In other classes of animals, the individual advances from infancy to age or maturity; and he attains, in the compass of a single life, to all the perfection his nature can reach: but, in the human kind, the species has a progress as well as the individual; they build in every subsequent age on foundations formerly laid.

people always have and always will seek food, desire sex, care for offspring, compete for status and avoid pain just like any other animal.

You can travel to the farthest corner of the earth and still expect to encounter singing, smiling, speech, sexual jealousy and a sense of humour–none of which you would find to be the same in a chimpanzee.

You could travel back in time and empathise easily with the motives of Shakespeare, Homer, Confucius and the Buddha. If I could meet the man who painted exquisite images of rhinos on the wall of the Chauvet Cave in southern France 32,000 years ago, I have no doubt that I would find him fully human in every psychological way. There is a great deal of human life that does not change.

they do not ‘raise their standard of living’, or experience ‘economic growth’. They do not encounter ‘poverty’ either. They do not progress from one mode of living to another–nor do they deplore doing so.

the list of features suggested as unique to human beings is long indeed. But then the list of features unique to aardvarks or bare-faced go-away birds is also fairly long.

human beings are very good at social learning, indeed compared with even chimpanzees humans are almost obsessively interested in faithful imitation.

It was not something that happened within a brain. It was something that happened between brains. It was a collective phenomenon.

Look again at the hand axe and the mouse. They are both ‘man-made’, but one was made by a single person, the other by hundreds of people, maybe even millions. That is what I mean by collective intelligence.

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

Humanity is experiencing an extraordinary burst of evolutionary change, driven by good old-fashioned Darwinian natural selection. But it is selection among ideas, not among genes.

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. Just like natural selection cumulatively building an eye bit by bit, so cultural evolution in human beings could cumulatively build a culture or a camera.

at some point in human history, ideas began to meet and mate, to have sex with each other.

Sex is what makes biological evolution cumulative, because it brings together the genes of different individuals. A mutation that occurs in one creature can therefore join forces with a mutation that occurs in another.

If microbes had not begun swapping genes a few billion years ago, and animals had not continued doing so through sex, all the genes that make eyes could never have got together in one animal; nor the genes to make legs or nerves or brains. Each mutation would have remained isolated in its own lineage, unable to discover the joys of synergy.

‘To create is to recombine’ said the molecular biologist François Jacob.

Exchange is to cultural evolution as sex is to biological evolution. By exchanging, human beings discovered ‘the division of labour’, the specialisation of efforts and talents for mutual gain.

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.

The more

human beings diversified as consumers and specialised as producers, and the more they then exchanged, the better off they have been, are and will be. And the good news is that there is no inevitable end to this process. The more people are drawn into the global division of labour, the more people can specialise and exchange, the wealthier we will all be.

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;

markets in assets are so automatically prone to bubbles and crashes that it is hard to design them so they work at all.

But the vast majority of people are much better fed, much better sheltered, much better entertained, much better protected against disease and much more likely to live to old age than their ancestors have ever been.

All this during a half-century when the world population has more than doubled, so that far from being rationed by population pressure, the goods and services available to the people of the world have expanded. It is, by any standard, an astonishing human achievement.

The rich have got richer, but the poor have done even better. The poor in the developing world grew their consumption twice as fast as the world as a whole between 1980 and 2000.

high earners now marry each other more than they used to (which concentrates income), immigration has increased, trade has been freed, cartels have been opened up to entrepreneurial competition and the skill premium has grown in the work place. All these are inequality-boosting, but they stem from liberalising trends.

by a strange statistical paradox, while inequality has increased within some countries, globally it has been falling.

‘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.’

The four most basic human needs–food, clothing, fuel and shelter–have grown markedly cheaper during the past two centuries.

If basic needs have got cheaper, then there is more disposable income to spend on luxuries.

hour of work at the average wage. The amount has increased from twenty-four lumen-hours in 1750 BC (sesame oil lamp) to 186 in 1800 (tallow candle) to 4,400 in 1880 (kerosene lamp) to 531,000 in 1950 (incandescent light bulb) to 8.4 million lumen-hours today (compact fluorescent bulb).

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.

Devoting less of your working week to earning your lighting means devoting more of it to doing something else.

The improved technology of lighting has liberated you to make or buy another product or service, or do a charitable act. That is what economic growth means.

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

And if you can get it made efficiently by others, then you can afford more of it. As light became cheaper so people used more of it.

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

In the 1950s it took thirty minutes work to earn the price of a McDonald’s cheeseburger; today it takes three minutes. Healthcare and education are among the few things that cost more in terms of hours worked now than they did in the 1950s.

Andrew Carnegie, while enormously enriching himself, cut the price of a steel rail by 75 per cent in the same period; John D. Rockefeller cut the price of oil by 80 per cent. During those thirty years, the per capita GDP of Americans rose by 66 per cent. They were enricher-barons, too.

Henry Ford got rich by making cars cheap. His first Model T sold for $ 825, unprecedentedly cheap at the time, and four years later he had cut the price to $ 575.

If Cornelius Vanderbilt or Henry Ford not only moves you faster to where you want to go, but requires you to work fewer hours to earn the ticket price, then he has enriched you by granting you a dollop of free time.

If you choose to spend that spare time consuming somebody else’s production then you can enrich him in turn; if you choose to spend it

producing for his consumption then you have also further enriched yourself.

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.

Besides, a million years of natural selection shaped human nature to be ambitious to rear successful children, not to settle for contentment: people are programmed to desire, not to appreciate.

political scientist Ronald Ingleheart: the big gains in happiness come from living in a society that frees you to make choices about your lifestyle–about where to live, who to marry, how to express your sexuality and so on. It is the increase in free choice since 1981 that has been responsible for the increase in happiness recorded since then in forty-five out of fifty-two countries.

By the same age, human hunter-gatherers have consumed about 20 per cent of their lifetime calories, but produced just 4 per cent. More than any other animal, human beings borrow against their future capabilities by depending on others in their early years.

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.

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.

If somebody somewhere takes out a mortgage, which he will repay in three decades’ time, to invest in a business that invents a gadget that saves his customers time, then that money, brought forward from the future, will enrich both him and those customers to the point where the loan can be repaid to posterity. That is growth.

Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft.

1930. All sorts of new products and industries were born during the Depression: by 1937, 40 per cent of DuPont’s sales came from products that had not even existed before 1929, such as rayon, enamels and cellulose film. So growth will resume–unless prevented by the wrong policies.

But so long as somewhere somebody is incentivised to invent ways of serving others’ needs better, then the rational optimist must conclude that the betterment of human lives will eventually resume.

It comes from exchange and specialisation and from the resulting division of labour.

‘To produce implies that the producer desires to consume’ said John Stuart Mill; ‘why else should he give himself useless labour?’

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

As Friedrich Hayek first clearly saw, 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’.

This is the diagnostic feature of modern life, the very definition of a high standard of living: diverse consumption, simplified production. Make one thing, use lots.

So this is what poverty means. You are poor to the extent that you cannot afford to sell your time for sufficient price to buy the services you need, and rich to the extent that you can afford to buy not just the services you need but also those you crave.

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.

Self-sufficiency is poverty

In truth, far from being unsustainable, the interdependence of the world through trade is the very thing that makes modern life as sustainable as it is.

Interdependence spreads risk.

There is no such thing as unproductive employment, so long as people are prepared to buy the service you are offering. Today, 1 per cent works in agriculture and 24 per cent in industry, leaving 75 per cent to offer movies, restaurant meals, insurance broking and aromatherapy.

Yet, surely, long ago, before trade, technology and farming, human beings lived simple, organic lives in harmony with nature. That was not poverty: that was ‘the original affluent society’.

Where every other species needed its niche, the hunter-gatherer could make a niche out of anything: seaside or desert, arctic or tropical, forest or steppe.

answers, human beings evolved to strive to signal social status and sexual worth.

materialist, human consumption is already driven by a sort of pseudo-spiritualism that seeks love, heroism and admiration.

Yet this thirst for status then encourages people to devise recipes that rearrange the atoms, electrons or photons of the world in such a way as to make useful combinations for other people. Ambition is transmuted into opportunity.

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.

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

We are used to thinking that technology and innovation go together, yet here is strong evidence that when human beings became tool makers, they did not experience anything remotely resembling cultural progress. They just did what they did very well. They did not change.

Most species do not change their habits during their few million years on earth or alter their lifestyle much in different parts of their range. Natural selection is a conservative force.

Only towards the edge of its range, on an isolated island, or in a remote valley or on a lonely hill top, does natural selection occasionally cause part of a species to morph into something different. That different sport sometimes then spreads to conquer a broader ecological empire, perhaps even returning to replace the ancestral species–to topple the dynasty from which it sprang.

Evolutionary change happens largely by the replacement of species by daughter species, not by the changing of habits in species.

Crucially, they did not expand or shift their niche. They remained trapped within it. Nobody woke up one day and said ‘I’m going to make my living a different way.’

Cooking enabled hominids to trade gut size for brain size.

living in large social groups on a plentiful diet both encourages and allows brain growth.

If language is the key to cultural evolution, and Neanderthals had language, then why did the Neanderthal toolkit show so little cultural change?

genes would undoubtedly have changed during the human revolution after 200,000 years ago, but more in response to new habits than as causes of them.

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.

The effect of this was to cause specialisation, which in turn caused technological innovation, which in turn encouraged more specialisation, which led to more exchange–and ‘progress’ was born, by which I mean technology and habits changing faster than anatomy.

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

Exchange needed to be invented. It does not come naturally to most animals.

Reciprocity means giving each other the same thing (usually) at different times. Exchange–call it barter or trade if you like–means giving each other different things (usually) at the same time: simultaneously swapping two different objects. In Adam Smith’s words, ‘Give me that which I want, and you shall have this which you want.’

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.

as long as two people are living in different habitats, they will value what each other has more than what they have themselves, and trade will pay them both. And the more they trade, the more it will pay them to specialise.

people can value highly what they do not have access to. And the more they rely on exchange, the more they specialise, which makes exchange still more attractive.

Chimpanzees and monkeys can be taught to exchange tokens for food, but this is a long way from spontaneously exchanging one thing for another:

True barter requires that you give up something you value in exchange for something else you value slightly more.

Cooking is the most female-biased of all activities, the only exceptions being when men prepare some ritual feasts or grill a few snacks while out on the hunt.

across the world, each sex contributes similar quantities of calories, though the pattern varies from tribe to tribe: in Inuits, for example, most food is obtained by men, whereas in the Kalahari Khoisan people, most is gathered by women. But–and here is the crucial point–throughout the human race, males and females specialise and then share food.

‘Women demand meat as their social right, and they get it–otherwise they leave their husbands, marry elsewhere or make love to other men.’

An evolutionary bargain seems to have been struck: in exchange for sexual exclusivity, the man brings meat and protects the fire from thieves and bullies; in exchange for help rearing the children, the woman brings veg and does much of the cooking. This may explain why human beings are the only great apes with long pair bonds.

Just to be clear, this argument has nothing to do with the notion that ‘a woman’s place is in the home’ while men go out to work. Women work hard in hunter-gatherer societies, often harder than men. Neither gathering nor hunting is especially good evolutionary preparation for sitting at a desk answering the telephone.

A sexual division of labour would exist even without childcare constraints.

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.

trade. It is as if the species now has two brains and two stores of knowledge instead of one–a brain that learns about hunting and a brain that learns about gathering.

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. This can lead to men being economically less productive than they might be.

This seem to made men more ambitious and risk takers.

collecting different foods and sharing them is something no other species does. It is a habit that put an end to self-sufficiency long ago and that got our ancestors into the habit of exchange.

In New Guinea and Australia, too, the genetics tell an unambiguous story of almost complete isolation since the first migration.

The reason for this shift, say Mary Stiner and Steven Kuhn, was that human population densities were growing too high for the slower-reproducing prey such as tortoises, horses and elephants. Only the fast-breeding rabbits, hares and partridges, and for a while gazelles and deer, could cope with such hunting pressure.

But 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.

Without trade, innovation just does not happen. Exchange is to technology as sex is to evolution. It stimulates novelty.

If you are not self-sufficient, but are working for other people, too, then it pays you to spend some time and effort to improve your technology and it pays you to specialise.

After a while, depressed by the low price fetched by hooks of even high quality, Adam hits on the idea of tanning some extra hides and bringing those to the trading point, too. Now he finds he is better at making hides than hooks, so he specialises in hides, giving his antlers to somebody from his own tribe in exchange for his hides. And so on, and on and on.

indignation,’ say the evolutionary biologists Mark Pagel and Ruth Mace. ‘Cultures, it seems, like to shoot messengers.’ People do their utmost to cut themselves off from the free flow of ideas, technologies and habits, limiting the impact of specialisation and exchange.

the capacity for innovation. 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. If you have a single fishing harpoon to make, there’s no sense in building a clever tool for making harpoons first, but if you have to make harpoons for five fishermen, then maybe there is sense and time-saving in first making the harpoon-making tool.

Evolution has discovered Ricardo’s law and applied it to symbioses, such as the collaboration between alga and fungus that is a lichen plant or the collaboration between a cow and a bacterium in a rumen.

Within species, too, there are clear gains from trade between cells of a body, polyps of a coral colony, ants of an ant colony, or mole-rats of a mole-rat colony. The great success of ants and termites–between them they may comprise one-third of all the animal biomass of land animals–is undoubtedly down to their division of labour.

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.

Equipped with the right tool, a human being can become a soldier or a worker (maybe not a queen), and he can switch between the roles. The more you do something, the better you get at it.

The bigger the connected population, the more skilled the teacher, and the bigger the probability of a productive mistake.

Conversely, the smaller the connected population, the greater the steady deterioration of the skill as it was passed on.

A band of a hundred people cannot sustain more than a certain number of tools, for the simple reason that both the production and the consumption of tools require a minimum size of market.

if there are not enough experts to learn one rare skill from, they will lose that skill. A good idea, manifest in bone, stone or string, needs to be kept alive by numbers. Progress can easily falter and turn into regress.

There was nothing special about the brains of the moderns; it was their trade networks that made the difference–their collective brains.

Technology was made possible by division of labour: market exchange calls forth innovation.

The Australian mainland, by contrast, experienced steady technological progress. Where Tasmanian spears merely had fire-hardened wood points, on the mainland spears acquired detachable tips, stone barbs and ‘woomera’ spear throwers. It is no coincidence that the mainland had long-range trade, so that inventions and luxuries could be sourced from distant parts of the land.

The difference is that the Fuegians were in fairly frequent contact with other people across the Strait of Magellan so that they could relearn lost skills or import new tools from time to time. All it took was an occasional incomer from the mainland to keep technology from regressing.

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.

This may explain why Australian aboriginal technology, although it developed and elaborated steadily over the ensuing millennia, was lacking in so many features of the Old World

it was that they had arrived with only a subset of technologies and did not have a dense enough population and therefore a large enough collective brain to develop them much further.

Human cultural progress is a collective enterprise and it needs a dense collective brain.

‘societies that use markets extensively develop a culture of co-operation, fairness and respect for the individual’.

And generally speaking the more cooperative a species is within groups, the more hostility there is between groups. As a highly ‘groupish’ species ourselves, still given to mutual aid within groups and mutual violence between groups, it is an extraordinary thing that people can overcome their instincts enough to have social commerce with strangers.

I think the first overtures may have been ventured first by human females.

The traders of Malaysia, Indonesia and the Philippines were often women, who were taught to calculate and to account from an early age.

smile–a small, instinctive gesture of trust.

The human smile, the glowing embodiment of Smith’s innate sentiment of sympathy, can reach right into the brain of another person and influence her thoughts.

‘Oxytocin is a physiologic signature of empathy,’ says the neuro-economist Paul Zak, who conducts these experiments, ‘and appears to induce a temporary attachment to others.’

oxytocin does not affect reciprocity, just the tendency to take a social risk, to go out on a limb.

there is still no evidence that any of this biology is uniquely developed in human beings.

Oxytocin is common to all mammals, and is used for mother-love in sheep and lover-love in voles, so the chances are that it is available to underpin trust in almost any social mammal. It is necessary, but not sufficient to explain the human propensity to exchange.

As a broad generalisation, the more people trust each other in a society, the more prosperous that society is, and trust growth seems to precede income growth.

The remarkable thing about the early days of the internet was not how hard it proved to enable people to trust each other in the anonymous reaches of the ether, but how easy. All it took was for eBay to solicit feedback from customers after each transaction and post the comments of buyers about the sellers. Suddenly every deal lay under the shadow of the future;

The internet, in other words, may be the best forum for crime, but it is also the best forum for free and fair exchange the world has ever seen.

A successful transaction between two people–a sale and purchase–should benefit both. If it benefits one and not the other, it is exploitation, and it does nothing to raise the standard of living.

The notion of synergy, of both sides benefiting, just does not seem to come naturally to people. If sympathy is instinctive, synergy is not.

‘the market system makes self interest into something thoroughly virtuous.’

This is the extraordinary feature of markets: just as they can turn many individually irrational individuals into a collectively rational outcome, so they can turn many individually selfish motives into a collectively kind result.

The ‘long tail’ of the distribution–the very many products that are each wanted by very few, rather than vice versa–can be serviced more and more easily.

The lesson of the last two centuries is that liberty and welfare march hand in hand with prosperity and trade. Countries that lose their liberty to tyrants today, through military coups, are generally experiencing falling per capita income at an average rate of 1.4 per cent at the time

the bizarre paradox of a conservative movement that embraces economic change but hates its social consequences and a liberal movement that loves the social consequences but hates the economic source from which they come.

‘One side denounced capitalism but gobbled up its fruits; the other cursed the fruits while defending the system that bore them.’

‘business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger.’ They are addicted to corporate welfare, they love regulations that erect barriers to entry to their small competitors, they yearn for monopoly and they grow flabby and inefficient with age.

half of today’s biggest companies did not even exist in 1980. The same is not true of government monopolies:

Innovation, whether in the form of new technology or new ways of organising the world, can destroy as well as create.

eBay was just one of many online auction companies. It succeeded where its competitors failed because it realised that a sense of shared community, not a competitive auction process, was key.

Whereas the typical firm was once a team of workers, hierarchically arranged and housed on a single site, increasingly it is a nebulous and ephemeral coming together of creative and marketing talent to transmit the efforts of contracting individuals towards the satisfying of consumer preferences.

firms are temporary aggregations of people to help them do their producing in such a way as to help others do their consuming.

But for anybody who thinks great art and great philosophy have nothing to do with commerce, let him visit Athens and Baghdad to ask how Aristotle and al-Khwarizmi had the leisure time to philosophise.

Where commerce thrives, creativity and compassion both flourish.

But note here that a country’s economic freedom predicts its prosperity better than its mineral wealth, education system or infrastructure do.

‘Rich countries,’ concluded the Bank, ‘are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity.’

Human history is driven by a co-evolution of rules and tools. The increasing specialisation of the human species, and the enlarging habit of exchange, are the root cause of innovation in both.

For Adam Smith capital is ‘as it were, a certain quantity of labour stocked and stored up to be employed, if necessary, upon some other occasion’.

In the conventional account it was agriculture that made capital possible by generating stored surpluses and stored surpluses could be used in trade.

Agriculture was possible because of trade. Trade provided the incentive to specialise in farmed goods and to generate surplus food.

They captured the benefits of cereals–milled and baked starch–long before they took on the hard graft of farming them.

But once agriculture has provided the capital, increased the density of people, and given them a good reason for chopping down trees, then there might be a market large enough to support a community of full-time copper smelters, so long as they can sell the copper to neighbouring tribes. Or, in the words of two theorists: ‘The denser societies made possible by agriculture can realize considerable returns to better exploitation of the potential of co-operation, co-ordination and the division of labour.’

Almost by definition, the more wealthy somebody is, the more things he acquires from specialists.

The characteristic signature of prosperity is increasing specialisation. The characteristic signature of poverty is a return to self-sufficiency.

‘These findings suggest that, on a global scale, there may be a considerable potential to raise agricultural output without necessarily increasing HANPP.’

You could double or quadruple yields and still be nowhere near the maximum practical yields of land, let alone the photosynthetic limit.

Once it is properly priced by markets, water is not only used more frugally, but its very abundance increases through incentives to capture and store it.

This is what it would take to feed nine billion people in 2050:

Once again, the theme of specialised production/ diversified consumption turns out to be the key to prosperity.

Cities exist for trade. They are places where people come to divide their labour, to specialise and exchange.

sustain their numbers. Just as agriculture appeared in six or seven parts of the world simultaneously, suggesting an evolutionary determinism, so the same is true, a few thousand years later, of cities.

Like traders ever since, they gathered as tightly together as possible to maximise information flow and minimise costs.

Those dull records, dug into the surfaces of clay tablets, are the ancestors of writing–accountancy was its first application.

The message those tablets tell is that the market came long before the other appurtenances of civilisation.

Each empire was the product of trading wealth and was itself the eventual cause of that wealth’s destruction. Merchants and craftsmen make prosperity; chiefs, priests and thieves fritter it away.

Even more than in Mesopotamia, Egypt followed the path of irrigation, centralisation, monument building and eventual stagnation.

Transport allowed extensive trade.

They fashioned the cotton into nets, which they bartered for fish. There was not just mutual dependence, but mutual gain.

Soon, through tax, regulation and monopoly, the wealth generated by trade was being diverted into the luxury of the few and the oppression of the many.

A Bronze Age empire stagnated for much the same reason that a nationalised industry stagnates: monopoly rewards caution and discourages experiment, the income is gradually captured by the interests of the producers at the expense of the interests of the consumers, and so on.

The list of innovations achieved by the pharaohs is as thin as the list of innovations achieved by British Rail or the US Postal Service.

this political fragmentation, perhaps aided by a population decline, caused a burst of invention as demand rose among free people.

There was of course nothing new about the boat

But, realising their comparative advantage in timber, the Phoenicians built ships of greater capacity, finer trim and more seaworthy mortise joints than any people before them.

Travelling farther afield, the Phoenicians’ innovations multiplied: better keels, sails, navigational knowledge, accounting systems, log-keeping. Trade, once more, was the flywheel of the innovation machine.

The Phoenician diaspora is one of the great untold stories of history–untold because Tyre and its books were so utterly destroyed by thugs like Nebuchadnezzar, Cyrus and Alexander, and Carthage by the Scipios, so the story comes to us only through snippets from snobbish and envious neighbours.

Regions that participated in Asian trade grew richer than the regions that did not: by 1500 Italy’s GDP per capita was 60 per cent higher than the European average.

The burst of economic activity in China after 1978 was driven by ‘township and village enterprises’, agencies of the government given local freedom to start companies. One of the paradoxical features of modern China is the weakness of a central, would-be authoritarian government.

Empires, indeed governments generally, tend to be good things at first and bad things the longer they last.

The behaviour of Hongwu, the first of the Ming emperors, is an object lesson in how to stifle the economy: forbid all trade and travel without government permission; force merchants to register an inventory of their goods once a month; order peasants to grow for their own consumption and not for the market; and allow inflation to devalue the paper currency 10,000-fold.

The message from history is so blatantly obvious–that free trade causes mutual prosperity while protectionism causes poverty–that it seems incredible that anybody ever thinks otherwise.

a machine that turns potatoes into computers, or anything into anything: who would not want to have such a machine at their disposal?

In the animal world, this is unique. In no animal species do individuals become more specialised as population is rising, nor less specialised as population is stalling or falling. In fact, the whole notion of specialised individuals is rare outside the human race, and where specialisation does happen–in ants, for example–it does not wax and wane in this way.

Increasing self-sufficiency is the very signature of a civilisation under stress, the definition of a falling standard of living.

The wealth that the Italian trading towns had generated soon found its way into scholarship, art or science, or in the case of Leonardo da Vinci, all three.

Europe was, in Joel Mokyr’s words, ‘the first society to build an economy on non-human power rather than on the backs of slaves and coolies’.

some time between 1700 and 1800, the Japanese collectively gave up the plough in favour of the hoe because people were cheaper to hire than draught animals.

Japanese population boomed to the point where land was scarce, labour was cheap and it was literally more economic to use human labour to hoe the land than to set aside precious acres for pasture to support oxen or horses to draw a plough. So

There is no country in the world that has a higher birth rate than it had in 1960, and in the less developed world as a whole the birth rate has approximately halved.

The more babies are likely to die, the more their parents bear. Only when women think their children will survive do they plan and complete their families rather than just keep breeding.

Probably by far the best policy for reducing population is to encourage female education.

‘There is no need to impose coercive population control measures; economic freedom actually generates a benign invisible hand of population control.’

It was fossil fuels that eventually made slavery–along with animal power, and wood, wind and water–uneconomic. Wilberforce’s ambition would have been harder to obtain without fossil fuels. ‘History supports this truth,’ writes the economist Don Boudreaux: ‘Capitalism exterminated slavery.’

The secret of the industrial revolution was shifting from current solar power to stored solar power.

Between 1750 and 1850 British men (some of them immigrants) invented an astonishing range of labour-saving and labour-amplifying devices, which allowed them to produce more, sell more, earn more, spend more, live better and have more surviving children.

You look at such a picture and wonder, ‘How did any one country have so much talent in the same place?’ The premise is false, of course, because it was the aura of the time and place that drew forth (and attracted from abroad–Brunel was French, Rumford American) such talent.

For all their brilliance, there are Watts, Davys, Jenners and Youngs galore in every country at every time. But only rarely do sufficient capital, freedom, education, culture and opportunity come together in such a way as to draw them out.

The heady combination of available skills and freedom of enterprise created a boom in an industry known as the ‘toy trade’, though the items made were mostly buckles, pins, nails, buttons and small utensils, rather than toys themselves.

The work was done in small workshops, with little new-fangled machinery, but it was split into skilled, specialised trades and organised along increasingly sophisticated lines. Manufacturers spun out of each other’s firms and started business on their own account, just as they would do around San Francisco Bay in the 1980s.

Demand it and they will supply

People do not start businesses unless there is demand from consumers.

’tis by the Largeness of their Gettings, that they are supported, and by the Largeness of their number that the whole country is supported.

Josiah Wedgwood, for instance, was not technically better at making pottery and porcelain than many others, but he was supremely good at making sure it was affordable, by dividing labour among skilled workers and applying steam to the process. He was also very good at marketing porcelain to the consuming classes by making it seem to be both posh and affordable–the holy grail of marketing ever since.

Cotton was considered unpatriotic.

The affordability of cloth for the English working class was made possible by the buying and selling of captured Africans.

coal took a century to compete on price with water power in factories–but that it was effectively limitless in supply.

Only coal could do that. There was never going to be enough wind, water or wood in England to power the factories, let alone in the right place.

The great increase in coal consumption (five-fold in the eighteenth century, fourteen-fold in the nineteenth century) was the result mainly of more investment, not more productivity.

It was coal that gave the industrial revolution its surprising second wind, that kept the mills, forges and locomotives running, and that eventually fuelled the so-called second industrial revolution of the 1860s, when electricity, chemicals and telegraphs brought Europe unprecedented prosperity and global power.

The capacity of the country’s steam engines alone was equivalent to six million horses or forty million men, who would otherwise have eaten three times the entire wheat harvest. That is how much energy had been harnessed to the application of the division of labour. That is how impossible the task of Britain’s nineteenth-century miracle would have been without fossil fuels.

A century later, despite wages that were four or five times higher than in India, Lancashire was able to flood even India with cheap cotton cloth, some of it manufactured from Indian raw cotton that had made a 13,000-mile round trip. This was thanks entirely to the productivity of Lancashire’s mechanised mills. That is how much difference having fossil fuels made.

By 1900, 40 per cent of the world’s cotton goods were produced within thirty miles of Manchester.

Industrialisation became contagious: the increased productivity of cotton mills encouraged demand from the chemical industry, which invented chlorine for bleaching, and from the printing industry, which turned to drum printing to print coloured cloth. By cutting the price of cotton, it also released consumer expenditure for other goods, which stimulated other manufacturing inventions. And of course to make the new machines, it demanded high-quality iron, which was made possible by cheap coal.

Today most coal is used for generating electricity.

The electrification of the world began, and although like the computer it took decades to show up in the productivity statistics, its triumph was inexorable and its effect far-reaching.

Thanks mainly to new energy technologies, what took a textile worker twenty minutes in 1750 took just one minute in 1850.

That was in essence why the second half of the industrial revolution made Britain rich. It made it possible for fewer people to supply more people with more goods and more services–in Adam Smith’s words, to make ‘a smaller quantity of labour produce a greater quantity of work’.

If America were to grow all its own transport fuel as biofuel it would need 30 per cent more farmland than it currently uses to grow food.

To get an idea of just how landscape-eating the renewable alternatives are, consider that to supply just the current 300 million inhabitants of the United States with their current power demand of roughly 10,000 watts each (2,400 calories per second) would require: solar panels the size of Spain or wind farms the size of Kazakhstan or woodland the size of India and Pakistan or hayfields for horses the size of Russia and Canada combined or hydroelectric dams with catchments one-third larger than all the continents put together

“Renewables are not green”.’

The mad world of biofuels

Fermenting carbohydrate is an inefficient business compared with burning hydrocarbon.

So the question is: how much fuel does it take to grow fuel? Answer: about the same amount. The

the biofuel industry is not just bad for the economy. It is bad for the planet, too.

Civilisation, like life itself, has always been about capturing energy.

successful species is one that converts the sun’s energy into offspring more rapidly than another species, so the same is true of a nation.

‘The chaos will prevail in the end, but it is our mission to postpone that day for as long as we can and to push things in the opposite direction with all the ingenuity and determination we can muster. Energy isn’t the problem. Energy is the solution.’

Silicon chips use so little power that they are everywhere and in aggregate their effect mounts up. A search engine may not use as much energy as a steam engine, but lots of them soon add up. Energy efficiency has been rising for a very long time and so has energy consumption. This is known as the Jevons paradox after the Victorian economist Stanley Jevons, who put it thus: ‘It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth. As a rule, new modes of economy will lead to an increase of consumption.’

The most fundamental feature of the modern world since 1800–more profound than flight, radio, nuclear weapons or websites, more momentous than science, health, or material well-being–has been the continuing discovery of ‘increasing returns’ so rapid that they outpaced even the population explosion.

The more you prosper, the more you can prosper.

The more knowledge you generate, the more you can generate. And the engine that is driving prosperity in the modern world is the accelerating generation of useful knowledge.

The more people you tell about bicycles, the more people will come back with useful new features for bicycles–mudguards, lighter frames, racing tyres, child seats, electric motors. The dissemination of useful knowledge causes that useful knowledge to breed more useful knowledge.

There is no equilibrium in nature; there is only constant dynamism. As Heraclitus put it, ‘Nothing endures but change.’

The accelerated exchange of ideas and people made possible by technology fuelled the accelerating growth of wealth that has characterised the past century.

Although the human race as a whole has experienced incessant change, individual peoples saw a much more intermittent flickering progress because the pace and place of that change was itself always changing.

No country remains for long the leader in knowledge creation.

‘Prosperity and success led to the emergence of predators and parasites in various forms and guises who eventually slaughtered the geese that laid the golden eggs.’ Again and again, the flame of invention would splutter and die… only to flare up elsewhere. The good news is that there is always a new torch lit. So far.

Very roughly, the best industry to be in as an innovator was: 1800–textiles; 1830–railways; 1860–chemicals; 1890–electricity; 1920–cars; 1950–aeroplanes; 1980–computers; 2010–the web.

Whereas the nineteenth century saw a rash of new ways to move people about (railways, bicycles, cars, steamships), the twentieth century saw a rash of new ways to move information about (telephones, radio, television, satellites, fax, the internet, mobile telephones).

The satellite is a neat example of a technology invented as a by-product of a transport project (space travel), which found a use in communications instead.

Note that the greatest impact of an increasing-return wave comes long after the technology is first invented. It comes when the technology is democratised.

Jets travel at the same speeds as they did in the 1970s, but budget airlines are new.

The death of distance may not be new, but it has been made affordable to all.

The story of the twentieth century was the story of giving everybody access to the privileges of the rich, both by making people richer and by making services cheaper.

Visa from the chaos of the mass mailings in the late 1960s, under Dee Hock’s reinvention, was the democratisation of credit.

‘People don’t like change,’ Michael Crichton once told me, ‘and the notion that technology is exciting is true for only a handful of people. The rest are depressed or annoyed by the changes.’ Pity the inventor’s lot then. He is the source of society’s enrichment and yet nobody likes what he does.

They believe that the recipe for making new ideas is easy: pour public money into science, which is a public good, because nobody will pay for the generation of ideas if the taxpayer does not, and watch new technologies emerge from the downstream end of the pipe. Trouble is, there are two false premises here: first, science is much more like the daughter than the mother of technology; and second, it does not follow that only the taxpayer will pay for ideas in science.

Throughout the industrial revolution, scientists were the beneficiaries of new technology, much more than they were the benefactors.

Thus only when the principles of electrical transmission were understood could the telegraph be perfected; once coal miners understood the succession of geological strata, they knew better where to sink new mines; once benzene’s ring structure was known, manufacturers could design dyes rather than serendipitously stumble on them. And so on. But even most of this was, in Joel Mokyr’s words, ‘a semi-directed, groping, bumbling process of trial and error by clever, dexterous professionals with a vague but gradually clearer notion of the processes at work’.

Sir Richard Friend, citing the example of high-temperature superconductivity–which was stumbled upon in the 1980s and explained afterwards–admitted that even today scientists’ job is really to come along and explain the empirical findings of technological tinkerers after they have discovered something.

The seventeenth-century discoveries of gravity and the circulation of the blood were splendid additions to the sum of human knowledge. But they did less to raise standards of living than the cotton gin and the steam engine.

London had managed to borrow from Amsterdam and nurture in the eighteenth century joint-stock, limited liability companies, liquid markets in bonds and shares, and a banking system capable of generating credit. These helped to give inventors the wherewithal to turn their ideas into products.

Corporate research and development budgets are only a century old and they have been growing pretty steadily all that time. The proportion of GDP spent by firms on research and development in America has more than doubled, to nearly 3 per cent, over the past half-century.

The pharmaceutical industry, having tried again and again to instil a sense of radical thinking into its research departments, has largely given up the attempt and now simply buys up small firms that have developed big ideas.

fate. The great innovators are still usually outsiders.

Sites like Innocentive and yet2. com allow companies both to post problems they cannot solve, promising rewards for their solution, and to post technologies they have invented that are looking for applications.

Manufacture the best bicycles and you profit handsomely; come up with the idea of the bicycle and you get nothing because it is soon copied.

The way to keep your customers, if you are Michael Dell, Steve Jobs or Bill Gates, is to keep making your own products obsolete.

The characteristic feature of a piece of new knowledge, whether practical or esoteric, whether technical or social, is that you can give it away and still keep it.

You cannot give away your bicycle and still ride it. But you can give away the idea of the bicycle and still retain it.

Innovators are therefore in the business of sharing. It is the most important thing they do, for unless they share their innovation it can have no benefit for them or for anybody else.

Ptolemaic astronomy was ingenious and precise, if not quite accurate, but it was never used for navigation, because astronomers and sailors did not meet. The secret of the modern world is its gigantic interconnectedness. Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity.

Almost every technology is a hybrid.

This is one area in which cultural evolution has an unfair advantage over genetic evolution. For insuperable practical reasons connected with the pairing of chromosomes during meiosis, cross fertilisation cannot happen between different species of animal. (It can, indeed does, happen between species of bacteria, 80 per cent of whose genes have been borrowed from other species on average–one reason bacteria are so darned good at evolving resistance to antibiotics, for example.)

Technologies emerge from the coming together of existing technologies into wholes that are greater than the sum of their parts.

It follows that spillover–the fact that others pinch your ideas–is not an accidental and tiresome drawback for the inventor. It is the whole point of the exercise. By spilling over, an innovation meets other innovations and mates with them.

After all, even the cleverest in-house programmer is unlikely to be as smart as the collective efforts of ten thousand users at the ‘bleeding edge’ of a new idea.

On the other hand, a piece of new knowledge lies behind every net advance in human economic welfare:

a world where perpetual innovation brings brief bursts of profit through temporary monopoly to whoever can commandeer demand for new products or services, and long bursts of growth to everybody else who eventually gets to share the spilled-over idea.

Romer saw that innovation itself was an item of investment, that new, applied knowledge was itself a product. So long as people who are spending money on trying to find new ideas can profit from them before they pass them on, then increasing returns are possible.

It is a beautiful feature of information systems that they are far vaster than physical systems: the combinatorial vastness of the universe of possible ideas dwarfs the puny universe of physical things.

The real danger comes from slowing down change. It is my proposition that the human race has become a collective problem-solving machine and it solves problems by changing its ways. It does so through invention driven often by the market:

scarcity drives up price; that encourages the development of alternatives and of efficiencies. It has happened often in history. When whales grew scarce, petroleum was used instead as a source of oil.

The pessimists’ mistake is extrapolationism: assuming that the future is just a bigger version of the past.

IBM’s founder Thomas Watson when he said in 1943 that there was a world market for five computers, and Ken Olson, the founder of Digital Equipment Corporation, when he said in 1977: ‘There is no reason anyone would want a computer in their home.’ Both remarks were true enough when computers weighed a tonne and cost a fortune.

It was a world, in retrospect, pregnant with possibility, ready to explode into modernity. To be born then you would see a life of ever-increasing wealth, health, wisdom and safety. Yet was the mood of 1830 optimistic? No, it was just like today:

Defining moments, tipping points, thresholds and points of no return have been encountered, it seems, by pessimists in every generation since.

The endless modern laments about how texting and emails are shortening the attention span go back to Plato, who deplored writing as a destroyer of memorising.

Yet surveys consistently reveal individuals to be personally optimistic yet socially pessimistic.

It goes with the fact that they are risk-averse: a large literature confirms that people much more viscerally dislike losing a sum of money than they like winning the same sum. And it seems that pessimism genes might quite literally be commoner than optimism genes:

(Willingness to take risks, a possible correlate of optimism, is also partly heritable: the 7-repeat version of the DRD4 gene accounts for 20 per cent of financial risk taking in men–and is commoner in countries where most people are descended from immigrants.)

The amount of oil left, the food-growing capacity of the world’s farmland, even the regenerative capacity of the biosphere–these are not fixed numbers; they are dynamic variables produced by a constant negotiation between human ingenuity and natural constraints.

evolutionary biologist Paul Ewald has long argued, viruses undergo natural selection as well as mutation once established in a new species of host and casually transmitted viruses like flu replicate more successfully if they cause mild disease, so that the host keeps moving about and meeting new people.

But its biggest advantage is one that the rest of Africa could easily have shared: good institutions. In particular, Botswana turns out to have secure, enforceable property rights that are fairly widely distributed and fairly well respected.

Give local people the power to own, exploit and profit from natural resources in a sustainable way and they will usually preserve and cherish those resources. Give them no share in a wildlife resource that is controlled–nay ‘protected’–by a distant government and they will generally neglect, ruin and waste it. That is the real lesson of the tragedy of the commons.)

The future will feature ideas that are barely glints in engineers’ eyes right now

How do I know? Because ingenuity is rampant as never before in this massively networked world and the rate of innovation is accelerating, through serendipitous searching, not deliberate planning.

When asked at the Chicago World Fair in 1893 which invention would most likely have a big impact in the twentieth century, nobody mentioned the automobile, let alone the mobile phone.

I have tried to show that, just as sex made biological evolution cumulative, so exchange made cultural evolution cumulative and intelligence collective, and that there is therefore an inexorable tide in the affairs of men and women discernible beneath the chaos of their actions. A flood tide, not an ebb tide.

Somewhere in Africa more than 100,000 years ago, a phenomenon new to the planet was born. A Species began to add to its habits, generation by generation, without (much) changing its genes. What made this possible was exchange, the swapping of things and services between individuals. This gave the Species an external, collective intelligence far greater than anything it could hold in its admittedly capacious brain. Two individuals could each have two tools or two ideas while each knowing how to make only one.

At first, the progressive expansion of the Species’ culture was slow, because it was limited by the size of each connected population. Isolation on an island or devastation by a famine could reduce the population and so diminish its collective intelligence. Bit by bit, however, the Species expanded both in numbers and in prosperity. The more habits it acquired, the more niches it could occupy and the more individuals it could support. The more individuals it could support, the more habits it could acquire. The more habits it acquired, the more niches it could create.

It is a common trick to forecast the future on the assumption of no technological change, and find it dire. This is not wrong. The future would indeed be dire if invention and discovery ceased.

‘Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered.’ By far the most dangerous, and indeed unsustainable thing the human race could do to itself would be to turn off the innovation tap. Not inventing, and not adopting new ideas, can itself be both dangerous and immoral.

Futurology always ends up telling you more about your own time than about the future. H.G. Wells made the future look like Edwardian England with machines; Aldous Huxley made it feel like 1920s New Mexico on drugs; George Orwell made it sound like 1940s Russia with television. Even Arthur C. Clarke and Isaac Asimov, more visionary than most, were steeped in the transport-obsessed 1950s rather than the communication-obsessed 2000s.

catallaxy–Hayek’s word for spontaneous order created by exchange and specialisation.

Intelligence will become more and more collective; innovation and order will become more and more bottom-up; work will become more and more specialised, leisure more and more diversified.

The bottom-up world is to be the great theme of this century.

‘The online masses have an incredible willingness to share’ says Kevin Kelly. Instead of money, ‘peer producers who create the stuff gain credit, status, reputation, enjoyment, satisfaction and experience’. People are willing to share their photographs on Flickr, their thoughts on Twitter, their friends on Facebook, their knowledge on Wikipedia, their software patches on Linux, their donations on GlobalGiving, their community news on Craigslist, their pedigrees on Ancestry.com, their genomes on 23andMe, even their medical records on PatientsLikeMe.

It happened in the past. Empires bought stability at the price of creating a parasitic court; monotheistic religions bought social cohesion at the price of a parasitic priestly class; nationalism bought power at the expense of a parasitic military; socialism bought equality at the price of a parasitic bureaucracy; capitalism bought efficiency at the price of parasitic financiers. The online world will attract parasites too: from regulators and cyber-criminals to hackers and plagiarists. Some of them may temporarily throttle their generous hosts.

So long as human exchange and specialisation are allowed to thrive somewhere, then culture evolves whether leaders help it or hinder it, and the result is that prosperity spreads, technology progresses, poverty declines, disease retreats, fecundity falls, happiness increases, violence atrophies, freedom grows, knowledge flourishes, the environment improves and wilderness expands.

History repeats itself as a spiral not a circle, Wilder implied, with an ever-growing capacity for both good and bad, played out through unchanging individual character. So the human race will continue to expand and enrich its culture, despite setbacks and despite individual people having much the same evolved, unchanging nature. The twenty-first century will be a magnificent time to be alive. Dare to be an optimist.