SMITH BRAIN TRUST -- U.S. oil prices fell to a six-year low on Aug. 11, 2015, and one person not surprised would be Julian L. Simon, an economist at the University of Maryland’s Robert H. Smith School of Business who died in 1998. When many scholars predicted ever-dwindling oil supplies, Simon argued that market forces would encourage innovation in extraction and energy alternatives. "There is no compelling reason to believe that world oil prices will rise in the coming decades," he wrote in 1984.
Simon made his point with a 1980 wager, described by Yale historian Paul Sabin in a recent book, The Bet. Terms were simple. Simon challenged Stanford conservationist Paul Ehrlich to select any five resources that he considered in danger of depletion — and then pick any length of time longer than one year.
If prices for the hand-picked commodities rose during the agreed period (an indication of demand outpacing supply), then Ehrlich would be the victor. If prices fell, then Simon would win.
Ehrlich and his partners put their minds together and chose copper, chrome, nickel, tin and tungsten. Then they set parameters for the bet at 10 years. By 1990, prices had fallen for the five commodities, and Ehrlich begrudgingly sent a check to Simon for $576.07 — the amount of the decline.
Following much publicity, Fortune listed Simon as one of the "150 great minds of the 1990s." Washingtonian called him one of the 25 "smartest people" in Washington, D.C. And Wired dubbed him the "Doomslayer." Ehrlich preferred other names, such as "imbecile," "flat earther" and "fringe character." Simon's former Smith School colleagues and children have their own recollections.
JUST THE FACTS
Smith School logistics professor Robert J. Windle says Simon welcomed the contrarian role, which continued to mark his career at the University of Maryland following his 1983 transfer from the University of Illinois.
“He wasn’t afraid to take the opposite side if he believed he was right,” Windle says. “He looked at the facts. And when you take a long-term view, it’s hard to dispute his facts.”
Windle says Simon was naturally inquisitive, a trait that took conversations down unexpected paths when faculty candidates came for job interviews. “The conversations would get exciting,” Windle recalls. “Whatever the person’s dissertation topic was, he would start asking questions about the research and debating the methods.”
Former Smith School dean Rudy Lamone says Simon won most of his debates. “He didn’t just say something,” Lamone recalls. “He proved it. He had the numbers.”
This is one reason Lamone worked to bring Simon to Maryland. “Julian Simon was one of my star acquisitions,” Lamone says. “Having a world-renowned economist like Julian Simon who set the bar on a number of key issues of the day — population, immigration, environmental concerns — brought a great deal of visibility to this school.”
No matter the topic, Lamone says Simon would cut through the clutter and identify the key issues. “He was a superb debater,” Lamone says. “It was not uncommon to see Julian out in the hallway debating some student or faculty member or anybody who would talk to him about important issues.”
Smith logistics professor Curt Grimm, the Charles A. Taff Chair of Economics and Strategy, says the same thing happened when Simon invited faculty members to lunch.
He would steer the discussions toward his colleagues’ latest research. “He had a lot of ideas and reactions,” Grimm says. “And he would debate and discuss.”
Grimm, who arrived at the Smith School the same year as Simon, says recent energy advancements seem to support Simon’s cornucopian views.
“If you look at the bigger picture, he clearly was right about the power of market forces and innovation in dealing with potential shortages of energy,” Grimm says. “No one talks about running out of oil anymore, which is pretty remarkable versus where we were 30 or 40 years ago.”
Simon gained notoriety for his views on resource depletion, but he also challenged conventional wisdom in other areas. One example was Simon’s push to shake up the way business schools taught economics. “He was taking on the whole economics profession,” Grimm says.
What stayed consistent throughout Simon’s career was his willingness to speak up on topics that mattered to him. “He was swimming upstream and willing to take on conventional wisdom in these other major areas,” Grimm says.
KEEPING IT REAL
Smith Logistics, Business & Public Policy department chair Martin Dresner, who came to the school in 1988, says Simon believed in simplicity and favored teaching methods grounded in real-world application. “He didn’t like overly complicated models,” Dresner says.
Simon also ventured into the national conversation on immigration. “He was a believer in opening the borders,” Dresner says.
LESSONS FROM DAD
Evidence of Simon’s flair for the unconventional abounded at home, where he often worked. To cope with the distraction of three young children playing nearby, Simon found a pair of large green airport-style noise-canceling headphones — the only kind available in the early 1970s. “They were very funny looking, but highly effective,” recalls one son, Chicago-based attorney David Simon.
The Simon patriarch also rearranged his sleep schedule to take advantage of quiet times. He often took naps in the evenings and then worked from 1 a.m. until sunrise.
“My dad had a similarly pragmatic approach to raising children,” David Simon says.
When the future attorney was 6, a schoolteacher insisted he not solve math problems by counting on his fingers. “My father thought that was silly, as that approach worked for me,” David Simon says. “He was completely supportive of my continued use of my fingers — under the table where the teacher could not see them.”
Years later, the father-and-son duo collaborated on two published papers analyzing the effects of “fair trade” laws on liquor stores.
Working with his father taught David Simon to challenge his own conclusions and to expect others to challenge them. “I learned that one should apply several different methods of analysis to the same data,” he says.
EMBRACE THE CONFUSION
Another son, Smith School alumnus Daniel Simon, PhD ’99, says his father prodded the three children to think critically.
“He liked to say that a little confusion was good for you, and he would delight in challenging us by answering our questions with more difficult questions,” says Daniel Simon, a psychology professor at the University of Illinois at Urbana-Champaign.
For example, if the children asked their father how many people lived in New York City, he would ask them if they meant all five boroughs or just Manhattan — and if they were including commuters into the city who did not sleep there at night. “We rarely got the answer we were looking for,” Daniel Simon recalls.
Generally, he says his father allowed his children to experiment and make mistakes. The same philosophy guided his career as an economist.
“He was a great believer that in the long run people would make sensible decisions, and people should be able to make their own decisions,” Daniel Simon says.
SIMON SAYS: Ten memorable quotes from the late Julian Simon. Read more...
Media Relations Manager
About the University of Maryland's Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.