The Evolution of Everything: How New Ideas Emerge

by Matt Ridley

Robert Solow in the 1950s was able to tease out just how much it was contributing by counting the contribution of capital and labour, and deducing that the rest (87.5 per cent) of the change in living standards must be due to technological change. It is technological change that is the chief source of increasing returns: of the fact that economic growth for the world as a whole shows no sign of reaching a plateau. Little wonder, then, that Deirdre McCloskey describes the system that produced the great enrichment of the past two centuries as ‘innovationism’ rather than ‘capitalism’. The new and crucial ingredient was not the availability of capital, but the advent of market-tested, consumer-driven innovation. She locates the cause of the Industrial Revolution in the decentralisation of the production and testing of new ideas: ordinary people were able to contribute to and to choose the products and services they preferred, which drove continuous innovation. For the Industrial Revolution to happen, trial and error had to become respectable. As she put it in a lecture in India in 2014, the enrichment of the poor has resulted not from charity, planning, protection, regulation or trade unions, all of which merely redistribute money, but from innovation caused by markets,