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In the humanitarian mission of global prosperity, many begin by asking, “What causes poverty?” They reason that, if they can divine the cause of poverty, they may be able to devise a cure. They treat poverty as if it were a disease, waiting only for medical intervention. When they approach the challenge of poverty in this manner, however, they have already failed because they began with the wrong question, which will invariably lead to the wrong answer. Poverty is not a disease; poverty is the default state in which our species has spent most of its existence. We should not be so naive as to inquire why some are impoverished, but rather, we should ask why some are not. The answer, of course, lies with energy capture and knowledge, which the “social supercomputer” used to lift billions out of material poverty. It did this via two pathways: income inflation and cost compression.
Superabundance
We’ve primarily discussed Malthusianism in the context of food production. Still, the core idea—that growth would inevitably exhaust finite resources—is broadly interpreted, widely accepted, yet profoundly erroneous. There is a long history of well-educated thinkers prophesying resource depletion, all arriving at the same inevitable conclusion: to save ourselves, we must “degrow.” As we have seen, however, Malthusians fail to appreciate the power of knowledge. With knowledge, humans have overcome every material constraint they have encountered thus far. Recall the 20th-century biologist Paul Ehrlich, who famously proclaimed that humanity would face mass famine by the 1980s. His thinking was, and remains, common among biologists who view humans as just another mammal subject to the laws of nature. In biology, it is understood that an environment has a maximum “carrying capacity” for a species; once the population exceeds that capacity, it will inevitably fall back to maintain the proper ecological balance.
Ehrlich's fears, however, were broader than empty stomachs; he also forecast dire shortages of essential commodities as demand stripped the Earth bare. Economists, on the other hand, were much less concerned. They understood that if and when a commodity becomes scarce, pricing signals would drive the “social supercomputer” to resolve those shortages before they become acute. Humans are obviously mammals, but our ability to transmit and accumulate knowledge sets us apart from the rest of the animal kingdom. The only “carrying capacity” for humans, perhaps, is the total computational power available to the social supercomputer itself; the rate at which we can collectively solve problems.
In the ultimate wager between professions, business professor Julian Simon made a bet with Ehrlich in 1980. They both agreed on the premise that the market price of a resource indicates its relative scarcity. If Ehrlich was correct that resources were being depleted by human development, the market price should rapidly climb as the supply dwindles. Simon challenged Ehrlich to choose any commodities he liked. If the inflation-adjusted prices rose in the wager period, indicating rising scarcity, Ehlrich could claim victory. Ehrlich chose chromium, copper, nickel, tungsten, and tin. Yet, when the wager drew to a close in 1990, the price of all five key commodities had fallen in inflation-adjusted prices. Paradoxically, they had grown more abundant; Ehrlich was wrong.
It turns out, the wager may have even understated the growing abundance of these commodities. Normally, we measure price trends by tracking nominal prices over time. This is not a good way to measure or track material abundance because prices, expressed in units of a currency, only tell part of the story. Instead,
and look to an alternate measure of abundance: “time cost” or “time price.” Instead of subjective currency units, they measure prices using the universal constant of time, the number of labor hours someone must work to purchase a unit of a commodity. For a population, they use the median income, as outliers can skew the average. Time cost better captures abundance trends because innovation reveals itself in both higher incomes and lower prices.Time Cost = Dollar Cost/Income
When we measure material wealth using time prices, we find that we are all becoming very wealthy indeed. By 2021, for example, the time prices of wheat, corn, and rice, staples that account for most of the calories humans consume, had collapsed since 1960, dropping 78 percent in the United States, 81 percent in India, and 96 percent in China. Between 1980 and 2020, the time cost of 50 key commodities, including food, energy, metals, and minerals, collapsed by over 75 percent, even as the population ballooned. This aligns with our computational understanding of growth, which suggests that abundance increased because of, not despite, population growth. More people mean more nodes on the “social supercomputer,” accelerating the accumulation of knowledge, enabling us to use atoms more efficiently, and to discover new supplies. In fact, during this period, a one percent growth in population resulted in a four percent increase in personal resource abundance of key commodities. In a book of the same name, Pooley and Tupy term this phenomenon “Superabundance.” As Allison Ryan writes at HumanProgress.org:
Every additional human being born on our planet appears to make resources proportionally more plentiful for the rest of us.
Superabundance isn’t limited to commodities; it is also happening to the manufactured goods we buy. In the US, the time price of refrigerators, for example, has collapsed by 92 percent since 1956. This means that the median American worker in 2022 could purchase 13 refrigerators for the same hours worked in 1956. In the same period, the time price of air conditioning units fell 97 percent; the median American could buy 36 AC units for the price of one in the 1950s. Perhaps no physical good today, however, is more abundant than the TV, where time prices have collapsed 99 percent since the year 2000. Remember, however, time prices still do not fully do progress justice; not only are these products more affordable, they are better. New refrigerators and AC units are more energy efficient, while TVs are larger, produce more vivid colors, and have higher resolution.
Superabundant Knowledge
Even knowledge itself has become superabundant. The printed book offers an information-dense means of transmitting highly granular knowledge from one person to many. Until innovation in printing technology, however, books were an extreme luxury reserved for the elite. Every book had to be copied by hand, each letter of every word painstakingly penned by a scribe. A single book of typical length took 135 days of human labor to create, making them prohibitively expensive. If we asked the median wage American blue-collar worker in 2020 to copy a manuscript like this, the average book would cost about $35,000.
Movable type technology, where printing panels were replaced with movable and reusable individual letters/characters, was first invented in China around 1000 A.D. The technology arrived in Europe centuries later, when Johannes Gutenberg, a German political exile living in France, began experimenting with printing around 1440. He returned to Germany several years later, and by 1450, the Gutenberg Press was on the market. The printing press dramatically lowered the cost of reproducing books, and by extension, the cost of storing and transmitting knowledge. In the 100 years after the arrival of the Gutenberg press in Europe, the price of books fell an average of 2.4 percent per year. As prices fell, books were increasingly printed in local vernaculars instead of Latin, increasing their accessibility to laypeople and raising the utility of literacy for the common man. It bestowed upon him an advantage over his ancestors whereby he could acquire knowledge directly from experts, bypassing the costly trial and error of those who came before him.
The price of the printed book continued its gradual decline throughout the Industrial Revolution; then the floor fell out from underneath it. With the Information Technology revolution after 1960, we developed digital media, like PDFs, ebooks, and the internet. In this new digital realm, the marginal cost of the production and distribution of knowledge has approached zero. This has made books and other forms of knowledge more abundant than ever before, if intangible. Today, armed with only a smartphone or a nearby library, everyone has access to billions of dollars of knowledge, a luxury that our ancestors could scarcely have imagined.
Let There Be Light
Perhaps nothing is more abundant, however, than light. Just a few generations ago, a candle at one’s bedside was a mark of luxury; today, we don’t give it a second thought. William Nordhaus tracked the progress of lighting technology from prehistory to modernity, from the open fire to the lightbulb. This history tells a dual story: one of dramatically improving efficiency and another of collapsing costs. The social supercomputer learned to light the darkness, producing more photons using less and less energy over time. The vast leaps in efficiency, in fact, are so dramatic that they cannot properly be represented on a chart.
Humans created our first simple animal-fat-burning stone “lamps” 40,000 years ago. They produced just 0.015 lumens per watt (a measure of light per unit of energy). Even so, they were roughly 7x more efficient at producing light than an open fire (0.00235 lumens per watt). By the First Industrial Revolution, candles and oil lamps had reached about 0.10 lumens per watt, or roughly 7x the efficiency of those early stone lamps. The Industrial Revolution gave us the incandescent lightbulb, which was ~37x more efficient, producing 3.7 lumens per watt. By the end of the 20th century, the efficiency of the incandescent lightbulb had quadrupled to 14.2 lumens per watt. Today, with LED lighting, a product of the Information Technology revolution, we’ve gone even further, achieving 100 lumens per watt by 2020, another 7x improvement.
Even more dramatic, however, is the collapse in the “time price” of light. The chart below tracks the median labor hours required to purchase 1,000 lumen-hours of light. Our prehistoric ancestors, with their crude stone lamps, needed to work about 50 hours to buy 1,000 lumen-hours. By 1800, due to rising incomes and the ~7x efficiency improvement of candles, the labor required to buy the same 1,000 lumen-hours was cut by almost 90%, to 5.4 hours. During the Industrial Revolution after 1750, incomes rose faster, while lighting efficiency advancements accelerated. By 1900, 1000 lumen-hours could be purchased with about 13 minutes of labor, and by 2000, just a fraction of a second of labor. Today, with the 7x improvement of LED lighting, the time cost of 1000 lumen-hours is hardly worth measuring at all.
Abundance For All
Now, we return to the mission of global prosperity and the challenge of poverty. It is here that many focus their attention on wealth inequality, contrasting the net worth of billionaires with everyone else. They reason that if only we expropriated the surplus wealth from the former and diverted it to the latter, everyone could enjoy a good life. But when we understand that material abundance, what we call wealth, is more than just a bank account or dollars earned, our perspective changes. It is correct that, on paper, the wealthy have a larger share of the economic pie than they did in the past, but the pie itself has grown larger; the “slices” owned by the middle class and the poor are also larger.
Yet, cost compression tells us that what really matters is not the number of dollars you have or earn, but what you can do with them. Here, economic growth becomes the great equalizer. In Enlightenment Now, author Steven Pinker writes that when we define poverty by what we can do with dollars, rather than the raw dollars earned, the poverty rate in America plunged 90 percent from 1960 to 2018, to a mere 3 percent of the population. The reason is that a dollar today, even when adjusted for inflation, buys a much greater quality of life compared to a dollar 60 years ago. Even the poorest live like kings compared to the wealthy of generations past. Progress may widen inequality when expressed in dollars, but it appears to narrow inequality in everything that matters. You may not have as much money as Jeff Bezos, but the phone in his pocket, the clothes on his back, and the TV he watches aren’t much different from yours.
Many will remain unconvinced by the arguments above, genuinely concerned that inequality creates inherent unfairness in the economic system that must be addressed through taxation. I agree in one sense. To the extent that wealth is “unearned” or achieved through “rent-seeking,” in economic parlance, inequality is a problem. Much of this comes from privately-captured land and mineral resources, which are not the fruits of human physical or intellectual labor. We will discuss how to address this challenge later on with policy suggestions that target extractive rent-seeking, but the economic engine, the productive forces that produce wealth, best remain untouched. The history of progress is clear: the quickest path to greater abundance and less poverty is to accelerate global energy capture and knowledge accumulation. This means getting out of our own way, and if we do, a world of unimaginable abundance awaits.
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Prosperity’s Pivot (Coming Soon)
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We’re all billionaires now. Nice.
A good article. Thanks.
I maintain that Malthus and Erlich were right but the timescales were too short. Most of our material resources are suffering from declining yields, requiring larger amounts of energy to capture and refine them. Then we come to the carbon pulse idea where we may be near the end of very cheap energy. Unless we can catapult ourselves off world to satisfy our need for rising resources we may find ourselves bereft of enough energy to find increasingly diluted resources using increasingly diluted energy sources.
There may be something I’m missing but we rely not only the social supercomputer but incredibly cheap concentrated energy. Oil may be infinite (abiotic theory) but so far the indicators are otherwise.