Principles of Economics 3

Saifedean Ammous argues that time is the ultimate resource and that all economic scarcity derives from the scarcity of human time, not from physical limits of natural resources. This framing, drawn from Julian Simon's work, reorients economics around economizing time rather than managing finite material stocks.

Why Time Is Unique

Time stands apart from all other economic goods in three critical ways:

• Irreversibility: Unlike an apple you can replace, lost time cannot be bought back
• Strict finiteness: No human has exceeded ~120 years; health improvements extend life only marginally
• Uncertainty of duration: Death can occur at any moment—you get "one shot" with no restart option

Because time is scarce, valuable, and irreversible, it qualifies as an economic good—but one with special properties that shape all economic decision-making.

The Surprising Evidence on Resource Abundance

The lecture presents striking data from Julian Simon comparing 1950 to 1990:

The surprising finding: Despite population doubling and GDP quintupling, proven reserves of major commodities increased dramatically—not decreased. The more humanity consumes, the more reserves we discover.

Why "Proven Reserves" Mislead

Common environmental thinking treats proven reserves as the upper limit of Earth's resources. This is conceptually wrong:

• Proven reserves = materials discovered but not yet extracted
• They represent merely "the tip of the iceberg"—what's visible above water
• The deeper we explore, the larger the iceberg appears

Scale illustration: All mines worldwide cover surface area equivalent to a medium desk (122 cm × 61 cm). Earth's surface equals a football field (105 m × 68 m). By volume, all extracted material equals half a cup of water from an Olympic swimming pool.

The Simon-Ehrlich Bet

In the 1970s, environmentalist Paul Ehrlich predicted imminent depletion of essential resources by specific years (oil by 1982, iron by 1984). Julian Simon wagered that any commodity prices would fall over any period longer than one year. Ehrlich selected five metals and a ten-year timeframe. Simon won on all five.

The geologist (Ehrlich) viewed Earth as a "static bucket" being drained. The economist (Simon) understood that resources are created through human action—discovery, extraction, and processing. The more we consume, the more we are motivated to find, and the more we find.

The Simon Abundance Index

Economists Marian Tupy and Gale Pooley extended this analysis (1980–2020):

• 50 basic commodities tracked
• Time price: what one hour of work could purchase
• Result: 75% price decline in wage terms over 40 years
• During this period, population increased 75%

Abundance multipliers (how much one hour buys now vs. then):

• Sugar: 7×
• Hides: 7×
• Coffee: ~7×
• Crude oil: 4.5×
• Average: 4×
• Even the lowest (iron ore): 1.3× (24% cheaper)

Opportunity Cost and Time Preference

Two foundational concepts emerge:

Opportunity cost: The value of foregone alternatives. Because time is finite, every choice carries this cost. Scarcity of time gives everything an opportunity cost.

Time preference: The universal preference for present over future satisfaction. Humans discount the future because:

• Future existence is uncertain (we might die)
• Present possession of durable goods yields utility throughout the waiting period

Time preference is always positive—identical goods now are preferred to later.

How Humans Economize Time

All economizing reduces to trading present utility against future survival and utility. Humans allocate time between:

• Leisure: activities pursued for their own sake
• Labor: activities pursued for their output (not the activity itself)

Even animals engage in basic labor (hunting when hungry). Humans develop nine progressively sophisticated economizing methods:

Individual methods (Chapters 4–8):

• Labor
• Property
• Capital (tools increasing productivity)
• Technology (new resource combinations)
• Power/energy

Social methods (Chapters 9–12):

• Trade
• Money
• Market order
• Capitalism ^[1:8]

Course Trajectory

The first three lectures established fundamentals: human action, value/marginal analysis, and time. The remaining fifteen chapters explore the nine methods of economizing, returning finally to money (time preference, banking, fiat distortion) and concluding with civilization and defense economics.