Fifty Things that Made the Modern Economy

by Tim Harford

The stick would be split in half, down its length from one end to the other. The debtor would retain half, called the ‘foil’. The creditor would retain the other half, called the ‘stock’ – even today, British bankers use the word ‘stocks’ to refer to debts of the British government. Because willow has a natural and distinctive grain, the two halves would match only each other.

On Monday 4 May 1970, the Irish Independent, Ireland’s leading newspaper, published a matter-of-fact notice with a straightforward title: CLOSURE OF BANKS. Every major bank in Ireland was closed and would remain closed until further notice. The banks were in dispute with their own employees, the employees had voted to strike, and it seemed likely that the whole business would drag on for weeks or even months. You might think that such news – in what was one of the world’s more advanced economies – would inspire utter panic, but the Irish remained calm. They’d been expecting trouble, so they had been stockpiling reserves of cash, but what kept the Irish economy going was something else. The Irish wrote each other cheques. Now, at first sight this makes no sense. Cheques are paper-based instructions to transfer money from one bank account to another. But if both banks are closed, then the instruction to transfer money can’t be carried out.

in. In the 1950s, British soldiers stationed in Hong Kong would pay their bills with cheques on accounts back in England. The local merchants would circulate the cheques, vouching for them with their own signatures, without any great hurry to cash them in. In effect, the Hong Kong cheques – like the Irish cheques, and like the tally sticks – had become a form of private money.

The tallest building in the world, the Burj Khalifa in Dubai, has more than 300,000 square metres of floor space; the brilliantly engineered Sears Tower in Chicago has more than 400,000. Imagine such skyscrapers sliced into fifty or sixty low-rise chunks, then surrounding each chunk with a car park and connecting all the car parks together with roads, and you’d have an office park the size of a small town. The

When the highest reaches of a six-or seven-storey building were at the end of an arduous climb, they used to be the servants’ quarters, the attic for mad aunts, or the garret for struggling artists. After the invention of the elevator, the attic became the loft apartment. The garret became the penthouse.

Without the air conditioner, modern glass skyscrapers would be uninhabitable; without either steel or reinforced concrete, they would be unbuildable; and without the elevator, they would be inaccessible.

We’re pleased if we have to wait only a couple of minutes for a bus or a train, but grumble if we have to wait twenty seconds for an elevator.

There is so little sense of place, that without signs and LED displays, we wouldn’t have a clue which floor we were emerging into.

all. It's one of the most environmentally friendly technologies and it is on display in buildings all around us. It’s a green mode of transport that moves billions of people every year – and yet is so overlooked

bullas of Mesopotamia are the very first archaeological evidence that written contracts existed.

The debate Snowden started rumbles on. If we can’t restrict encryption only to the good guys, what powers should the state have to snoop – and with what safeguards?

Accountancy is a powerful financial technology – but it does not protect us from outright fraud, and it may well lure us into complacency.

The legal body created that New Year’s Eve was charged with handling all of England’s shipping trade east of the Cape of Good Hope. Its shareholders were 218 merchants.

Enter a young professor of accountancy by the name of James McKinsey. McKinsey’s breakthrough was a book published in 1922, with the not-entirely-thrilling title Budgetary Control.

Bower was a particular man. He insisted that the men who worked for him wore a dark suit, a starched white shirt, and, until the 1960s, a hat. McKinsey & Co, he said, was not a business but a ‘practice’; it didn’t take on jobs, it took on ‘engagements’; it was not a company, it was a ‘firm’. Eventually it simply became known as ‘The Firm’. Duff McDonald wrote a history of The Firm, arguing that its advocacy of scientific approaches to management transformed the business world.

Part of the explanation is surprising: government regulators cleared a niche for them. The Glass-Steagall Act of 1933 was a far-reaching piece of American financial legislation. Among many provisions, Glass-Steagall made it compulsory for investment banks to commission independent financial research into the deals they were brokering; fearing conflicts of interest, Glass-Steagall forbade law firms, accountancy firms and the banks themselves from conducting this work. In effect, the Glass-Steagall Act made it a legal requirement for banks to hire management consultants. For a follow-up, in 1956 the Justice Department banned the emerging computer giant IBM from providing advice about how to install or use computers: another business opportunity for the management consultants.

American literature and American innovation were in their infancy. The US economy was in full-blown copying mode: they wanted the cheapest possible access to the best ideas that Europe could offer. American newspapers filled their pages with brazen copying – alongside their attacks on the interfering Mr Dickens.

China didn’t have a system of copyright at all until 1991.

argue that what truly unleashed steam-powered industry was the expiry of the patent, in 1800, as rival inventors revealed the ideas they had been sitting on for years.

He was absolutely right: off the back of pirated copies of his work, Charles Dickens made a fortune as a public speaker, many millions of dollars in today’s terms.

Once it was because a moth had flown into the machine, which gave us the modern term ‘debugging’. More likely, the bug was metaphorical – a switch flipped wrongly,

Hopper’s compiler evolved into one of the first programming languages, COBOL; more fundamentally, it paved the way for the now-familiar distinction between hardware and software.

Grace Hopper realised made sense: freeing up programmer brainpower to think about concepts and algorithms, not switches and wires.

Every single one of these twelve vital technologies was supported in significant ways by governments – often the American government.

Back in the year 2000, seven years before the first iPhone, the US Defense Advanced Research Projects Agency, DARPA, commissioned the Stanford Research Institute to develop a kind of proto-Siri, a virtual office assistant that might help military personnel to do their jobs. Twenty universities were brought into the project, furiously working on all the different technologies necessary to make a voice-activated virtual assistant a reality.

Diesel engines can use a heavier fuel than petrol engines – specifically, a heavier fuel that’s become known as ‘diesel’.

How different might the world look today, if the most valuable land during the last hundred years wasn’t where you could drill for oil, but where you could cultivate peanuts?

In fact, there’s no such thing as ‘the correct time’. Like the value of money, it’s a convention that derives its usefulness from the widespread acceptance of others. But there is such a thing as accurate timekeeping. That dates from 1656, and a Dutchman named Christiaan Huygens.

but it’s still enough to misidentify your position by a couple of metres – a fuzziness amplified by interference as signals pass through the Earth’s ionosphere. That’s why self-driving cars need sensors as well as GPS: on the highway, a couple of metres is the difference between lane discipline and a head-on collision.

what economists call technological substitution: when we seem to have reached some basic physical limit, then find a workaround.

When the sun isn’t shining and the wind isn’t blowing, you need coal or gas or nuclear to keep the lights on – and once you’ve built those plants, why not run them all the time?

water uphill when you have energy to spare, and then – when you need more – letting it flow back down through a hydropower plant.

The Bakelite Corporation didn’t hold back in its advertising blurb: humans, it said, had transcended the old taxonomy of animal, mineral and vegetable; now we had a ‘fourth kingdom, whose boundaries are unlimited’.

One estimate is that by 2050, all the plastic in the sea will weigh more than all the fish. (It’s not clear how confident we can be of this claim, since nobody has managed to weigh either quantity.)

Vehicles made with plastic parts are lighter, and so use less fuel. Plastic packaging keeps food fresh for longer, and so reduces waste. If bottles weren’t made of plastic, they’d be made of glass; which would you rather gets dropped in your children’s playground?

Here was a simple, cheap synthetic product that was tough enough to replace ceramic tableware or metal letter openers, yet beautiful enough to be used as jewellery, and could even replace precious ivory. It was a miracle material, even though – like all plastics today – we now take it for granted.

If you had been at the great fair of Lyon in 1555, you could have seen the answer. Lyon’s fair was the greatest market for international trade in all Europe and dated back to Roman times.

International banks are locked together in a web of mutual obligations that defies understanding or control.

That business model is known as two-part pricing. It’s also known as the ‘razor and blades’ model, because that’s where it first drew attention – sucker people in with an attractively priced razor, then repeatedly fleece them

Consider the PlayStation 4. Every time Sony sells one, it loses money: the retail price is less than it costs to manufacture and distribute. But that’s okay, because Sony coins it in whenever a PlayStation 4 owner buys a game. Or how about Nespresso? Nestlé makes its money not from the machine, but the coffee pods.

One solution is legal: patent-protect your blades. But patents don’t last forever. Patents on coffee pods have started expiring, so brands like Nespresso now face competitors selling cheap, compatible alternatives. Some are looking for another kind of solution: technological. Just as other people’s games don’t work on the PlayStation,

But the two-part pricing model pioneered by Gillette is highly inefficient, and economists have puzzled over why consumers stand for it. The most plausible explanation is that they get confused by the two-part pricing. Either they don’t realise they’ll be exploited later, or they do realise but find it hard to pick the best deal out of a confusing menu of options.

Tax avoidance is legal. It’s the stuff of double Irish, Dutch sandwiches. The laws apply to everyone: smaller businesses and even ordinary individuals could set up border-hopping legal structures, too. They just don’t earn enough to justify the accountants’ fees.

The euphemism for a tax haven these days, of course, is ‘offshore’ – and Switzerland doesn’t even have a coastline.

One widely reported example may be apocryphal, but it illustrates the logical extreme of these practices: a company in Trinidad apparently sold ball-point pens to a sister company for 8500 dollars apiece. The result: more profit booked in low-tax Trinidad; less in higher-tax regimes elsewhere.

for tiny, palm-fringed islands it can even make sense to set taxes at 0 per cent, as the local economy will be boosted by the resulting boom in law and accounting.

In Roman times, lead pipes carried water; the Latin for lead, plumbum, gave us the word plumber.

Reyes wondered: children’s brains are especially susceptible to chronic lead poisoning. Is it possible that kids who didn’t breathe leaded petrol fumes grew up to commit less violent crime?

One recent review estimated that drug-resistant bugs could kill ten million people a year by 2050 – more than currently die from cancer.

And recent studies suggest that when animals are kept in better conditions, routine low doses of antibiotics have very little impact on their growth.