The Hockey Stick of Human Prosperity

Instructor: Don Boudreaux, George Mason University

In this series, Professor Don Boudreaux explores the question economists have been asking since the era of Adam Smith – what creates wealth? On a timeline of human history, the recent rise in standards of living resembles a hockey stick – flatlining for all of human history and then skyrocketing in just the last few centuries. Without specialization and trade, our ancient ancestors only consumed what they could make themselves. How can specialization and trade help explain the astonishing growth of productivity and output in such a short amount of time—after millennia of famine, low life expectancy, and incurable disease?

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Transcript

The astonishing growth in prosperity in the last two or three hundred years is one of the greatest events of humankind. Take the average human in, say, the year 1000 BC. He's poor, fighting to find food and to fend off diseases. Fast forward 500 years to the time of classical Greece. Still poor, still hungry. How about another thousand years after that? It's the dark ages. Wow. Still poor. Then jump to the 18th century and forward. Things change rapidly. This phenomenon is known as the hockey stick of human prosperity. Take what is surely one of the most important measures of human well-being: life expectancy. 

 

Before the Industrial Revolution, life expectancy was around thirty years. Today in the United States, we expect to live to be about eighty. Prior to the industrial revolution, one in four kids would die before the age of 5. Today in developed countries, it is more like 1 in 200. Due to better nutrition, we grow to be four inches taller than we were just 250 ago. Remember this disease? No you don't, because it was eradicated in 1977. Look around -- you'll find a roof over your head and a hard floor under your feet. Most of our ancestors lived in huts with dirt floors and thatched roofs. Everything was infested with insects and rodents. Streets and alleys were open sewers. There were none of these. The filth was horrible and often toxic. Our ancestors ate gruel and wore the same home-made underwear over and over. Now, even the least fortunate Americans typically have electricity, running water, toilets, refrigerators, televisions, and, yes, cheap washable underwear. 

 

Those of us who live in modern industrial society are incredibly, amazingly, off the charts rich compared to our ancestors, and here's yet another huge difference between us and our ancestors. Before the Industrial Revolution, people knew how to make from scratch many of the things they consumed. They made a lot of their own clothing, grew most of their own food, and built their own dwellings. Fast forward to today and believe it or not, none of us has a hint of how to make the majority of the things that we consume. Just getting ready in the morning involves taking many trips around the globe. Take this coffee for example. The beans come from Guatemala, and they were brewed in this coffeemaker from Switzerland. The container ship that carried the beans was built in Korea. It's insured by a company from London and it's captained by a Frenchman who loves Turkish cigarettes. We've transitioned from each of us doing many things to each of us doing one thing. Having a job only makes sense in a modern world where each individual typically does only one type of work. So while we mostly only produce one thing, doing one job, each of us now consumes a whole bunch of products that require a whole bunch of jobs to produce. 

 

The question of where prosperity comes from launched the field of economics. It's why Adam Smith wrote the first book in modern economics. An Inquiry into the Nature and Causes of The Wealth of Nations. Back in 1776 when he published it, Smith was trying to understand the causes of modern prosperity that were just starting to appear. Poverty and starvation were still normal as they had been from the beginning, but in the late 18th century, for the first time ever, the masses began to enjoy riches once reserved only for the nobility. It is this mass prosperity that Adam Smith sought to explain. Why was it happening? What was causing wealth to move from being the exception to being the norm. Now we look around, and try to figure out what causes poverty instead of what causes prosperity. 

 

You are watching Everyday Economics, a course where we use the lens of Economics to explore everyday questions. This section is about trade. In the upcoming videos, we will attempt to explain how trade plays a role in our prosperity. You also get to decide where the course goes. Maybe you have some questions related to trade that you've wondered about. We'll cover the basics and then you tell us what topics come next.

 

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