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Matthew Simmons's 'Club of Rome' Epiphany (The strange case of an energy investment banker turned energy alarmist)

By Robert Bradley Jr. -- February 9, 2011

[Editor note: This (unpublished) review of “Revisiting The Limits to Growth: Could the Club of Rome Have Been Correct After All?” by Matthew R. Simmons (1943–2010) was written by Bradley in 2000.

Tomorrow, Michael Lynch will examine the Simmons’s peak-oil advocacy. A third post will described the failed bets that Simmons made with John Tierney of the New York Times and with Bradley on the average price of oil in 2010. (Simmons bet on $200 per barrel or higher averaged over 2010–and lost resoundingly.)]

Matt Simmons founded the investment banking firm Simmons & Company International soon after the 1973 energy crisis to cater to oil companies. He first stepped out in a very public way by questioning official inventory statistics for oil. But then he took a decidedly controversial turn (and one that befuddled his longtime industry friends). In this White Paper, Simmons donned a neo-Malthusian hat to challenge the reality of the improving condition of mankind (particularly in market settings). 

But given the elementary errors and oddities of his attempted resurrection of the doomsday Club of Rome study, one must speculate if Simmons wanted to be a maverick for its own sake and whether he was working from his conclusions to his reasoning rather than the other way around. Such a perversion of logic appears to have also occurred in his peak-oil thinking–suggesting a strange case study of energy thinking indeed.


Simmons’s  “Revisiting The Limits to Growth: Could the Club of Rome Have Been Correct After All?” attempts to resurrect the major themes of the Club of Rome’s much maligned 1972 study, The Limits to Growth. This study used an MIT “formal, written model of the world” to assess five concerns 100 years out: “accelerating industrialization, rapid population growth, widespread malnutrition, depletion of nonrenewable resources, and a deteriorating environment.” Simmons thus concludes:

If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime in the next one hundred years. The probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity.

Mid-course corrections, however, Simmons’ finds, could permit “a condition of ecological and economic stability that is sustainable far into the future.” This hint of optimism is joined at the end of the book with the statement, “It may be within our reach to provide reasonably large population with a good material life plus opportunities for limitless individual and social development.” Other than this sop to reality, much alarmism reigns.

Simmons defends Limits to Growth against the “premature” criticisms of economists. He cites the currently tight energy market as part of a possible if not probable era of increasing resource constraints. He chides a one-year-old Foreign Affairs article that predicted two decades of an oil glut and proudly refers to his own 1994 forecast that all three energy “bubbles” with oil, gas, and drilling rigs was about to burst. He notes that a major concern of Limits to Growth, income inequality, is still with us.

Simmons is correct to disparage those who believed that low energy prices would continue almost indefinitely. That includes a lot of the market investors and academics who assumed that technology would keep supply ahead of demand even in a low price environment. Simmons qua contrarian is to be commended, particularly if he profitably bet on his views with his investments.

But Simmons as a sustainable development theorist is open to criticism on several grounds. One, he may have fallen into his own trap by getting “stuck” on the top end of the energy price cycle (short of making a case that anti-production public policies were now overtaking the inducement effects of high prices).

Second, Simmons extrapolates from the part to the whole by asserting without proof that all or most resources now face new constraints. He does not appear to have expertise in non-energy areas and does not cite a body of research supporting resource optimism beyond short-term price cycles. His ultimate trump card is pollution, which includes the key and possibly last sustainable development issue, increasing carbon dioxide concentrations in the atmosphere from hydrocarbon energy combustion.

Fundamental Misreadings, Contradictions

Simmons misread The Limits to Growth in fundamental respects as documented by these quotations (Simmons in bold).

“I am not a Malthusian at all” (Simmons, p. 4).

But Simmons also states:

“The world probably cannot wait another 30 years to begin pondering whether we could begin to experience problems and sheer limits to non-renewal [sic] energy consumption” (Simmons, p. 38).



“After reading “The Limits to Growth” I was amazed. Nowhere in the book was there any mention about running out of anything by 2000. Instead, the book’s concern was entirely focused on what the world might look like 100 years later. There was not one sentence or even a single word written about an oil shortage, or limit to any specific resource, by the year 2000” (Simmons, p. 11).

But Limits to Growth was all about resource famine!

“If all the policies instituted in 1975 in the previous figure are delayed until the year 2000, the equilibrium state is no longer sustainable. Population and industrial capital reach levels high enough to create food and resource shortages before the year 2000” (Limits to Growth, p. 169).

“Perhaps the most dramatic projections in The Limits to Growth were the estimates of the number of years until reserves of nonrenewable resources would be exhausted. That study made its projections by dividing estimates of global reserves (identified resources that can be profitably exploited at the current prices and technology) by annual global mine output. It adjusted the latter for projected future output growth, set equal to post-war trends. According to such projections, gold should have been exhausted by 1979, silver and mercury by 1983, tin by 1985, zinc by 1988, petroleum by 1990, copper and lead by 1991, and natural gas by 1992.”

– Malcolm Gillis and Jeffrey R. Vincent, “National Self-Interest in the Pursuit of Sustainable Development” in Sustainable Development: The Challenge of Transition (2000), p. 24.


“There was nothing that I could find in the book which has so far been even vaguely invalidated.” (Simmons, p. 15)

But Limits to Growth has been invalidated!

“Donella and Dennis Meadows, in The Limits to Growth, argued that population growth would outstrip the stocks of non-renewable resources, in particular fossil fuels. This particular prediction, following in the footsteps of Malthus and his concern about insufficient food for growing populations, was premature. New technologies, new discoveries and improved efficiency in using resources helped alleviate resource constraints. But the book was a milestone for focusing vigorous debate on linkages between natural, economic, and environmental factors.”

– Malcolm Gillis and Jeffrey R. Vincent, op cit., p. 3.


The Limits to Growth was never meant to be a doomsday book” (Simmons, p. 69).

But Limits to Growth was alarmist!

“We are unanimously convinced that rapid, radical redressing of the present unbalanced and dangerously deteriorating world situation is the primary task facing humanity” (The Limits to Growth, p. 193).

“The transition in any case is likely to be painful, and it will make extreme demands on human ingenuity and determination. As we have mentioned, only the conviction that there is no other avenue to survival can liberate the moral, intellectual, and creative forces required to initiative this unprecedented human undertaking” (The Limits to Growth, p. 196).


“The current strain on many of our precious resources is already becoming serious” (Simmons, p. 16).

But the “strain” is not evident in mineral price trends.

“Using econometric tests to examine the trends in the real prices of thirteen commodities, we find little evidence of increased natural resource scarcity from 1870 through 1998. For none of these commodities do we find conclusive evidence that the relevant real price has risen. Our results indicate that the relevant real prices could have risen or remained unchanged for natural gas; could have risen or fallen for anthracite coal, bituminous coal, steel, and tin; could have remained unchanged or fallen for iron and crude oil; and have fallen for aluminum, copper, lead, nickel, silver, and zinc.”

In short, the evidence suggests that over the past century, new technology driven by free market forces has overcome the geophysical scarcity of nonrenewable natural resources. Increased reliance on markets during the closing decades of the twentieth century is cause for optimism that these trends will continue in the twenty-first.”

– Stephen P. A. Brown and Daniel Wolk, “Natural Resource Scarcity and Technological Change,” Federal Reserve Bank of Dallas—Economic & Financial Review (Q1 2000), p. 9.

“All the mileposts raised as red flags in The Limits to Growth have so far been met” (Simmons)

But just the opposite is true!

Since The Limits to Growth was written, world population has increased from under 4 billion to over 6 billion, yet “every forecast of the doomsayers has turned out flat wrong. Metals, foods, and other natural resources have become more available rather than more scarce. . . . . Pollution in the developed world has been decreasing.” Julian Simon, The Ultimate Resource 2 (1996), p. 15.


“The energy economists’ incorrect dismissal of this important work was not only a mistake but their criticism also turned somewhat mean spirited and even shrill.” (Simmons, p. 67).

“The healthy reaction to computer fetishism is exemplified by the terse aphorism “Garbage in, garbage out.” What has gone into the Limits to Growth model is not garbage. On the contrary a great deal of effort has been made to find data, to develop reasonable assumptions about the real world and to test the model. But Meadows has himself emphasized that only about 0.1% of the data on the variables required to construct a satisfactory world model is now available. Moreover, as will be shown in these essays, little is known about the forces which determined past relationships between some of the variables; still less about their relationships.”

– Christopher Freeman, “Malthus with a Computer,” in H.S.D. Cole, et al. eds., Models of Doom: A Critique of the Limits to Growth (New York: Universe Books, 1973), pp. 8, 12.

What-If Scenarios

Simmons says (p. 26): “It is also interesting to contemplate the possible strains on our oil and gas resources had nuclear not been commercialized, particularly if the gap between rich and poor been narrowed over this period of time.”

The same logic could be used to conclude (my quotation): “It is also interesting to contemplate the possible strains on our oil and gas resources had there not been price controls on interstate natural gas that resulted in a 45% (150,000 MW) increase in coal power plant capacity between 1969 and 1980.”

Without nuclear (which was a government-fostered fuel source in many ways) or price controls with natural gas, much more investment would have gone into the gas resource base and infrastructure, for starters. A natural gas pipeline from Alaska might be in service, and LNG facilities could have been much greater. Problems and challenges inspire market solutions given market incentives—making “what if” scenarios much more optimistic than Simmons postulates.

Pollution—The Ultimate Constraint?

Simmons states (p. 53): “If the world is fortunate enough to find a way to actually produce such vast sums of added energy, a secondary problem emerges. The pollution created by this added energy could become overwhelming or even life-threatening.”


“National reductions in air quality concentrations and emissions continue to occur in the face of economic growth. Since 1970, total U.S. population increased 31 percent, vehicle miles traveled increased 127 percent, and the gross domestic product (GDP) increased 114 percent. . . . [In the same period] aggregate criteria pollutant emissions decreased 31 percent.” (U.S. Environmental Protection Agency, National Air Quality and Emissions Trends Report, 1997, p. 9.)

“Total emissions [for all U.S. criteria pollutants] declined substantially on a per-capita basis, from about 1.2 pounds per person in 1972 to 0.68 pounds per person in 1996. The decreases are attributable to the Clean Air Act regulations, which began in 1970 and continued into the 1990s. Changes in the business cycle and improved manufacturing practices also have played a role in the decline.” (U.S. Energy Information Administration, 25th Anniversary of the 1973 Oil Embargo: Energy Trends Since the First Major U.S. Energy Crisis, p. 28.)

A Fatal Flaw of “Limits”—Technological Pessimism

Neglected by Simmons, the explicit rejection of technological responses to natural problems is the fatal flaw of Malthusianism. The Limits to Growth rejects technological solutions as follows: 

“Technological optimism is the most common and the most dangerous reaction to our findings from the world model. Technology can relive the symptoms of a problem without affecting the underlying causes.” (The Limits to Growth, p. 154)

“We have not found it possible to aggregate and generalize the dynamic implications of technological development because different technologies arise from and influence quite different sectors of the model.” (The Limits to Growth, p. 130)

Another View of Sustainable Development: Julian Simon

Matt Simmons does not reference a literature that empirically and theoretically refutes The Limits to Growth. Another view of sustainable development—that the “ultimate resource” of human ingenuity in markets expands useful resources and solves new problems—is now widely accepted in the economics profession.

A leading critic of Malthusianism began as a Malthusian but was persuaded by the data. Julian Simon’s The Ultimate Resource 2 sets forth his opposing view:

“There is no physical or economic reason why human resourcefulness and enterprise cannot forever continue to respond to impending shortages and existing problems with new expedients that, after an adjustment period, leave us better off than before the problem arose. Adding more people will cause us such more problems, but at the same time there will be more people to solve these problems and leave us with the bonus of lower costs and less scarcity in the long run” (p. 380).

“The world’s problem is not too many people, but lack of political and economic freedom” (p. 11).

“The quantities of education that people obtain all over the world are sharply increasing, which means less tragic waste of human talent and ambition” (p. 579).

“There is only one important resource which has shown a trend of increasing scarcity rather than increasing abundance. That resource is the most important of all—human beings. . . . [An] increase in the price of peoples’ services is a clear indication that people are becoming more scarce even though there are more of us.” (p. 581).

“Human beings create more than they destroy” (p. 580).

[1] Comments of Robert L. Bradley Jr. for Enron executives, November 28, 2000.

One Comment for “Matthew Simmons's 'Club of Rome' Epiphany (The strange case of an energy investment banker turned energy alarmist)”

  1. Richard Haydn  

    Very good at high-lighting the doomsday scenario vs. the reality we have seen so far. I would stress that it’s not so much that we will not eventually find certain distinct resource materials scarce, but that we will have advanced to the point of creating a substitute. I believe that unless there are some extreme events that upset things, technology will prevail. Just place a massive solar panel farm in space gathering sunlight 24 hours a day and run an extension cord to the earth :). Even a nuclear war would probably only set us back maybe 1000 years. I guess all bets are off if we get whammed by a rogue astroid or sucked up in a black hole. The only troubling thing is the “transition period”. Malthous could not forsee the technological wonders that lie ahead. Are we so bold now to ignore his error, as we certainly cannot predict the future in detail. There may be no limits (save the speed of light, and hopefull that too will be overcome) but certainly transition periods can be very tough.


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