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Wednesday, April 1, 1998

Julian Simon, Lifesaver

Julian Simon Was a Hero of the Free Market

The real issue is not whether one cares about nature, but whether one cares about people.
Julian L. Simon,
The Ultimate Resource 2 (1996)

Julian Simon’s unexpected death in February brought a major loss. With the passing of this noted free-market champion, humankind lost a genuine hero; the economics profession lost one of its most brilliant, if underappreciated, members; FEE lost the wisdom of an original member of its Council of Scholars; and I lost a kind and dear friend.

It was heartening to see, in the sad days following Julian’s passing, an outpouring by writers in several newspapers and magazines—including The Freeman’s own Sheldon Richman—of tributes to Julian and to his courage and perseverance in challenging the emotionally charged deceptions spewed by doomsayers and self-styled environmentalists. While pessimism-pushers such as Lester Brown, Paul Ehrlich, and Al Gore received the mainstream media’s reverence, during his life Julian received mostly scorn for showing that the world is not on the brink of an environmental and population calamity. His only consolation was that truth was his constant ally.

Julian’s foremost contribution to humankind was his demonstration that prosperity and a healthy environment are best assured when governments respect private property and free markets—because only within free markets can human creativity flourish. In his magnum opus, The Ultimate Resource 2 (Princeton University Press, 1996), Julian showed that ours is not a world of fixed resources. Instead, he rightly taught that the quantity of resources available at any given time is determined by how creative and energetic we are in extracting resources from the earth, as well as by how creative and energetic we are in devising ways of getting more and more output from each unit of resource. His massive and masterful documentation of how free people unfailingly use resources with increasing efficiency is the single most potent intellectual weapon available today for doing combat against the anti-people puritans of both the left and the right.

By chronicling the vast improvements unleashed by free, private-property markets—by demolishing countless Chicken Little falsehoods spawned by statists—Julian Simon has done more than any single human being during the past quarter century to protect us from the coercive schemes incubating in the hothouse of unwarranted public hysteria.

But Julian also contributed in a more direct way to the saving of human lives. Indeed, it may well be that some of Julian’s most vehement critics would not be alive today were it not for his genius.

More than 20 years ago, Julian devised the volunteer system that U.S. airlines use today to handle overbooked flights. Because of him, airline travel is now more reliable and less costly. As a result, fewer people drive long distances; more people fly. And because flying is much safer than driving, Julian’s idea literally saves lives. Here’s how.

Airlines overbook because chances are high that not all booked passengers for any given flight will actually show up for that flight. By increasing the number of seats sold for a flight, the airline lowers the minimum price it must charge for each seat. Overbooking lowers the cost of flying.

But what to do when too many booked passengers show up for a flight? In the days before Julian’s proposal was adopted, airlines arbitrarily bumped some booked passengers. This practice made flying unnecessarily inconvenient. Those people who absolutely had to be at their destinations by a certain time could not depend upon airlines to get them there. Many of these people would drive rather than fly.

One possible solution is for airlines never to overbook. But avoiding over-booking means that too many airplanes would take off with too many empty seats. And every empty seat means that the airline’s cost per actual passenger on board is higher than it would be if the seat were occupied with a paying passenger. An airline whose flights are consistently filled with paying passengers can charge lower prices than can an airline whose flights are regularly only half filled.

Julian’s ingenious solution simultaneously enables airlines to continue the efficient practice of overbooking while assuring passengers with tight schedules that they will not be bumped from over-booked flights.

His system is fair and simple—although no one thought of it until he came along. When too many booked passengers show up for a flight, airlines now engage in voluntary exchange with their customers. No one is forced to miss the flight; instead, the airline pays people to miss the flight. The airline pays with an offer of a later flight to the passenger’s immediate destination as well as with a free roundtrip ticket to another destination of the passenger’s choosing.

This system works splendidly. I’ve been on countless overbooked flights and never have I witnessed an airline failing to persuade enough people to “sell” their seats in exchange for a later connection and free roundtrip airfare.

Julian’s creative idea for handling overbooked flights is not as celebrated as is Henry Ford’s idea for producing automobiles on assembly lines or Sam Walton’s brilliant method of lowering retail prices. Few people, after all, have ever heard of Julian Simon, while Ford’s and Walton’s names are legendary.

Julian’s anonymity, however, itself testifies to his larger life’s work. More clearly than almost anyone else, Julian understood Adam Smith’s insight that in free markets wealth is the product of human creativity. And the greater the number of free people, the greater the number of innovative ideas for transforming raw resources into goods and services that improve human lives. In free markets, more people mean more wealth. This is the reason why Julian rightly celebrated population growth, and why he devoted so much effort toward championing open immigration.

Precisely because a free market inspires literally millions of people to add their creative geniuses to industrial and commercial efforts, relatively few individuals are singled out as great benefactors. But that’s the beauty of the free market: it is so full of creative heroes that we cannot honor them all!

Julian Simon was one such hero, a man who deeply cared about people. We are all poorer now that his genius and immense humanity are lost to us forever.

Donald J. Boudreaux

  • Donald J. Boudreaux is a senior fellow with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, a Mercatus Center Board Member, and a professor of economics and former economics-department chair at George Mason University.