The Rational Optimist

It is my contention that in looking inside our heads, we would be looking in the wrong place to explain this extraordinary capacity for change in the species. It was not something that happened within a brain. It was some thing that happened between brains. It was a collective phenomenon.

At some point, human intelligence became collective and cumulative in a way that happened to no other animal.

The same is true of cancer, heart disease and respiratory disease: they all still increase with age, but they do so later and later, by about ten years since the 1950s.

Food and clothing especially so (a brief rise in food prices in 2008 notwithstanding), fuel more erratically and even housing has probably got cheaper too: surprising as it may seem, the average family house probably costs slightly less today than it did in 1900 or even 1700, despite including far more modern conveniences like electricity, telephone and plumbing.

Put it another way, an hour of work today earns you 300 days’ worth of reading light; an hour of work in 1800 earned you ten minutes of reading light.

The true measure of something’s worth is the hours it takes to acquire it.

This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work.

Healthcare and education are among the few things that cost more in terms of hours worked now than they did in the 1950s.

Housing, too, is itching to get cheaper, but for confused reasons governments go to great lengths to prevent it. Where it took sixteen weeks to earn the price of 100 square feet of housing in 1956, now it takes fourteen weeks and the housing is of better quality. But given the ease with which modern machinery can assemble a house, the price should have come down much faster than that.

Rich people are happier than poor people; rich countries have happier people than poor countries; and people get happier as they get richer.

True, but assuming the worst will not avert these fates; striving to continue improving the human lot may.

More than any other animal, human beings borrow against their future capabilities by depending on others in their early years. A big reason for this is that hunter-gatherers have always specialised in foods that need extraction and processing

In 1900, the average American spent $76 of every $100 on food, clothing and shelter. Today he spends $37.

It also illustrates the magic of specialisation and exchange: thousands of people, none of them motivated by the desire to do Thwaites a favour, have come together to make it possible for him to acquire a toaster for a trivial sum of money.

To put it plainly, local sourcing multiplied the cost of a cheap suit roughly a hundred-fold.

The point of all this cooperation is to make (Adam Smith again) ‘a smaller quantity of labour produce a greater quantity of work’.

Because, he answers, human beings evolved to strive to signal social status and sexual worth. What this implies is that far from being merely materialist, human consumption is already driven by a sort of pseudo-spiritualism that seeks love, heroism and admiration.

The bodies and brains of the creatures that made Acheulean hand axes changed faster than their tools.

The second theory is that a fortuitous genetic mutation triggered a change in human behaviour by subtly altering the way human brains were built.

They had stumbled on what Friedrich Hayek called the catallaxy: the ever-expanding possibility generated by a growing division of labour. This is something that amplifies itself once begun.

me. I am not talking about swapping favours – any old primate can do that.

Indeed, it has the beautiful property that it does not even need to be fair. For barter to work, two individuals do not need to offer things of equal value. Trade is often unequal, but still benefits both sides. This is a point that nearly everybody seems to miss.

had access to objects he did not know how to make or find; and so did Oz. And the more they did it, the more valuable it became. For whatever reason, no other animal species ever stumbled upon this trick – at least between unrelated individuals.

In terms of nutrition, women generally collect dependable, staple carbohydrates whereas men fetch precious protein. Combine the two – predictable calories from women and occasional protein from men – and you get the best of both worlds.

There are untidy complications to the story, including that men seem to strive to catch big game to feed the whole band – in exchange for both status and the occasional seduction – while women feed the family.

But the big difference is that in every other species than human beings, the colonies consist of close relatives – even a city of a million ants is really just a huge family.

The argument is not that exchange teaches people to be kind; it is that exchange teaches people to recognise their enlightened self-interest lies in seeking cooperation.

at some point before 100,000 years ago culture itself began to evolve in a way that it never did in any other species – that is, to replicate, mutate, compete, select and accumulate – somewhat as genes had been doing for billions of years.

As you can tell, I like neither theory. I am going to argue that the answer lies not in climate, nor genetics, nor in archaeology, nor even entirely in ‘culture’, but in economics. Human beings had started to do something to and with each other that in effect began to build a collective intelligence.

Specialisation encouraged innovation, because it encouraged the investment of time in a tool-making tool. That saved time, and prosperity is simply time saved, which is proportional to the division of labour.

As Hayek put it, ‘once the rise in the position of the lower classes gathers speed, catering to the rich ceases to be the main source of great gain and gives place to efforts directed towards the needs of the masses. Those forces which at first make inequality self-accentuating thus later tend to diminish it.’

In monetary terms, the same amount of artificial lighting cost 20,000 times as much in England in the year 1300 as it does today.

From six hours to half a second – a 43,200-fold improvement – for an hour of lighting: that is how much better off you are than your ancestor was in 1800, using the currency that counts, your time.

Evolutionary change happens largely by the replacement of species by daughter species, not by the changing of habits in species. What is surprising about the human story is not the mind-bogglingly tedious stasis of the Acheulean hand axe, but that the stasis came to an end.

At the cost of some extra work, women get to eat some good protein without having to chase it; men get to know where the next meal is coming from if they fail to kill a deer. That very fact makes it easier for them to spend more time chasing deer and so makes it more likely they will catch one. Everybody gains – gains from trade.

It is rare for a predator to wipe out its prey altogether. In times of prey scarcity, erectus hominids, like other predators, had simply suffered local depopulation; that in turn would have saved the prey from extinction and the hominid numbers could recover in time. But

The experience has left me mistrustful of markets in capital and assets, yet passionately in favour of markets in goods and services. Had I only known it, experiments in laboratories by the economist Vernon Smith and his colleagues have long confirmed that markets in goods and services for immediate consumption – haircuts and hamburgers – work so well that it is hard to design them so they fail to deliver efficiency and innovation; while markets in assets are so automatically prone to bubbles and crashes that it is hard to design them so they work at all.

Learning to do this extraction and processing takes time, practice and a big brain, but once a human being has learnt, he or she can produce a huge surplus of calories to share with the children. Intriguingly, this pattern of production over the lifespan in hunter-gatherers is more like the modern Western lifestyle than it is like the farming, feudal or early industrial lifestyles. That is to say, the notion of children taking twenty years even to start to bring in more than they consume, and then having forty years of very high productivity, is common to hunter-gatherers and modern societies, but was less true in the period in between, when children could and did go to work to support their own consumption.

things. This is the diagnostic feature of modern life, the very definition of a high standard of living: diverse consumption, simplified production.

Prosperity, or growth, has been synonymous with moving from self-sufficiency to interdependence, transforming the family from a unit of laborious, slow and diverse production to a unit of easy, fast and diverse consumption paid for by a burst of specialised production.

I am a rational optimist: rational, because I have arrived at optimism not through temperament or instinct, but by looking at the evidence. In the pages that follow I hope to make you a rational optimist too. First, I need to convince you that human progress has, on balance, been a good thing, and that, despite the constant temptation to moan, the world is as good a place to live as it has ever been for the average human being – even now in a deep recession. That it is richer, healthier, and kinder too, as much because of commerce as despite it. Then I intend to explain why and how it got that way. And finally, I intend to see whether it can go on getting better.

Posterity can pay for its ancestors’ lives because posterity can be richer through innovation.

This is history’s greatest theme: the metastasis of exchange, specialisation and the invention it has called forth, the ‘creation’ of time.

For the first time its technology changed faster than its anatomy. This was an evolutionary novelty, and you are it.

people. The first is that it was driven by climate. The volatility of the African weather, sucking human beings into deserts in wet decades and pushing them out again in dry ones, would have placed a premium on adaptability, which in turn selected for new capabilities. The trouble with this theory is first that climate had been volatile for a very long time without producing a technologically adept ape, and second that it applies to lots of other African species too: if human beings, why not elephants and hyenas? There is no evidence from the whole of the rest of biology that desperate survival during unpredictable weather selects intelligence or cultural flexibility. Rather the reverse: living in large social groups on a plentiful diet both encourages and allows brain growth.

these new people could innovate their way out of trouble; they could shift their niche, so they continued to thrive even as they extinguished their old prey.

This is in striking contrast to the Neanderthals, whose stone tools were virtually always made from raw material available within an hour’s walk of where the tool was used. To me this is a vital clue to why the Neanderthals were still making hand axes, while their African-origin competitors were making ever more types of tool. Without trade, innovation just does not happen. Exchange is to technology as sex is to evolution. It stimulates novelty.

Self-sufficiency was dead tens of thousand years ago. Even the relatively simple lifestyle of a hunter-gatherer cannot exist without a large population exchanging ideas and skills. The importance of this notion cannot be emphasised too strongly. The success of human beings depends crucially, but precariously, on numbers and connections. A few hundred people cannot sustain a sophisticated technology: trade is a vital part of the story.

So long as somebody allocates sufficient capital to innovation, then the credit crunch will not in the long run prevent the relentless upward march of human living standards.

Specialisation would lead to expertise, and expertise would lead to improvement. Specialisation would also give the specialist an excuse for investing time in developing a laborious new technique.

Think of this: never before this generation has the average person been able to afford to have somebody else prepare his meals.

knowledge ‘never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess’.

The cumulative accretion of knowledge by specialists that allows us each to consume more and more different things by each producing fewer and fewer is, I submit, the central story of humanity.

I think is vital, so let me repeat it here once more: at some point, after millions of years of indulging in reciprocal back-scratching of gradually increasing intensity, one species, and one alone, stumbled upon an entirely different trick. Adam gave Oz an object in exchange for a different object. This is not the same as Adam scratching Oz’s back now and Oz scratching Adam’s back later, or Adam giving Oz some spare food now and Oz giving Adam some spare food tomorrow. The extraordinary promise of this event was that Adam potentially now

The lesson of this study is that, on the whole, having to deal with strangers teaches you to be polite to them, and that in order for such generosity to emerge, costly punishment of selfishness may be necessary.