Fifty Inventions That Shaped the Modern Economy

by Tim Harford

But the more ordinary people are able to produce, the more powerful people can confiscate. Agricultural abundance creates rulers and ruled, masters and servants, and inequality of wealth unheard of in hunter-gatherer societies.

it seems to have enabled the rise of misogyny and tyranny. Archaeological evidence also suggests that the early farmers had far worse health than their immediate hunter-gatherer forebears.

With their diets of rice and grain, our ancestors were starved of vitamins, iron, and protein.

As societies switched from foraging to agriculture ten thousand years ago, the average height for both men and women shrank by about six inches, and there’s ample evidence of parasites, disease, and childhood malnutrition. Jared Diamond, author of Guns, Germs, and Steel, called the ad...

What’s the connection between Elton John and the promise of the paperless office? Which American discovery was banned in Japan for four decades, and how did that damage the careers of Japanese women? Why did police officers believe that they might have to execute a London murderer twice in 1803—and what does that have to do with portable electronics? How did a monetary innovation destroy the Houses of Parliament? Which product was launched in 1976 and flopped immediately, yet was lauded by the Nobel laureate economist Paul Samuelson alongside wine, the alphabet, and the wheel? What does Federal Reserve chair Janet Yellen have in common with the great Mongolian-Chinese emperor Kublai Khan?

The Luddites weren’t worried about being replaced by machines; they were worried about being replaced by the cheaper, less skilled workers whom the machines would empower.3 So whenever a new technology emerges, we should ask: Who will win and who will lose out as a result? The answers are often surprising, as we’re about to see.

Thomas Edison’s phonograph led the way toward a winner-take-all dynamic in the performing industry. The very best performers went from earning like Mrs. Billington to earning like Elton John. Meanwhile, the only-slightly-less-good went from making a comfortable living to struggling to pay their bills. Small gaps in quality became vast gaps in money, because nobody was interested in paying for a copy of the second-best when you could have a copy of the best.

But while modern minds naturally think of the telephone as transformative, barbed wire wreaked huge changes on the American West, and much more quickly.

arable

The English seventeenth-century philosopher John Locke—a great influence on the Founding Fathers of the United States—puzzled over the problem of how anybody might legally come to own land. Once upon a time, nobody owned anything; land was a gift of nature or of God. But Locke’s world was full of privately owned land, whether the owner was the King himself or a simple yeoman. How had nature’s bounty become privately owned? Was that inevitably the result of a guy with a bunch of goons grabbing whatever he could? If so, all civilization was built on violent theft. That wasn’t a welcome conclusion to Locke—or to his wealthy patrons.

modern economies are built on private property—on the legal fact that most things have an owner, usually a person or a corporation. Modern economies are also built on the idea that private property is a good thing, because private property gives people an incentive to invest and improve in what they own—whether that’s a patch of land in the American Midwest, or an apartment in Kolkata, India, or even a piece of intellectual property such as the rights to Mickey Mouse.

There are time savings. Studies suggest that googling is about three times as quick as finding information in a library, and that’s before you count the time spent traveling to the library. Likewise, finding a business online is about three times faster than using a traditional, printed directory such as the Yellow Pages. McKinsey put the productivity gains into the hundreds of billions.

capricious,

While wealthy countries today secure their borders to keep unskilled workers out, municipal authorities in the eighteenth century had used them to stop their skilled workers from leaving.4

France’s Emperor Napoleon III shared Gadsby’s admiration for the more relaxed British approach: he described passports as “an oppressive invention . . . an embarrassment and an obstacle to the peaceable citizen.” He abolished French passports in 1860.5 France was not alone. More and more countries either formally abandoned passport requirements or stopped bothering to enforce them, at least in peacetime.6 You could visit 1890s America without a passport, though it helped if you were white.7 In some South American countries, passport-free travel was a constitutional right.8 In China and Japan, foreigners needed passports only to venture inland.9

In most facets of life we want our governments and our societies to help overcome such accidents. Many countries take pride in banning employers from discriminating among workers on the basis of characteristics we can’t change: whether we’re male or female, young or old, gay or straight, black or white. But when it comes to your citizenship, that’s an accident of birth that we expect governments to preserve, not erase. Yet the passport is a tool designed to ensure that a certain kind of discrimination takes place: discrimination on the grounds of nationality.

The idea that technology can destroy or degrade some jobs isn’t new—that’s why the Luddites smashed machine looms two hundred years ago. But as we’ve seen, “Luddite” has become a term of mockery because technology has always, eventually, created new jobs to replace the ones it destroyed. Those new jobs have tended to be better jobs—at least on average. But they haven’t always been better, either for the workers or for society as a whole. An example: one dubious benefit of cash machines is that they freed up bank tellers to cross-sell dodgy financial products. What happens this time remains debatable; it’s at least conceivable that some of the jobs humans will be left doing will actually be worse. That’s because technology seems to be making more progress at thinking than doing: robots’ brains are improving faster than their bodies. Martin Ford, the author of Rise of the Robots, points out that robots can land airplanes and trade shares on Wall Street, but they still can’t clean toilets.18 So perhaps, for a glimpse of the future, we should look not to Rosie the Robot but to another device now being used in warehouses—the Jennifer unit. It’s a headset that tells human workers what to do, down to the smallest detail; if you have to pick nineteen identical items from a shelf, it will tell you to pick five, then five, then five, then four . . . which leads to fewer errors than if you were told “Pick nineteen.”19 If robots beat humans at thinking, but humans beat robots at picki...

Historians will tell you that it wasn’t Frances Perkins who invented the welfare state. It was Otto von Bismarck, chancellor of the German Empire, half a century earlier.

Otto von Bismarck was no social reformer in the Frances Perkins mold. His motives were defensive. He feared that the public would turn to the revolutionary ideas of Karl Marx and Friedrich Engels unless the German government intervened.

quiescent.

The populist Louisiana governor Huey Long complained that Frances Perkins hadn’t gone far enough in her reforms; he prepared to run for president in 1936 on the slogan “Share Our Wealth” and a promise to confiscate fortunes from the rich. He was shot dead in 1935, so that policy was never tested. At the beginning of the twenty-first century, such political tumult felt very distant. But now raw populist politics is back in many parts of the Western world.

But the real revolution would come when unmarried women could use oral contraceptives. That took time. In the United States, by around 1970, ten years after the pill had been approved, state after state was making it easier for young unmarried women to get the pill, most obviously by lowering the legal age at which they could access the product. Universities began to open family-planning centers, and their female students began to use them. By the mid-1970s, the pill was overwhelmingly the most popular form of contraception for eighteen- and nineteen-year-old women in the United States.

Of course, many other parts of life were changing for American women in the 1970s. There was the legalization of abortion, laws against sex discrimination, and the social movement of feminism.

when Goldin and Katz tracked the availability of the pill to young women, state by state, they showed that as each state opened access to the technology, the enrollment rate in professional courses soared—and so did women’s wages.4

Amalia Miller used a variety of clever statistical methods to demonstrate that if a woman in her twenties was able to delay motherhood by one year, her lifetime earnings would rise by 10 percent: that was some measure of the vast advantage to a woman of completing her studies and securing her career before having children.

In Japan, one of the world’s most technologically advanced societies, the pill wasn’t approved for use until 1999. Japanese women had to wait thirty-nine years longer than American women for the same contraceptive. In contrast, when the erection-boosting drug Viagra was approved in the United States, Japan was just a few months behind.

Henry Ford is widely supposed to have quipped that people could buy a Model T in “any color they like, as long as it’s black.”

when the temperature exceeds the low seventies, students start to score lower on math tests.

air-conditioning makes us more productive: according to one early study, air-conditioned offices enabled U.S. government typists to do 24 percent more work.

Statistics back this up. In the early 1960s, world merchandise trade was less than 20 percent of world GDP. Now, it’s about 50 percent.

This was far more dangerous work than manufacturing or even construction. In a large port, someone would be killed every few weeks. In 1950, New York averaged half a dozen serious incidents every day—and New York’s port was one of the safer ones.

Researchers studying the Warrior’s trip to Bremerhaven concluded that the ship had taken ten days to load and unload, as much time as it had for the vessel to cross the Atlantic Ocean. In total, the cargo cost about $420 a ton to move, in today’s money. Given typical delays in sorting and distributing the cargo by land, the whole journey might take three months.

But McLean’s biographer Marc Levinson,

Book to read

rather than the $420 (in today’s money) that a customer would have paid to get the Warrior to ship a ton of goods across the Atlantic in 1954, you might now pay less than $50 a ton.

What matters instead is finding a location where the workforce, the regulations, the tax regime, and the going wage all help make production as efficient as possible. Workers in China enjoy new opportunities;

The Cold Chain

One study found it was eco-friendlier to grow tomatoes in Spain and transport them to Sweden than it was to grow them in Sweden.

Economic logic tells us that specialization and trade will increase the value of production in the world. It doesn’t guarantee that the value will be shared fairly.

A few weeks earlier, the Stanford researchers had received an unsettling letter from a shadowy agency of the United States government. If they publicly discussed their findings, the letter said, that would be deemed legally equivalent to exporting nuclear arms to a hostile foreign power.

The year was 1977. If the government agency had been successful in its attempts to silence academic cryptographers, it might have prevented the Internet as we know it.

The Stanford researchers were interested in whether encryption could be asymmetrical. Might there be a way to send an encrypted message to someone you’d never met before, someone you didn’t even know—and be confident that they, and only they, would be able to decode it? It sounds impossible, and before 1976 most experts would have said it was.3 Then came the publication of a breakthrough paper by Whitfield Diffie and Martin Hellman;

“auditors,” literally “those who hear.”

1494, he wrote the book.10 And what a book it was: Summa de arithmetica, geometria, proportioni et proportionalita was an enormous survey of everything that was known about mathematics—615 large and densely typeset pages. Amid this colossal textbook, Pacioli included twenty-seven pages that are regarded by many as the most influential work in the history of capitalism. It was the first description of double-entry bookkeeping to be set out clearly, in detail, and with plenty of examples.

Perhaps

Adam Smith. In The Wealth of Nations, in 1776, Smith dismissed the idea that professional managers would do a good job of looking after shareholders’ money: “It cannot well be expected that they should watch over it with the same anxious vigilance with which partners in a private copartnery frequently watch over their own.”

Milton Friedman argued that “the social responsibility of business is to maximize its profits.” If it’s legal, and it makes money, they should do it. And if people don’t like it, don’t blame the company—change the law.

In 1770, for instance, a famine in Bengal clobbered the company’s revenue. British legislators saved it from bankruptcy by exempting it from tariffs on tea exports to the American colonies. Which was, perhaps, shortsighted on their part: it eventually led to the Boston Tea Party, and the American Declaration of Independence.7 You could say the United States owes its existence to excessive corporate influence on politicians.

Few want a return to the command economies of Mao or Stalin, where hierarchies, not markets, decided what to produce. Yet hierarchies, not markets, are exactly how decisions are taken within companies.

Even The Economist worries that regulators are now too timid about exposing market-dominating companies to a blast of healthy competition.

Perhaps a young, sharp-suited graduate, earnestly gesturing to a bulleted PowerPoint presentation that reads something like “holistically envisioneer client-centric deliverables.” Okay, I got that from an online random buzzword generator.