Wednesday, May 25, 2016

Build a better mousetrap, and ... wait, are you allowed to do that?

The mousetrap is a metaphor, of course.  I don't want you to think that the next gazillions are to be made from a better mousetrap ;)

One of my favorite charts is from The Economist.  Incidentally, implementing austerity measures at home, I did not renew the subscription to the magazine newspaper.  I have also canceled the cable connection, which means my favorite television channel is also gone.  Woe is me!!!

Where was I?  Yes, one of my favorite charts.  This one:

For the longest time, the world's economy was dominated by two countries--India and China.  Which is also why people from the rest of the world wanted to get to India and China.  And then things changed.  In a hurry.  Other people got rich.  And now China is also rich. India too is getting rich.  The middle class in India now leads a life that is far more luxurious than the emperor's life that Akbar's was.  How rich are we, and how fast was this transformation?
Two centuries ago, the average world income per human (in present-day prices) was about $3 a day. It had been so since we lived in caves. Now it is $33 a day—which is Brazil’s current level and the level of the U.S. in 1940. Over the past 200 years, the average real income per person—including even such present-day tragedies as Chad and North Korea—has grown by a factor of 10. It is stunning. 
Before we complicate the story with colonialism and white supremacy, we do need to wonder why the rapid rise to wealth did not happen in India or China, and why it began in Europe, right?
The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious. Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not. 
How well phrased, right?  I have always been a big fan of the author of that commentary--Deirdre McCloskey.  It was in graduate school that this began when I read McCloskey's The Rhetoric of Economics.  A scholar of the highest caliber.

McCloskey continues:
By certain accidents of European politics, having nothing to do with deep European virtue, more and more Europeans were liberated. From Luther’s reformation through the Dutch revolt against Spain after 1568 and England’s turmoil in the Civil War of the 1640s, down to the American and French revolutions, Europeans came to believe that common people should be liberated to have a go. You might call it: life, liberty and the pursuit of happiness.
We often fail to recognize and appreciate life today, like how McCloskey presents it:
Look at the magnificent plenty on the shelves of supermarkets and shopping malls. Consider the magical devices for communication and entertainment now available even to people of modest means. Do you know someone who is clinically depressed? She can find help today with a range of effective drugs, none of which were available to the billionaire Howard Hughes in his despair. Had a hip joint replaced? In 1980, the operation was crudely experimental.
It has been a magical transformation, in merely two centuries.  McCloskey is everywhere, because of a new book that is coming out.  From a commentary at Reason:
Hear again that amazing fact: In the two centuries after 1800, the goods and services made and consumed by the average person in Sweden or Taiwan rose by a factor of 30 to 100—that is, a rise of 2,900 to 9,900 percent. The Great Enrichment of the past two centuries has dwarfed any of the previous and temporary enrichments. It was caused by massively better ideas in technology and institutions. And the betterments were released for the first time by a new liberty and dignity for commoners—expressed as the ideology of European liberalism.
 It is such an enrichment that has made possible our daily complaints about the cable company, cellphone signal being weak, gluten, ... So, pause for a moment and be thankful that you live now and not two hundred years ago ;)

And, thank the freedom(s) that you have.


Ramesh said...

My deep commiserations on the withdrawal of the most exciting, heart thumping, adrenaline surging TV channel in the world. Our sympathies are with you :)

Yes, the dramatic increase in living standards are nothing short of magical. No other era in history has seen such advancements in such a short time. And yet most people in the world moan about their economic misery. A real paradox.

By the way, European progress was not due to liberty alone. I don't even think it was the main reason. A spirit of adventure and superior technology (both ships and guns) I would submit were the main reasons. I doubt if that were exclusively the product of liberty although that should certainly be one of the causes. You could argue that there is greater liberty in Europe today but far less spirit of adventure.

Sriram Khé said...

I am not going to argue against McCloskey's thesis on liberty and the Great Enrichment, as she calls it. McCloskey relies only on logic and evidence. And--this is crucial--does not try to fool or impress people with fancy mathematical equations and statistical manipulations. (Her "Rhetoric of Economics" was a critique of the math mumbo jumbo) ...

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