and clothe and shelter those bodies. “Minds matter economically as much as, or more than, hands or mouths.”
Simon uses various historical examples to make his point, though I will mention just one here. Simon argues that the transition from wood to coal, and from coal to oil, corresponds to natural free market incentives driving people to look for better sources of energy in the midst of declining returns on their current sources. As the sources of wood grew more scarce, that scarcity incited the free market to embrace the discovery of coal. As the sources of coal became more scarce, that scarcity incited us to discover oil. According to Simon, this development was not accidental. Rather “the entire process of impending shortage and new solution left us better off than if the shortage problem had never arisen.”
We can extrapolate out from this example to predict that once humanity finds itself at the collapse of oil-based energy, which we know will happen because oil is a non-renewable resource, there will be another form of energy that will come and take its place if we just let the free market take care of it.
Since the time that I first read Simon, there seemed to me to be something wrong with his argument against government intervention. He was a strict free market thinker and generally opposed governmental restrictions. He argued that “market directed economies have performed much better economically than the centrally planned economies.” At the same time, he argued that innovation was driven by resource scarcity. However, if it is true that innovation is driven by resource scarcity, his argument would seem to support government restrictions, not cut against them. After all, what are government restrictions other than the creation of artificial scarcity?
Take as an example the attempt to put caps on carbon emissions. There have been some attempts at forcing companies to limit their use of fossil fuels by capping the amount of carbon emissions they are allowed to create each year. Free market capitalist would argue that this artificially suppresses the market. However, Simon’s argument doesn’t actually support that conclusion. Simon would have us believe that if there is an actual scarcity of oil, human ingenuity would somehow respond with a burst of creativity. Why wouldn’t the same be true of artificial scarcity? If there is an artificial scarcity of oil, as would be created by a carbon cap, it seems to me that Simon's argument equally supports the conclusion that there would be a similar burst in human creativity.
For as much as Simon purports that his argument favors free market solutions to resource scarcity, it has always seemed to me that his arguments actually cut the other way. If it is scarcity that drives human ingenuity, then human ingenuity should be equally spurred on by natural and artificial scarcity. Thus, the artificial scarcity created by government regulations may actually be the impetus that drives creativity.
For several years now, I have thought about writing an essay about Julian Simon’s theory and why I believe it actually supports governmental regulation and the creation of artificial scarcity. I have, however, struggled with selecting the examples I wanted to used to illustrate my point. Yet, my struggle isn’t so much because I lack examples. In fact, I have many; however, my area of focus is in the creative arts, not natural resource management, and I have always been somewhat hesitant to say that my examples would directly translate from one to the other, though some recent news has given me more reason to think that they do.
In the creative arts, artists often challenge themselves by creating artificial restrictions which force them to new heights of creative genius. We see this a lot in music (my area of specialty). Rather than give a lot of examples, I want to give one particular example here that is clear and illustrative. It is the fugue in A Major by Dmitri Shostakovich. In this piece, Shostakovich wrote a fugue with absolutely no non-harmonic tones. Every note in the piece belongs to the chord being played. There are no passing tones, no appoggiaturas, no upper or lower neighbors, no mordents, no trills, no suspensions or retentions – no embellishments whatsoever. This is a perfect example of what is called in music “constrained writing.”
As a musician, I have a great appreciation for how Shostakovich’s fugue is marvelously constrained, even if it sounds incredibly expressive and expansive. The point is that musicians can and do work through processes of self-restraint, and this self-restraint can result in marvelous creations. If we think of non-harmonic tones like natural resources, the removal of these resources is not the end of creativity but a challenge to find new resources. And, of importance here, in the creative arts, this creativity is often brought about through artificial restrictions. (There are, to be sure, also natural restrictions to music, such as the register range to whichever instrument is being played, but that it not my current interest here.)
The question is, does this same sort of creativity result from, say, governmental restrictions on resources? I am writing this essay today in light of the fact that we are currently seeing in the news right now a perfect example, albeit an unintentional one, of government restrictions that ended up advancing innovation rather than hurting it. Since 2020 the United States government has gradually placed greater and greater restrictions on the sale of computer technology to China. This has included limiting China’s access to the latest state-of-the-art microchips. And what happened as the result of the computer limitations placed on Chinese researchers? By all accounts so far, it appears that they have created an artificial intelligence, DeepSeek, that uses less computing power than other models currently available, like ChatGPT, while still delivering results that are as good as any other. In other words, they used the scarcity of their resources, which we imposed on them, to create a better product.
While I was researching DeepSeek, the following tweet from Chamath Palihapitiya really caught my eye. I do not know much about Palihapitiya, but from a quick wikipedia lookup, it appears he is a computer engineer and venture capitalist who once had an executive position at Facebook. From what I can see of his politics on X (Twitter), I disagree with him on almost everything, but this one particular thing was very interesting. I’ll link to the full tweet, but I’ll quote the part I’m interested in below.
Several important questions/comments come to my mind as I read more about DeepSeek. Listing them here:
— Chamath Palihapitiya (@chamath) January 26, 2025
1) Let’s give 1% probability to all the conspiracy theories upfront so we can address it and move on. If it is possible for China/Chinese companies to use shell companies in… https://t.co/x7O28jc4gW
The part that I am interested in is point #5. Here it is, in case you do not care to read the entire quote.
"5) The innovation from China speaks to how “asleep” we’ve been for the past 15 years. We’ve been running towards the big money/shiny object spending programs (AI is not the first and it likely won’t be the last) where we (Team USA) have thrown hundreds of billions of dollars at a problem vs thinking through the problem more cleverly and using resource constraints as an enabler. Let’s get our act together. We need all the bumbling middle managers out of the way - let the engineers and the brilliant folks we have actually working on this stuff to cook! More spending, more meetings, more oversight, more weekly reports and the like does not equate to more innovation. Unburden our technical stars to do their magic."
What I find fascinating here is the use of the phrase “using resource constraints as an enabler.” What is interesting here is that a computer engineer is talking about software development in the same manner that a composer would talk about musical development. The idea is that computer programming can benefit from resource constraints just as much as musical themes can. The irony is, of course, that the “resource constraints” in question here are the constraints that the United States put on Chinese engineers by refusing them access to the latest microchips. In a way, the artificial resource scarcity of our government’s intervention spurred the creation of a superior product.
My point is, here is an example of what I have long speculated. If Julian Simon is right that natural scarcity incentivizes creativity and development, then so does artificial scarcity, provided it is the right kind. As Palihapitiya points out, certain forms of restrictions get in the way of development, thought resource scarcity does not appear to be one of those things. In fact, it might even be the thing we need.
Since first reading Julian Simon, I have become more of an environmental protectionist, not less of one. His arguments have had the direct opposite effect on me than he intended. If it is true that we needn’t fear the day we run out of oil because scarcity will drive innovation to discover its replacement, then why should I fear the day oil is banned? Won’t this artificial scarcity drive the same innovation? If I needn’t fear for the destruction of our rainforests or our aquafers, why should I fear government restrictions on rainforests or aquafers? Simon’s argument that scarcity will spur innovation will apply in both cases. I see government restrictions spurring innovations, even if it is unintentional. This should be reason to encourage certain government restrictions and regulations.
Excerpts from Julian Simon's essay were taken from "More People, Greater Wealth, More Resources, Healthier Environment" as found in the Anthology "Environmental Ethics: The Big Questions" edited by David R. Keller. Wiley-Blackwell 2010, pp 447-454.
I watched multiple videos and read a few essays in consideration of this essay. I was referred to the tweet by Chamath Palihapitiya by this video.