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The Rational Optimist

How Prosperity Evolves

Matt Ridley

The human explosion out of its original niche not due to our 'big brain' or 'imitation' or language. In fact it's the collective phenomenon of minds/ideas cross-fertilizing.

The idea of ideas having sex with each other - organisms mutate, but without sexual gene swapping each mutation wd remain isolated in the original family. All the mutations which made up the eye wd never have got together.

Humans discovered division of labour - each cd make/catch/grow something and exchange in away that both better off.

"On what principle is it, that when we see nothing but improvement behind us, we expect nothing but deterioration before us?" (McCauley)

Last 50 years or so huge progress: the average Mexican lives longer today than the average Briton in 1955. Infant mortality in Nepal is today lower than it was in Italy in 1951.

Yet 1950's were themselves period of extraordinary abundance compared with what had come before. World income oer head had doubled since 1900. In 1900 America no-one had running water, electric lights, washing machine or refrigerator, but by 1955, 8 out of 10 did.

Louis XIV, the Sun King, dined each night off plates of gold and silver. A staff of 498 prepared each meal. Where he was the richest of the rich in the world's richest city, you have no servants, no palace, no carriage, no kingdom. You have no chefs, but you can decide on a whim to choose between scores of local restaurants, in each of which a team of skilled cooks is waiting to serve you at an hour's notice.

Never before this generation has the average person been able to afford to have somebody else prepare his meals.

You have no carriage but you can but an airline ticket and summon the skilled pilot to fly you to one of hundreds of destinations that Louis wd never have dreamed of seeing.

You have no runner to carry yr messages, but even now a repairman is climbing a cell-phone mast somewhere in the world to make sure it's ready just in case you need to make that call.

You have far more than 498 servant at yr beck and call. Sure they work for many other people as well, but from yr perspective, what is the difference? This is the magic of exchange and specialization.

Trade is a giant leap up from reciprocity, which is what other primates do. Trade doesn't have to be equal; it just has to benefit both sides. The big point of trade, and way in which it differs from reciprocity, is that you now have access to objects you didn't know how to make or find.

Ricardo's Law of comparative advantage explained why it made sense for England to trade cloth for Portuguese wine, even though the Portuguese were better at cloth making than the English.

(Here's Wikipedia's explanation of comparative advantage)

Ricardo's Law has been described as the only proposition in the whole of social sciences that is both true and surprising.

Importance of population density to stimulate and sustain innovation. Tasmanian aborigines isolated from Australian mainland for ten thousand years by rising sea levels, gradually losing technology. Their craftsmen died without handing on the skills, so bone tools got simpler and simpler, then eventually vanished, so cd no longer sew clothes or make fish hooks, so they went naked and never fished.

A country's economic freedom predicts its prosperity better than other indices such as mineral wealth, education or infrastructure.

Most extreme examples North and South Korea. One is fair and free, where the people are mostly getting richer and happier. The other is an arbitrary, hungry ad cruel place which people flee as quickly as they can.

Rich countries are rich because of the quality of their institutions supporting economic activity. Nigeria scores so low on the rule of law, education and honesty of its public officials that even its immense oil resources haven't saved them.

If you look at the history of mercantile law you'll see that merchants make it all up as they go along, then their innovations turn into customs, ostracizing those who break the informal rules, and then only later do rulers subsume the mercantile rules into laws of the land.

Societies that use markets extensively develop a culture of co-operation, fairness and respect for the individual. Can test this with Ultimatum Game - the societies least used to trading with outsiders give, and accept, the hardest, least generous bargains (as little as 15c in the dollar)

(Ultimatum Game explained here if you've never heard of it)

(Some tribes made hyper-generous offers - as in 60c in dollar or more, and were rejected , apparently because in their cultures a gift incurred a reciprocal obligation)

As Robert Wright pointed out, the history of human prosperity lies in the repeated discovery of non-zero-sum bargains that benefit both sides.

Standard axiom of modern debate that trade is to be despised because encourages and demands selfishness, and that putting a price on everything has cheapened everyone's lives, and that everyone lived a much kinder and gentler existence before the introduction of filthy commerce.

Nobody planned the global capitalist system, and nobody's in charge of it, or even really understands it. This offends intellectuals, because capitalism renders them redundant. It goes on perfectly well without them. So the intelligensia have disdained commerce throughout history. There's a lovely quote from Lord Taverne: "A classical education teaches you to despise the wealth it prevents you from earning."

Corrugated iron, plastic bags, container shipping and discount marketing are the most unsophisticated yet enriching innovations of the twentieth century. Ironic that the critics of corporate giants who normally complain about profiteering, still disapprove of WalMart, saying that low prices are a bad thing because small businesses can't compete.

Otzi the Iceman, living 5300 years ago, was a walking compendium of the inventions of hundreds of people. He had a copper axe 99.7% pure, that was the product of a furnace that had cost alot of human capital to build -to smelt and refine the metal in that axe would have taken weeks, and implies an elaborate trade system in place to make such an investment worthwhile.

The irrational fears of the anti-GM pressure groups. There've been a trillion GM meals with not a single case of human illness caused by the food. Or the organic food movement: "I'm so tired of people who would crit a doctor for using a stethoscope instead of an MRI demanding that farmers use 1930's technology to raise food."

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