EconTalk |
Ridley on Trade, Growth, and the Rational Optimist
Oct 18 2010

Matt Ridley, author of The Rational Optimist, talks with EconTalk host Russ Roberts about why he is optimistic about the future and how trade and specialization explain the evolution of human development over the millennia. Ridley argues that life is getting better for most of the people on earth and that the underlying cause is trade and specialization. He discusses the differences between Smith's and Ricardo's insights into trade and growth and why despite what seems to be strong evidence, people are frequently pessimistic about the future. Ridley also addresses environmental issues.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Robert Kennedy
Oct 18 2010 at 8:53am


I read The Rational Optimist a few months ago. I highly recommend it. The last 30-is pages that focus on climate change issues is somewhat provocative and not particularly rigorous. But the rest of the book is a delightful read. His documentation of how trade and division of labor has brought prosperity from nearly the beginning of human existence is fascinating.

Oct 18 2010 at 9:25am

While listening it occured to me that the division of labor in pre-agricultural societies between hunting and gathering is a good example of Nassim Taleb’s barbell strategy — one activity is high-risk and high-reward, the other activity low-risk and low-reward.

Oct 18 2010 at 2:41pm

The section on how much things have improved over the last 100 years reminded me of the following bit from comedian Louis C.K. Very entertaining.

Oct 18 2010 at 2:53pm

I enjoyed the talk, but when he got into the process of using non-renewable resources when renewable resources run low he began to lose me. How is that not inherently unsustainable? The fact that we haven’t YET run into problems with exploiting non-renewable resources on a global scale doesn’t mean that we won’t.

Until someone can provide a well-reasoned response to William Catton’s argument in “Overshoot” I will continue to see people such as Ridley as charming cheerleaders of a way of life that may be of surprisingly short duration when future generations look back on the period through which we are curently living.

When thinking about non-renewable resources, ask yourself how they are different from using a credit card to make up for a cash flow shortfall. It works for a while, but ultimately it leads to a standard of living that is inherently unsustainable.

I find that, in general, economists tend not to have a strong grasp of basic ecological truths. Those with an understanding of ecological truths, in turn, tend not to be much fun at cocktail parties.

Whichever perspective is correct, we are clearly living through a marvelous period in history. The question is whether there is a mean to which we will revert, or whether the future will match the fanciful visions people such as Ridley offer us.

Oct 19 2010 at 3:57am

Thank you for a great podcast. I’m myself trying to get people around me to understand that we are going in the right direction which is a little hard to get through. But maybe the fact that humans are pessimistic, apocalyptic, never satisfied or just grumpy old men complaining about trains not arriving in time is the reason for our great prosperity. If people wouldn’t worry so much about climate we wouldn’t see as much innovation. If people would be happy with the trains just because they’re better now than a hundred years ago the demand for punctual trains would decrease.

I think it is human to never be satisfied with what you have be scared to death of what the future might look like and luckily that is what drives innovation, novelty and variation.

Oct 19 2010 at 4:02am

Nothing better than waking up on Tuesdays with Econtalk on my iPod. It really is my favorite podcast. Found out about it through your appearance on the Planet Money podcast (when you talked about uncertainty of economic models), which I heard about through This American Life after their famous episode “The Big Pool of Money”, which attempted to explain the housing crisis.

Keep them coming!

(Russ or anyone else, do you know of other really enlightening podcasts like this one, possibly economics related but not necessarily?)

Oct 19 2010 at 7:38am

I agree that viewing history as a series of wealth accumulations and piracies of wealth is a really useful prism. I suspect this view is not more dominant because history is written by the pirates — aka “the victors”

Oct 19 2010 at 10:46am

Excellent podcast! I’m wondering if it isn’t just another confirmation bias for my optimistic personality?

That being said:
Mike, your William R. Catton comment got me to look him up. “Worse than Foreseen by Malthus” is interesting for the idea that Catton wrongly channels Malthus. He sees Malthus hating the world we live in because of the load we are placing on it. I wonder if Catton lived one week in Malthus’ world he wouldn’t see things a might differently about loads?

Oct 19 2010 at 10:53am

Enjoyed the podcast. Like Mike, I was thrown off a little with Ridley’s assertion that renewable resources are limited. Once ownership comes into play, renewable resources are generally renewed.

“I will continue to see people such as Ridley as charming cheerleaders of a way of life that may be of surprisingly short duration when future generations look back on the period through which we are curently living.” – Mike

Mike – I think Ridley addresses this specifically when he says that as we began progressing from trade just about every lifestyle has been of surprisingly short duration (“bronze period” etc.). But, his insight is that it wasn’t the limitation of the resources that drove us to the next run on the ladder. It was that we found a better way.

Mads Lindstrøm
Oct 19 2010 at 12:27pm

To Seth:

I understood Ridley’s point about the limitation of renewable resources a little differently. It is not that the renewables disappear totally, just that they are nor renewed fast enough for our needs. Imagine powering Great Britain by wind mills. It may be that there simply is not enough land / shallow water available for all the wind mills needed. So we run out of space to place our wind mills, and you can thus say that the renewable resource runs out.

By the way, the wind mills are just an example. I have no idea if there actually is land enough to power Great Britain by wind mills.

Oct 19 2010 at 12:41pm

Seth wrote: Mike – I think Ridley addresses this specifically when he says that as we began progressing from trade just about every lifestyle has been of surprisingly short duration (“bronze period” etc.). But, his insight is that it wasn’t the limitation of the resources that drove us to the next rung on the ladder. It was that we found a better way.

Sometimes we find better ways and sometimes entire lifestyles, societies and worldviews collapse, with no regard for treasured and unquestioned delusions about the durability of given ways of life.

I’ll bet if you had asked a Roman citizen during the height of the Roman empire about the future, he would have given you a Ridley-esque assessment of the inevitability of continued Roman progress.

Optimism is a marvelous tool for feeling better about the present, but it can lead to a dangerous complacency regarding the lessons of history–i.e., all societies and ways of life have periods of ascent and descent, and the mythologies of the societies in question rarely allow for such dynamics.

A little skepticism and humility should be included with every serving of Ridley’s rainbow stew.

Oct 19 2010 at 2:09pm

“The man who despairs when others hope is regarded by a large class of persons as a sage.”

Maybe this is the argument in favor of poor universal economic education: so that those who see injustice and inequality, as the world creates more justice and opportunity, push the creators to higher highs.

Oct 19 2010 at 3:45pm

Of course growth isn’t sustainable. That would violate the laws of thermodynamics. There is a finite amount of energy in the world. There is also a limit to how efficiently that energy can be used. Most economists ignore this. The question is how long can it be sustained. As pointed out in the podcast undiscovered technologies could prolong the growth for a very long time, but it still must end.

Justin P
Oct 19 2010 at 4:00pm

I think that the criticism against rational optimism stems a lot from the failure to fully understand dynamic systems and from the inability to look at the long-term. 100-400 years in the grand scheme of things is the short-term view. So the criticism about the Roman citizen, by Mike, isn’t really valid.

You look at the plight of the Egyptian slave and asking them about the world in 500 or 1000 years, they wouldn’t even be able to comprehend the advancement in Technology or Human standard of living. While the Fall of the Roman Empire really sucked for a long time, we eventually got out of it. We came out of it far better off than we were during the height of the Empire.

“Renewables” aren’t sustainable. Eventually the Sun will die out right?

But seriously, the Sun could be all we will ever need as an energy source but the technology isn’t there yet. I’m thinking more of an enormous solar collector on the edge of Venus, that transmits power to the earth via geo-stationary satellites. Laugh if you want, but wireless power transmission technology is only starting to take off, of course we will need to use plenty of those pesky fossil fuels until we reach that point, technologically. But I’m Optimistic we can do it within the next few hundred years.

Oct 19 2010 at 6:02pm

Anyone who doesn’t understand his long run optimism should watch the TV show “Mad Men” without meaning to it puts the time of my childhood, not that long ago, into a context that we cannot otherwise fully appreciate. From inequality to air conditioning.

Oct 19 2010 at 6:20pm

Russ and Matt –

Thanks for a great podcast. This was a very interesting discussion, and I appreciate the dive into the idea of trade as the key to the source of prosperity.

I do differ strongly, however, on the points about climate and fossil fuels not being major issues of concern, however. Two quotes from the podcast seem to even enhance this idea of concern somewhat, and I hope I am not taking them out of context:

(36:00) Any boom you could look at–Italy, Venice, Holland, etc.–doesn’t really work at raising human living standards because it just gets started and then runs into a Malthusian correction often–the population grows and you start to get a resource constraint.

(39:00) If you look at the graph of human living standards, GDP per capita, it takes a step change 200 years ago and starts going up at a much faster rate. I think we need a special explanation for that, and I think it’s about getting cheap energy.

If I follow this logic, I am left with the following dilemma: human prosperity is growing in the modern age moreso than in other periods of history, largely due to cheap energy in the form of fossil fuels. They are unique in this ability to provide unchecked growth. However, as is the nature of non-renewable resources, they can eventually run out. Even so, the unchecked prosperity can be expected to continue.

I believe very much that the premise of the discussion is correct – trade makes us all better off. Larger markets allow more specialization and the inclusion of more varied resources, ever increasing the opportunity for continued growth. However, in global markets, trade (of goods) requires transportation. Expensive fuels may act as a barrier to this type of global transportation. Can we rationally expect continued growth of prosperity without investment into alternative fuels powering the necessary transportation?

Similar to the bronze age yielding to the iron age not through scarcity, but through improvement, I hope that the fossil fuel age yields to a new energy age through improvement. It’s just a bit of a risky game, considering that the powering of the innovation for the new energy sources currently requires fossil fuels as the mechanism for movement of goods and ideas in the economy. Individuals and nations that invest early to develop new energy sources before fossil fuel costs become prohibitively high will do very well in the future.

Oct 19 2010 at 8:55pm

What a brilliant exchange. Thanks for putting a smile on my face this week.

I am sympathetic and generally in agreement with the host’s and guest’s views. The one devil’s advocate position discussed most was with respect to ecological concerns. The rational optimist’s answer is, more or less, that modern science will likely come up with innovative solutions for any real problems as they develop. This argument always strikes me as the stronger for all of the reasons stated and alluded to in the podcast.

It seems to me that other arguments from the pessimistic corner, some perhaps stronger than others, and some more hypothetical include: 1) the future possibility of cataclysmic warfare fueled by our increased technologic prowess 2) the eventual dissolution of the political framework (whether through violence or simply “progressive” socialist regulation, etc.) that was perhaps necessary if not sufficient for the past two centuries’ miraculous economic growth 3) the dissolution of the sub-political unit of the family with the resulting increase in social pathologies over the last forty years.

That said, I still side with the rational optimist’s position, if only cautiously so.

Cheers, wbond

Mark Crankshaw
Oct 19 2010 at 9:09pm

I share Ridley’s optimism to a large extent. However, this optimism is tempered by the fact that, as our productive capacity has increased, the amount of parasitic activity has explosively sky-rocketed. As Ridley correctly explains:

human history is a competition between the kind of wealth generation I’ve talked about and the kind of wealth-seeking that comes from chiefs, thieves, predators, parasites, and rent-seekers.

While the productive forces of society (termed by Franz Oppneheimer in his work ‘Der Staat’ as the economic means) have developed the technology and methods necessary to increase production to a staggering and phenomenal extent, the parasitic forces (Oppenheimer’s political means)relentlessly strive to squander this increase in production. While to date the increased production has outpaced the parasitic legions– although at times quite tenuously– I fear that, at least in the next few decades, the parasitic forces may well have the upper-hand.

For centuries, the main societal parasite came in the form of religion, where, in the service of imaginary gods, very real resources were squandered by an army of non-productive priests and other charlatans. As societal power has drifted from the religious to secular sphere in the West, the State has taken the lead parasitic role.

The rise of the State has brought War, which destroys production, massive standing armies, as well as massive non-productive bureaucracies, which consume but produce nothing. In the west, the State has simultaneously imposed the Welfare State, which in essence amounts to a massive transfer of resources, away from those who produce and exchange (those engaged in the economic means) and towards those which merely consume (those engaged in the political means). This trend is set to escalate in the next few decades. When not promoting these direct forms of parasitism, the State is busy stifling trade, interfering with and politically distorting markets, promoting new forms of parasitism, and devising new ways of punishing the innovative and productive.

On top of the welfare state, the rise of the modern-Luddite environmental movement is another threat in the competition between production and parasitism. While the environmental movement has more than its’ fair share of parasites, the movement is also intent on depressing production by artificially making energy resources more scarce. For over 100 years, the Socialists claimed that a planned economy could out-produce the free market–therefore the Socialists should control resources so we could all have more now. When this claim was obviously no longer tenable, the Socialists, which has claimed that the free market could only produce at a level that meant poverty for most, simply did an abrupt about-face. The free market, they now proclaimed, produced too much, and would soon deplete all of our resources–therefore Socialists should control resources so we all could have more later. Their objective has never changed (they control and allocate resources), the only change has been the pretext by which they gain control…

While those parasites who live by the political means no doubt want to keep their host healthy and productive (the better to feed off from), I fear that their greed may be our undoing as they are likely to over-reach.

Ralph Buchanan
Oct 20 2010 at 12:48am

Milton Friedman and Whitaker Chambers spent a lot of time lamenting the future in the 1960s and 1970s; Friedman then contributed to changing the prospects. Russ, you and Ridley are carrying on that work.
Education is the most important means of changing the future. Thanks for the podcast.

Oct 20 2010 at 1:24am

Max writes:

Of course growth isn’t sustainable. That would violate the laws of thermodynamics. There is a finite amount of energy in the world.

The second law of thermodynamics applies to closed systems. The earth is nowhere near a closed system, and we have got the sun to thank for that. And as Matt pointed out in the podcast, we are getting better and better at doing more with less and less.

Matt Ridley
Oct 20 2010 at 2:00am

Thanks to all commenters for some excellent points. Two thoughts from me.

First, Mads Linstrom is right in her (his?) interpretation of what I mean when I say renewable resources are more prone to running out that non-renewable ones. Britain did almost run out of forest and streams that could be dammed for cotton mills and it would run out of wind-farm sites long before satisfying its energy needs, especially on still days. Whales turned out to ben easily exhausted source of oil, petroleum not so yet. The discovery of shale gas has transformed the fossil fuel story for many decades, it seems, so the question of what replaces fossil fuels is that bit further off. Then there is nuclear, which looks to me to have many centuries in it.

Besides, a lot of what we think of as non-renewable resources are renewable. Take phosphate. We mine it and the high-concentration ores run out. But the phosphorus atoms have not vanished. They have gone through sewage into waste dumps and the mud of estuaries. We can mine those to get them back and use them again.

Second, as dai_vet argues, the thermodynamic reason for the end of growth is not persuasive. All we need for a burst of economic growth is a new idea. A new suggestion for how to rearrange atoms and electrons in a useful fashion: ie, gets more useful work out of the limited sunlight (present and past) that comes into the system. In the same way, evolution is a combinatorial system exploring an infinite DNA library. There is no limit to the new genes you can evolve because there is no limit to the number of DNA combinations you can create (you can always add one more letter to a linguistic string). With incoming energy, growth is an information issue, not an energy issue or a material issue.

Oct 20 2010 at 3:31am

There is a limited amount of sunlight that falls on the earth. Once we are harnessing all of that, more energy cannot be obtained from the sun. You can consider this your closed system.

Sure we are getting better and better at doing more with less, but there is a limit to that too. There is a maximum amount of work that can be extracted from a unit of energy.

As I said, there may still be hundreds of years of growth, but eventually it will stop.

Oct 20 2010 at 6:47am

1) the political & physical interdependency in the world today means hiccups or screw ups in one part of the system can impact the whole completely and immediately. That presents dangers never before as great
2) natural resource depletion must be a serious concern. With 70% of oil devoted to transport, the entire calculus of trade changes as that resource becomes scarcer… and I don’t see a suitable replacement whether needed in 10 or 100 years.

but the reason I write is to share the magic I witnessed with my 1st grader after listening to the show. He was beaming after he had successfully ‘traded’ silly bands with his sister – getting the one he wanted as she got the one SHE wanted. Through free exchange, they had both made themselves better off by following self interests. Trivial – to be sure, but it reminded me of the innate and exciting nature of trade.

Thanks for the discussion.

Oct 20 2010 at 11:00am

Matt Ridley –

The argument you use is inherently flawed: “Besides, a lot of what we think of as non-renewable resources are renewable. Take phosphate. We mine it and the high-concentration ores run out. But the phosphorus atoms have not vanished.”

Phosphorus is an element (15 on the periodic table).
As such, it cannot be destroyed except through a nuclear reaction. As such, we can continually mine the waste stream, or in other words, recycle.

Oil and fossil fuels are entirely different. Oil is an organization of hydrogen and carbon, as is coal, as is natural gas. Once we burn these fuels, the organization is destroyed, and will take energy to re-create.

Another way to think of energy is like money. Money in a vault has potential, but while it sits in the vault it does nothing productive. When money changes hands, the exchange is used to provide some utility to the user. At the end of the day, the same amount of money exists, but the passing of money from one person to another is what provides utility.

Similarly, energy can be used to do work, but only as it moves from one place or one form to another. Oil is burned to move a car. All the energy is still there, but now it is changed from chemical energy into motion and exhaust heat.

The problem we face is not the scarcity of energy, but the scarcity of useful energy. Just as a million people, each with $1 cannot build a factory without work to coordinate the resources, sunlight falling over a million acres cannot power a fleet of cars unless there is some way of concentrating the energy. Fossil fuels are a great way of concentrating energy collected over millions of years into instantaneous use today, but we cannot expect millions of years worth of saving in that bank to last forever. We need a new collection method.

Justin P
Oct 20 2010 at 12:09pm

Mark –
“For over 100 years, … Their objective has never changed (they control and allocate resources), the only change has been the pretext by which they gain control…”

You pretty much described the current AGW fairly well. It’s first and foremost about control. Anyone that says the AGW movement isn’t about controlling the lives of others, is either naive or not honest.

Justin P
Oct 20 2010 at 12:14pm

Max –

No growth will not stop. You say that there is a finite amount of light that hits the Earth. Well then read my comment from earlier…how about a huge solar collector around Venus…that would be a lot more energy than what hits the Sun…and we have absolutely no clue when that might happen…it would be completely ridiculous 5 years ago, but now…not so much. It’s entirely feasible if not economically practical now…but in another 100 years, it just might be worth getting built.

Then of course we could always Tarra-form Mars or the Moon for population growth, mine some asteroids or comets. The possibilities are endless.

I think the problem is that the Pessimist severely lack any sort of imagination. I think it would be interesting to see where the Pessimist work. Do they work for other people or are they entrepreneurs. I have a hunch that they pessimists aren’t running their own businesses.

Oct 20 2010 at 10:37pm

Thank you gentlemen,

I thought, you covered the subject very well.

I would add my observations:

Could it be that our attitude that the world is falling apart attitude a key part of why our well being continues to increase?

I agree that over the past 200 years progress has been tremendous, but this tremendous prosperity growth is just a blink in the life span of earth, the glaxy and the universe. Many empires such as the Romans, Greeks grew for years and then declined. Even in midst of our current outstanding improvements lies, WWI, WWII, genocides and other atrocities.

The question still remains if we are on the road of a great metamorphisis or the road to ruin. Only our future inginuity and markets will tell which road we are on.

Oct 21 2010 at 10:17am

Gents –

Thanks again for the overall theme of the podcast, i.e. that we have developed a system of trade that makes us all better off, and that it is rational to expect this trend to continue. Whatever our hurdles or our grumpy old man displeasures with minutiae, our desire for something better can be channeled into a system of trade. This system, in turn, can incentivize people to continue working for themselves, and for each other.

Just like the optimism put forward in the podcast with Robert Laughlin as a guest, I feel this podacst expresses the optimism that we can overcome our challenges – technical and otherwise – because there is a great incentive for us to do so. There will be convenient transportation in the future because people want it; therefore, they will work for it and trade other things to achieve that goal.

Thanks again.

Oct 21 2010 at 3:27pm


I enjoyed the talk, but when he got into the process of using non-renewable resources when renewable resources run low he began to lose me. How is that not inherently unsustainable?

A billion years worth is not infinitely sustainable but close enough for me and even the sun will run out one day. Cohen calculates that we could take 16,000 tonne per year of uranium from seawater, which would supply 25 times the world’s present electricity usage and twice the world’s present total energy consumption. He argues that given the geological cycles of erosion, subduction and uplift, the supply would last for 5 billion years with a withdrawal rate of 6,500 tonne per year. The crust contains 6.5×10^13 tonne of uranium.

That assumes no new invention and that we do not find a better way to release the energy that is in all matter. The EROEI of nuclear is positive now.

E=MC^2 tells us that in a universal sense energy is cheap and matter is expensive.

[Link fixed–Econlib Ed.]

Oct 21 2010 at 3:55pm

Re: Ridley Puzzles/Contradictions?

Good podcast, but this time Russ’ broad sympathy with the interviewee’s views produced some really egregious straight man/straw man rejoinders. Here are a few questions to which I’d have loved to hear a Ridley response:

1. Pessimistic proles and unrealistic expectations

Ridley is baffled that so many (ordinary) people fail to appreciate how lucky they are to be alive today, as opposed to some time in the distant past when leisure time, lifespans, consumer opportunities, etc. were relatively more constrained. Ignoring for a moment any possible unfavorable comparisons with the more recent past, I wonder how Ridley would respond if the same question were posed with respect to the “less ordinary” people, e.g., those who occupy senior managerial and/or ownership positions in the modern economy. Given the tremendous growth in labor productivity over the last century (a nontrivial portion of which is completely unrelated to private capital investment), why do present-day firms demand productivity levels that require a growing share of employees to put in 20th c. (or considering the prevalence of two-income families, 19th c.) era commitments of human-hours? I imagine that most business owners and managers would become quite unhappy if everyone else unilaterally decided to stay home one day a week to pursue their own personal or entrepreneurial ventures — but the question is, why? Would their displeasure be rational, especially if the overall labor productivity with a four-day work week would still be some substantial x% higher than productivity a century ago? If it’s unreasonable to expect employers to base their current expectations on past conditions — or in this case on some earlier point-observation on a consistently upward-sloping trend — then why would anyone think that it’s reasonable for anyone else to embrace that view?

2. Futility of forward-looking precautionary action

A similar question arises in response to Ridley’s views regarding the irrationality of foregoing any consumption or (more) profitable investment opportunities today to hedge against the incalculable risk (ala Taleb’s Fourth Quadrant) of potentially serious future resource constraints and/or environmental problems. Ridley is certain that e.g., 22nd c. technological remedies for such problems will be so much more advanced than current tech that making any precautionary adjustments or investments now would be positively absurd. Ignoring for a moment the obvious infinite regress problem that such an assumption would imply (as well as the applicability of the ever-popular “taxing future generations” critique that often comes up on EconTalk), I wonder if Ridley generally finds such arguments equally persuasive when they’re used by humbler folk, e.g., individuals who are revealed by changing circumstances to have failed to save enough to cover their mortgage in the event of 2-3 years of unemployment, or enough to pay for a major, non-elective but uninsured surgical procedure? In general it seems that we tend to castigate such individuals for their lack of foresight, and also to think highly of those who plan ahead for the proverbial “rainy day.” Given the stark contrast between the prudence of individual-level savings/precautionary investment and the absurdity of such forebearances at the firm level, I wonder where Ridley would draw the line — at what point, or what size, do such activities start/cease to be “rational”?

3. The power of capital as a universal palliative

The cumulative application of entrepreneurial capital is a tremendously important part of the labor productivity story, but it is not the only part of that story. Neither is productivity enhancement the sole objective of every capital investment, nor is it the universal, invariant effect of such investments. It seems unlikely that Ridley would recommend or applaud large investments today to expand the stock of residential housing in the US… but many people did just that as late as 2008. Granted, this particular example might seem unfair or unreasonable today — but the point is that productivity levels in an increasing number of technology-intensive industries and product markets are such that current supply already outstrips all conceivable near-medium term human demand. Pouring even more capital into such endeavors would make no more sense than blanketing more of Nevada with vast fields of condos and McMansions. Sooner or later the actual supply conditions in such industries will be become matters of common knowledge. Maybe then the discipline and the general public will be ready to embrace a more nuanced understanding of the virtues and primacy of capital investment.

Oct 21 2010 at 4:51pm

Mr. Ridley – Thanks for the additional info on the limits of renewable energy capacity. I think it is a good point. Even current sources of renewable energy are subject to capacity constraints.

But I’m not sure ‘running out’ is the right way to describe this limitation. I don’t think reaching a point of maximum capacity is the same as having used up all of something.

And assuming today’s capacity will also be tomorrow’s takes the unimaginative position of the people who do not factor in potential unpredictable innovation.

Floccina – Fascinating information if true.

Oct 21 2010 at 5:48pm

I also have one question that comes up regarding the renewable vs. non-renewable sustainability claims.

When Mr. Ridley discusses the unsustainability of renewable resources, he seems to refer to cases focused on a tragedy of the commons problem – over-fishing of whales, supply of white pine forests, etc. These are renewable resources that had a nature-defined harvest capacity. Just as North American streams cannot be fished freely, nor deer hunted completely freely in the forests, some regulation (public or private) over the rates can allow the resource to continue indefinitely. Hatcheries and fishing/hunting licenses have “solved” the problem in these situations.

In the energy world, some geothermal energy companies have set themselves capacities for a given resource that allows continuous extraction indefinitely. In contrast, any coal mine or oil well will eventually run dry. I find it hard to follow the claim that non-renewable resources are inherently “better” than renewable resources because they face no limiting rate of extraction. At the rate the Earth produces petroleum, the sustainable rate of extraction is very near zero.

Fred G.
Oct 22 2010 at 11:13am

Here is an relevant quotation from Keynes in 1930.

John Maynard Keynes, “Economic Possibilities for our Grandchildren,” N&A and Saturday Evening Post. 1930.

“We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the nineteenth century is over; that the rapid improvement in the standard of life is now going to slow down –at any rate in Great Britain; that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.”

“I believe that this is a wildly mistaken interpretation of what is happening to us. We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another.”

“But this is only a temporary phase of maladjustment. All this means in the long run that mankind is solving its economic problem. I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of a far greater progress still.”

Oct 23 2010 at 2:58am

I have just a few quick comments.

I would just like to say before I continue that I don’t consider myself much of a pessimist OR optimist. I happen to have little regard for my predictive abilities (and most other people’s) and so I feel the best option is to come to lose and tentative conclusions, while always entertaining the various other possibilities.

First off is a general comment about the arch of history. The “things are so much greater now than even 10 or 20 years ago, and have been continuing in that fashion so why expect it not to continue?” idea. I agree this has a lot of intuitively pleasing aspects, but I must point out that that is actually a very narrow and short term view. To pick the short span of time that humans have been around and say it’s ridiculous that things won’t continue this way is not exactly basing your view on precedent, but the exact opposite.

It ignores the many billions of years prior to our existence, not to mention the very “recent” history of mass extinctions and turmoil on our planet. I do think there is a case to be made for ever continuing “progress” of some sort, say forming a symbiotic relationship with robots (blue tooth?). But I think it’s laughable to ASSUME that things will just continue on as they do now for ever, that things have just “always” been this way and there is no precedent for things going catastrophically wrong. Far from it. In fact we wouldn’t be here if things hadn’t gone horribly wrong for other species prior to us.

Another interesting oversight in my opinion was the conception of human progress. Ridley is willing to admit that technological innovations have grown exponentially beyond most’s wildest imaginations, but seems to have no such regard for the sciences related to researching climate and resources. In this context to point out that people’s predictions of disastors in the past have been false seems the same as claiming we shouldn’t listen to doctors because they use to believe demons made one sick.

If sciences and human knowledge have progressed to such a extent, it seems to me those who study climate and resources should be taken MORE seriously, not less.

Along similar lines Ridley says its ridiculous to do anything about the climate now because the technology to deal with it in the future will be so much better. This is a serious argument? Why quit smoking now when they will most likely have even better medical curse tomorrow, right? Why did we even bother reducing sulfur dioxide in the past when we knew by now we’d have magical solutions to remove it from the environment?

Also I’m interested considering you have had quite a few people on who have talked about climate change, why you have not had a climate scientist or someone else actually in the scientific field being discussed on a podcast? Not to be rude, but doesn’t that seem like someone you might want to consider talking to if it is a topic that apparently interests you?

Oct 23 2010 at 6:15pm

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Tony Gill
Oct 24 2010 at 1:31am


Stephen asked if there were anymore enlightening podcasts such as EconTalk. There just happens to be one that is inspired by, and modeled after, the one that Russ created. Indeed, Russ even provided me advice on how to “set up shop” with the proper equipment and such. The podcast is called Research on Religion ( While we touch on various topics regarding the social scientific study of religion, I tend to like economic explanations of religion, including our most recent podcast that looks at the organization of the Mormon church.

And Russ, another good podcast that I am using in my comparative politics class. It is very hard convincing undergrads that the world is getting better and that such improvement is due to freedome and capitalism.

Oct 25 2010 at 2:15pm
paul vreymans
Oct 25 2010 at 5:51pm

Thanks Mr. Ridley for the very optimistic message.

For listeners who fear that “this time will be different” and CO2 emissions will destroy our world, Please have a look at the World Fact book, who gives two amazing statistics about carbon emissions both confirming Mr. Ridley’s thesis .

The World Fact book gives both figures of Carbon Footprints Per Capita

and figures about the Carbon Intensity of Economy by Country

The figures show not only a fast declining carbon Intensity of Economy over the years, Many advanced wealthy nations such as France, Switzerland, Norway, Switzerland…. with high energy consumption already today have an overall carbon footprint per capita that is even smaller than many poorer nations, with much lower fuel consumption.

My conclusion is that these wealthy nations improved their “carbon productivity” even faster than the growth of their energy consumption. The technologies are already here today and will even improve tomorrow. What these countries could manage, the US certainly one day will.

stat arb
Oct 26 2010 at 5:14am

This interview reminds me … it’s time to start listening to EconTalk again. 🙂

stat arb
Oct 26 2010 at 5:21am

Two things I wish you would have brought up:

1. Steven Pinker’s TED talk about how, starting with the Enlightenment, violence and violent deaths dropped precipitously and have been meandering down ever since.

2. Robert Wright’s book Nonzero — about a similar theme, and even grander in scope — including “trade” (i.e. positive-sum games) between early biomolecules as necessary in the development of life.

David Zetland
Oct 31 2010 at 11:08am

Great interview. I agree with Ridley’s thesis, BUT

1) Environment is, at best, indirectly improving with the expansion in our living standards. Without a price on clean air, etc., there is little reason to assign positive value to it.

2) Adaption to climate change will be easier for rich countries, but what about LDCs? They will not be able to save themselves with an iPad app.

Oh, and I TOTALLY agree with the industrial revolution/current living standards was driven by coal and other fossil fuels. The problem is not that they will run out, but that their use will poison us and our environment.

Wayne Lusvardi
Nov 1 2010 at 3:29pm

I respectfully disagree with Dr. Zetland that we can’t put a price on clean air. In 2001 California shut down old polluting power plants to clean the air and shifted to lower polluting natural gas power plants. Problem was who was going to pay for the unpaid mortgages (bonds) on the mothballed power plants? After the State and the regulated utilities played hot potato for awhile eventually the state rolled the unpaid corporate bond debt into a $40 billion general obligation bond paid for by long-term electricity contracts. So it cost California $40 billion to clean the air. There is your price (or more precisely the “cost”).

Those long term electricity contracts are expiring in 2012 and California’s new Green Power Law wants to capture that over-priced power and shift it to wind and solar energy.

We may be about to repeat the Cal Energy Crisis of 2001 again by embargoing cheap coal and hydropower so that it can’t compete with expensive wind and solar power in order to once again clean the air. But once cheap coal and hydropower is embargoed there is no competition mechanism to hold down the price of power and price inflation will ensue.

In 2001 we embargoed cheap but polluting oil power plants along the California coastline and replaced them with expensive but relatively cleaner natural gas power plants.

Only worse than in 2001, California’s Green Power Law has a cap and trade provision which means that there will be no net reduction of pollution. Energy companies in remote areas that reduce pollution can sell pollution credits to other power providers in the urban air basins where smog and particles are easily trapped. So we will have pseudo-clean power that actually reduces no pollution but raises electricity rates. Cities will then siphon this rate premium into General Fund revenues by the mechanism of Utility User’s Taxes to bail out pension fund deficits.

We were running out of clean sky in 2001, not energy. By 2012 when the Green Power Law kicks in California will be running out of taxes in return for pseudo-clean air.

Comments are closed.


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Podcast Episode Highlights
0:36Intro. [Recording date: October 14, 2010.] Book is ambitious and extraordinary achievement in both depth and breadth. Try to do something that is a little bit beyond modest--try to explain all of human history, a small slice of what we might want to know about. Provocatively leverage the idea that trade--the ability to exchange--and the subsequent division of labor that ensues can explain much of human development, going back thousands of years. One of my ambitions is to try and take the notion of trade back into pre-history a lot further than people generally do. Tendency among anthropologists and archeologists to say that you can't do trade until you've invented law and order, government, farming, things like that. Evidence suggests that isn't true: hunter/gatherers are perfectly good at trading; has a crucial impact on human history. Other ambition is to say this is actually the grand theme of human history. Forget the wars, poets, culture--all important, but the theme that's running through history all the time is this tendency to divide labor on a big scale; sometimes it shrinks again to a small scale, but gradually, inexorably, ratchet-like it grows until it gets everybody in this habit of getting other people to do things for us and doing things for other people. Working for each other is the great theme of human history. Comes about through exchange in a local way; and through trade on a wider scale. Adam Smith talked about the human propensity to truck, barter, and exchange; you point out there is reciprocity among animals, but not trade. What's the difference? Point I had trouble getting across to people. Reciprocity, which featured in my previous book, is indeed something you can find animal models, roots for. You can find primates, baboon, things like that, that indulge in reciprocal altruism: you scratch my back, I scratch yours. Dolphins, vampire bats. Don't turn out to be all that interesting in terms of the social behavior of animals, but it's a theme. It's a theme of our story, too. But I think it's different from our story, because reciprocity is: I do you a favor today; you do me the same favor tomorrow. Same thing being exchanged at different times. What I'm talking about is different things being exchanged at the same time. I give you bread if you give me money, or I give you fish if you give me a fruit, or whatever it might be. Because it's simultaneous, you don't have this problem of defection: I could take the favor today and not return it tomorrow. In that sense it ought to be easier to evolve; and yet you simply cannot find an animal that does this. There is one partial exception: some insects and some birds which trade food for sex--if the male brings food, the female will allow him to mate. Outside the pair bond, you can't find examples of, as Adam Smith said, "Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog." Got this idea straight from Adam Smith: zoological, first book of The Wealth of Nations is a very psychological, very anthropological book as well as being about economics. Interestingly, brilliant scientist Sarah Brosnan, working on this in chimpanzees, trying to get barter going in chimpanzee colonies. She can do it, can get chimps to barter, but only using human mediation. They simply don't get it. They don't want to give up something they value even if it means they can get something they value more. They say, I want to hang onto this; I just want that off you. At some point in history we crossed that threshold: realized that if I give this thing or want this thing, it's not that I don't want the fish I've got, but I want the fruit that you've got more. And you happen to be in the opposite position. Also requires a different leap of faith than the reciprocity leap of faith, that you'll come back and scratch my back tomorrow. Trade is complicated subject--seems so simple. I give you something you don't have, you give me something I don't have. But not just that I'm going to give up something I like to have something I want more. As a result of that trade we are going to specialize, if we really want to exploit this opportunity to trade. Think how scary it is: I'm going to only make one thing in the expectation and hope--and this is what we all do in our trading--that someone else will want it and will give me the other things I don't have. Requires me to assume that eventually someone will come along with those desires who likes my stuff and who has something I want--before money; that was the barter problem; and that they'll feel the same way I do, and take that risk to swap. Right in emphasizing--can see in the animal world, if you spend your time doing only one thing, if you didn't get those trading partners, you are going to die. How we navigated this move away from self-sufficiency--and by the way, people say we need self-sufficiency, food security, oil security--actually, self-sufficiency is terrifically vulnerable. Look at what happened when countries had to grow their own food in the Middle Ages--one bad harvest and everybody's starving. Now, one bad harvest and the price adjusts; food flows around the world and everybody gets a bit. Some people suffer if the price goes up to much; but you don't get starvation on a wide scale.
8:33On the animal thing, the pair bond is very important. There is specialization in the animal world--you do have sexual division of labor. But only in the family. Right. You have the reproductive division of labor a lot, and that's the one we don't have. Ironically. In ants, leave the reproducing to the queen; we'll do the working, she does the reproducing. In honeybees, naked mole rats; brilliant system, means you can build up giant families which we call colonies which work very well and have divisions of labor with them, sometimes quite sophisticated divisions of labor between different kinds of workers, soldiers versus workers. But they can never go beyond the colony, which is basically a big family, because it is based on this reproductive division of labor. Like to joke: reproductive specialization is the one thing we don't like to do; insist on being self-sufficient. I'm not happy to find that my Queen is doing all the reproducing for me, even in England--ha ha. But the sexual division of labor, the phrase anthropologists use for male hunting versus female gathering, and the sharing that then follows--that's a pretty uniquely human thing. You do get species in which the two sexes specialize in terms of hunting, but they don't often do a lot of sharing afterwards. The idea that I go hunting for meat and my wife goes digging for roots and we then come back and share may be the oldest example of a gain from trade--of a real Ricardian or Smithian gain from trade. Beautiful system on the African savannah: If I'm a male, my chances of coming back with a dead warthog are pretty low. A lot days I'm going to come back empty-handed. How I am going to feed on such a day? I can rely on the fact that my wife is digging up some roots, so there is going to be something to eat. On the other hand: from her point of view, roots are all very well, but I'd really like some protein from time to time; but I just can't afford the time or risk the effort of going hunting, particularly with kids to look after. I'm in a beautiful situation because he can go hunting. If I want warthog meat, all I have to do is dig some roots, and then I've got something to trade for warthog meat. Both sides benefit from the exchange.
11:40Books opens with extraordinary chapter that I am adding to my pantheon of favorite collections of how much life has changed. You start off by saying: Life's a lot better than it was 5,000 or 10,000 or 20,000 years ago, but it's even a lot better than 100 years ago, something I've written about. A lot better than 50 years ago. We find it so difficult to appreciate that incredible transformation. Going to come back and talk about trade more, but put that in the context you do at the beginning of the book, which is the optimism. James Buchanan said this beautifully the other day here at George Mason: When I look to the future I get very nervous but when I look to the past I feel pretty good. A lot of times when things look bleak--take the Great Depression for a modern example. If you were alive in 1933 when unemployment was 25%, your forecast for where the U.S. economy was going in the next 40 years would be very bleak. Turned out to be a bad prediction. Turned out that we recovered fairly quickly--though a lot of suffering and hardship. But the long-run trend is so gloriously positive; easy to forget that. Talk about your underlying optimism. I became an adult in the 1970s--I was 21 in 1979. Pretty depressing decade in many ways, particularly if you were in Britain. We basically considered ourselves to be in decline; turned the lights off two days a week. Wasn't just Britain. The population was said to be out of control; famine was inevitable; cancer epidemic caused by chemicals in the environment was going to shorten our lives; our sperm counts were going to be falling; the forests were going to be killed; the desert was advancing at 2 miles a year. Unemployment was rising, inflation was high, the oil was going to run out; and we were going to have to get used to negative growth, or whatever. Nobody ever said anything to me about how the future was going to be great. The grown-ups never discussed it. Over the next two decades, as I watched my country snap out of recession, have a pretty tidy boom spread through the rest of society; and then I saw China and India take off. Extraordinary reduction in polity, ill health. Hundreds of millions of millions of people--not like some little corner where they caught onto something and did a little better. Glorious 25 years. Not only that, people became healthier, wealthier, wiser; lived longer, became freer; and they became more equal. Looked at the numbers; realized the world has always been getting better, and everybody is always saying it's about to get worse. Amazed by the numbers. Lifespan up one-third in my lifetime--globally, not talking about any one country. Per capita income trebled in my lifetime in real terms, includes Africa; at a time when the population has doubled. There is this thing called prosperity, and it's actually growing. Not saying--and I'm not being Dr. Pangloss, this is the best of all possible worlds--that's exactly what I'm not saying. What I'm saying is: Don't you dare try and stop now, because this is still a vale of tears. Do you realize how much richer we could get if we really pushed forward with the human experiment? how many people we could still get out of poverty. Despair about Africa, people saying it is never going to get rich. They said that about India 30 years ago. It's not rich yet but it's on the way. Can tell from the tone of my voice--this has become an evangelical issue for me. Want to spread the good news about how good it could get. I find nobody knows. Everybody thinks they are no richer than when they were born. They forget that they live longer than when they were born; that the population growth rate has fallen. They don't hear the good news. Part is they literally don't hear it: it is often not the focus of most news coverage. Also the fact of what the human brain focuses on. Part of why we like horror movies, I guess. Don't fully understand it. It's the question people ask me most and the one I have the least satisfactory answer to. Just-so stories, focusing on things that might go wrong is probably more rewarding than being complacent about the world. Fascination with pessimism surprising. Quote from H. G. Wells, "The man who despairs when others hope is regarded by a large class of persons as a sage." Why is that? Wiser if you are gloomy. Nothing wrong with being gloomy right now in 2010; we've got other political/economic problems that loom. But if you step back just a titch the prospective is pretty cheerful. Don't want to belittle the problems people have. Part of my ambition is to get people to be ambitious about solving problems. We take things for granted. Some hilarious examples of this: cursing the fact that you can't get a signal on your mobile phone, or flight across the Atlantic is delayed by one hour. Just talked about this a couple of podcasts ago with de Botton. We get furious when the world doesn't work the way we couldn't have imagined it working ten years ago. Not just like 100 years ago--10 years ago. We say, I hate supermarkets. Someone is chopping and washing salad and packaging it so it's beautifully fresh and charging me almost nothing for it. Why are they doing that? Very nice of them! Not doing it out of love--out of self-interest. Podcast with Deborah Gordon, ant expert. Distinction between human and animal behavior fascinates me.
19:47Criticism one could make of your thesis of optimism: sustainability. What you've just said is something many economists--not too many, but some--believe that things are not only getting better but they will continue to get better. One of the arguments against that isn't just the financial crisis. We can imagine that we'll get by. May take 5 years, 10 years, 3 months, whatever--but we can imagine like with the Great Depression that we will put it behind us at some point. What about the limits that some people worry about that we're reducing the resource base of the planet: Okay, in 1978 we were overly pessimistic, but ultimately these are finite resources. Along with global warming, we are eventually going to have trouble sustaining not just the growth rate but maybe growth at all, and we may plunge into a much darker era. What's your argument against that? Completely misunderstands the nature of what we do with resources. For a start, we do more with less. That's the nature of growth--to get more energy out of each gallon of oil we burn by devising more efficient cars or whatever it is. Our rate of use of resources per work we get out of them is always improving. Secondly, if you look at the human footprint on the land--how much landscape are we needing for our uses, it's very interesting. It keeps going down. What I mean by that is that back in the 19th century before we invented synthetic fertilizers, we had to raid more and more land because our population was going up. Thank goodness for the American prairies and the Argentinian pampas and the steppes of Russia because if we hadn't been able to plow those, there would have been mass starvation as the population expanded in Europe. We exported people and we imported corn; just kept going that way. About 1900, William Crooks: We've got a wheat problem, land problem: we are going to run out of wheat and we are all going to starve. About 10 years later, Haber invented the Haber process--a way of getting the nitrogen in the air and using it as fertilizer, and increasing the productivity of land. Result is now we've quadrupled the population in this century just ended, and we've pretty well extinguished starvation at the same time; and we've slightly reduced the amount of land under the plow. We've returned a lot of land to forest in places like the eastern seaboard of North America for example. If we were to continue doing that in the next century--population only going to go up one and a half times instead of four times--we could imagine feeding the world from a much smaller acreage than today, when there's 9 billion people, much higher standard, plenty of meat for everybody and the rain forests would be bigger, not smaller. Somebody would say that's at the expense of, say, using more natural gas, which we use to make fertilizer. Yes, but we're getting our energy now from a hole in the ground--coal mines, etc. We don't have to get it from the landscape. We used to have to get it from the forests, the streams, the wind. These were the ways we powered civilization before. Now we can let the forests grow and rot and support beetles and birds; let the streams run free for salmon because we don't need to dam them. Every stream in Britain was dammed everywhere possible by the end of the Middle Ages to make mills. We've got this upside down. We're reducing our impact on the land. Imagine if we were hunter-gatherers. We'd need 1000 hectares each to support our lifestyle. If everybody in Manhattan tried that, there would not be a lot of wildlife left in North America. In many ways, our impact on the planet can get less because of growth. Growth is the only thing that can make civilization sustainable.
25:20You sound kind of Dr. Panglossian there. Since I share your view, have to indict myself as well. Let me give the counterpoint. Your point about the rivers running free and trees growing is a gorgeous point. But the skeptic would say: We've scarred the earth, we've strip-mined the coal, we've unleashed all this carbon. We get better and better at using any one gallon of crude oil or ton of coal--cleaner and more efficient than it used to be. No reason to think that process will ever stop. People talk about using up the oil, coal, uranium, phosphate--phosphorous is an element we have to mine to support our agriculture--high concentration ores running out. But the low concentration ones are not, and they are all over the world. There is not a single example of a non-renewable resource that has run out. Nobody ran out of stone in the stone age or iron in the iron-age or bronze in the bronze-age. That's not the reason these ages peter out--it's because people move on to something else. Whereas renewable resources have a nasty tendency to run out. Whales, passenger pigeons, white pine forests. Obsession to moving to renewable resources seems a bit weird. The phosphorous that we use in agriculture gets washed down our rivers and ends up in our estuaries; at some point we'll mine the mud of our estuaries if we need to. Passage in book about evolution of guano--bird droppings--to synthetically-produced fertilizer. Prophecy that we would starve to death because we didn't have any more fertilizer because we'd used up all the bird droppings. Peak bird-dropping problem. Misunderstands the nature of creativity. Julian Simon has written eloquently on this. Need to pay tribute to a lot of people. I have to throw in a plug for The Choice and The Invisible Heart. There is one resource that people are using up and I can't yet prove that we are not, and that's the capacity of the atmosphere for absorbing our emissions. We've got better at the other kinds of emissions--sulfur dioxide, carbon monoxide from car exhausts. Car is now 19 million percent cleaner than it was in my youth in about 1970. That's why you don't have smog in Pasadena as you did 30 years ago. You can actually see the mountains. Can we do the same with carbon? We're working on it. About to see a major shift to using a lot of natural gas in the next few decades instead of coal and oil for generating electricity because of the shale gas revolution. Natural gas has, I think, a quarter as much carbon per energy as coal does. More effective than building wind turbines, which doesn't reduce carbon at all, because of backup problem. Can we do it fast enough, before it damages the climate? I've had a hard look at climate science and I can see definite evidence we might be doing something to the climate that is slow and mild; cannot see evidence we are doing anything fast and dangerous yet. I think we've got plenty of time to work on this problem. I suspect we'll give up fossil fuels before they run out. People often say to me: Well, if you don't believe in climate change, surely you believe that fossil fuels are going to run out. I reply: Well, if fossil fuels are going to run out, why are you worried about climate change? Should be, because we will start burning those forests down. Unless we stop worrying about being cold.
30:45Let me raise a different question. Book is ambitious, panoramic look at human development. Start with the hunter-gatherer, go through agriculture, move to cities, industrialization, modern world. Running through that story is the power of trade. As a student of Ricardo on Smith, Russ Roberts podcast. Ricardo's theme, which you use many times in the book, is that differences between us allow us to get more than we could on our own. Standard economic lesson not fully absorbed by the public. While we have this evolutionary process of cultural and human change from hunter-gatherer to farmer to urbanization to industrialization to the so-called knowledge economy, through an enormous part of that history there was very little progress. While it's true that at the micro level, being able to trade with you, my near neighbor, not just my family member but my strange neighbor and in a city with a bunch of strangers--how powerful is the source when in fact most of the improvement took place in the last 250 years and before that the overwhelming story is one of getting by. How do you reconcile the story of the power of trade with that seemingly undeniable fact? Just had an exchange on the Cato website with Deirdre McCloskey on exactly this. Two words: piracy and fossil fuels. Piracy point: human history is a competition between the kind of wealth generation I've talked about and the kind of wealth-eeking that comes from chiefs, thieves, predators, parasites, and rent-seekers. Wake up in the morning: Am I going to get rich by exchanging with someone or by pinching someone else's wealth--through conquest, plunder, subjugation or whatever it might be. The story of nearly all trade booms is that you get wonderful efflorescences of human prosperity and then someone comes along and eats them either by conquering or by bureaucratizing them. The Greeks, Phoenecians before that, Italian city states, Dutch trading position. Free city states create enormous prosperity and then along comes the Roman Empire. China a wonderful example; when decentralized, because extremely rich and had a huge amount of trade with the world, and then the Ming Empire comes along and shuts everything down: We're going to regulate everything and tax everything. Close our borders. In Holland's case, the Dutch had a great thing going in the 17th century. What killed it? The fact that they had to keep spending huge fortunes fighting wars against Louis the XIV. You can trace this process back on a different scale right back to 160,000 years ago. Archeological group in London looking at these explosive areas of new technologies in Africa, in demographic terms. Increased population, people exchanging with each other; they can't prove that piracy is what destroyed it but in the end that would be my guess. Warfare breaks apart these civilizations. Have to admit there is this weird discontinuity in human history; people like Robin Hanson good at reminding me of this--at around 200 years ago. Any boom you could look at--Italy, Venice, Holland, etc.--doesn't really work at raising human living standards because it just gets started and then runs into a Malthusian correction often--the population grows and you start to get a resource constraint. I like Greg Clark's analysis: that you escape the Malthusian trap--we Brits do--and then the rest of the world comes barreling through the hole with us. In the 19th century. Britain had a great 18th century--kind of took over the world; the Dutch trade, lucky because the English channel meant it didn't have to build up a big standing army; got trade with East Asia and America; slave trade not so beautiful. Get growth of Britain the 18th century but real wages for the average Brit had not gone up much by the end of the 18th century. If it had stopped there, then we would talk about it like we talk about ancient Greece. But what happened in the early 19th century was we harnessed fossil fuels--something that wasn't showing diminishing returns, a source of energy, amplification of human labor; the more you got out of this stuff called coal, the cheaper it got. Wasn't true for forests or agricultural land, get more expensive the more you use them. Opposite of diminishing returns--you get increasing returns. That makes me quite old-fashioned. Theory used to be that coal helped transform the industrial revolution; but then went out of favor and people are talking about institutions and things like that. If you look at the graph of human living standards, GDP per capita, it takes a step change 200 years ago and starts going up at a much faster rate. I think we need a special explanation for that, and I think it's about getting cheap energy.
39:11Could be. Deirdre has her idea that it was okay to be bourgeoisie. Interesting idea, don't know if it's testable. I don't have an answer either. If you can only trade with a relatively small number of people, which in primitive times meant a handful; and even in the Middle Ages--we've tried "buy local" before and it's called the Middle Ages--occasionally a guy would come through from far away and bring you some spices, but most of trade is division of labor among a relatively small group of people. For whatever reason, when prices of transportation fell enough--partly because of coal, partly the steam engine, other innovations--you could suddenly trade with a very much larger group of people. Totally underappreciated; theme in your book--that took us from a Ricardian world to a Smithian world. Smith had talked about the division of labor being limited by the extent of the market--that little cute phrase--once we got the opportunity to trade with such a larger group, which is what modernity is, then the process has a life of its own. Challenging you with, first read in Robert Lucas's writings: the process of farming was the same in the 1700s as it was in Rome. You lived pretty much the same life in terms of how much protein, nutrition you could wrest from the earth. Something changed. Once that changed, suddenly you could get more and more from less and less; and that revolution is the one that could last forever. It looks like. Do think that's a very perceptive analysis. However, would caution that compared with the modern world, the world of 1700 A.D. looks static; but it isn't static in technological terms. There are an accumulation of technologies--perfection of the horse collar, etc.--that may not improve the standard of living all that much because the population goes up or something like that. An 18th century ship was much more efficient than a Roman sailing ship. Simply that the graph is going up at a slower rate before that. Love this point about specialization and exchange on a wider scale. The wider the scale, the more it brings you into contact who have differences--different preferences, native abilities, natural endowments. Beauty of the Ricardian thing, gains from trade: the more you specialize the more you've got to exchange and the more you've got to exchange, the more it pays to specialize. Virtuous circle. The Smith point: the more you specialize--Mike Munger podcast and then I did one as a solo--the more you specialize, the more advantageous it is to apply technology to it, and capital. That's the modern story. Not so much the story of the past, some of it. That opportunity to benefit from the productivity of labor embodied in capital that Smith talks about is what sets it going crazy. Just got an iPad; son sent me an app I wasn't so interested in--he's 12. Wrote him back; said when you get one in 5 years, a chip that's put under your skin that when you think about the game a virtual, holographic screen appears in front of you, you can get it then. The things we enjoy today are not just things we couldn't imagine 150 years ago--they couldn't be imagined 15 years ago. Makes you wonder what will be available 15 years from now. Written exchange this morning about climate, government adviser: I don't think we should be blase about even 2 degrees over 200 years. I replied: Are you implying that someone in 1810 should have used his technologies to try and influence the world in 2010? Because that's what you are saying: that I should be doing something today with my existing technologies about the world in 2210. Sorry, but I think my existing technologies are going to be laughably irrelevant in influencing that world. The future is very opaque, always will be. I have no background as an economist. As a reporter gradually came to cover economics issues. No courses of any kind, totally autodidactic on Smith and Ricardo. To some extent that helps me.
46:09Conversation you just reported, some of the reason we are so pessimistic. When someone says you've got to do xyz to help people 200 years from now and point out that 200 years ago, could you imagine them talking about what we would have available to us--it's a lack of imagination. Being forced because we live in the present, not much good at history; but it's a fear of the future without taking account of anything we've learned from the past. Joke, laughable, inhuman literally to not imagine what would be available 200 years from now. Everything around us tells us that's the thesis of a child. It's hard to step back because time goes slow for us, but in the scope of human progress, we are looking at a nanosecond. Remembering to be dynamic about the future. You think of where we've got to as static, but it's always changing. Possibility of perpetual change is something we don't notice. Three hundred years ago we could have lived our lives and not seen a new technology. Somebody could have come along to the village with a new kind of plow. Wouldn't be much of an improvement. Now, dithering about getting an iPad, maybe waiting for next generation. To throw back at you what is often thrown back at me on that: The past is no guide to the future. Stockbroker argument: just because something's gone up doesn't mean it's going to keep going up. The fact that a whole bunch of white swans have swung past doesn't mean the next one won't be black. People find this a bit of a killer argument; you are just doing extrapolation. Suggests there is a dogmatic faith that you and I have. Colleague Don Boudreaux writes about this as well. Just because the future always gets brighter, will it always get brighter? Often comes up in the exhaustion of natural resources. But this time it could be different? Could be catastrophic. It could be a good idea not always to extrapolate from the past, not naively. But your extrapolation and mine isn't naive. Our optimism isn't because we look at a trend line and say: It's always been getting better so it probably will always keep doing so. It's because we saying something about the underlying process that produces that improvement. It's not because in winter as it keeps getting colder--oh my gosh, entering a new ice age! Understand the science of the seasons--it gets warmer again. Underlying ability of the human enterprise. For example, talking about the iPad: biggest model is 64 gigabytes, $699. No camera, no video. You are thinking maybe you'll wait, maybe it will get bigger, better. If I say to you: Oh, you are just going to assume it's going to keep getting better? What if it gets worse! That would be stupid assumption. Why are you so confident that the next generation will be lighter, faster, bigger? Know there are guys working on improvements, whole industry there. If it turns out there's a better way that comes along, it won't get better--it will disappear. Why am I so confident that something as marvelous as this working toy is--I'm 5 days into it, I'm addicted to it, I may come out of it--why is it I think there will be something better and this will look like the cell phone of 1992 which will look like a giant walkee talkee? Is it just because I'm a mindless optimist about the future? No; that's why your book is called the rational optimist. You know something. We live in the physical world; don't think people will learn to swing their arms and fly. Rational important word in my title. I've arrived at optimism through argument. I'm not a particularly cheery person. Has affected my behavior in life, writing this book. Conversations: grumpy old men conversations: moan about the modern world, kick myself. Everything's fine! They look at me like I've gone bad. Good for internal well-being, not good for social life. When we go through a period like now--and your book was written in the middle of this, launching into a headwind. People now are saying it was a good run in America, but now we've got this Social Security, Medicaid, Medicare crisis--we can ruin our political system with some stupid things, always at risk of that. Struck by how pessimistic America's mood is. You guys tend to cheer us up.
56:26Observation, being self-taught. Your book is an implicit homage to Adam Smith. In 1776 he comes along and says a bunch of things revolutionary at the time; saw things people didn't see; made the point that money isn't everything, that mercantilism, accumulating silver and gold, is not the source of the wealth of nations--that the source of wealth is our skills and what we can produce. Goes one to say where does it come from--the division of labor. Do you find it strange that over 200 years ago that book gets written and we don't understand the lesson? Don't really teach it in our economics classes. How strange is that? What were my school teachers doing not teaching me about this? Most brilliant idea I've ever come across with possible exception of Darwin's natural selection. Nobody ever told me about this. Found it out embarrassingly late in life. At least there's something for me to do in the world. Prosperity is accumulation. Still work to do. Exciting game to contribute to.

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