Fifty Inventions That Shaped the Modern Economy

by Tim Harford

In 1719, a French biologist, René-Antoine Ferchault de Réaumur, wrote a scientific paper pointing out that wasps could make paper nests by chewing up wood, so why couldn’t humans?

Perhaps habits are finally changing: In 2013, the world hit peak paper.

When Bogle launched the First Index Investment Trust in August 1976, it flopped.

Forty years after Bogle launched his index fund, fully 40 percent of U.S. stock market funds are passive trackers rather than active stock-pickers.

Cumming’s solution was simplicity itself: bend the pipe. Water settles in the dip, stopping smells from coming up; flushing the toilet replenishes the water. While we’ve moved on alphabetically from the S-bend to the U-bend, flushing toilets still deploy the same insight: Cumming’s invention was almost unimprovable.

giving the English language one of its enduring euphemisms for emptying one’s bladder: “to spend a penny.”

According to the World Health Organization, the proportion of the world’s people who have access to what’s called “improved sanitation” has increased from around a quarter in 1980 to around two-thirds today. That’s a big step forward.5 Still, 2.5 billion people remain without improved sanitation, and improved sanitation itself is a low bar: the definition is that it “hygienically separates human excreta from human contact,” but it doesn’t necessarily treat the sewage itself. Fewer than half the world’s people have access to sanitation systems that do that.

The challenge is that public sanitation isn’t something the market necessarily provides. Toilets cost money, but defecating in the street is free. If I install a toilet, I bear all the costs, while the benefits of the cleaner street are felt by everyone. In economic parlance, that’s what is known as a positive externality—and goods that have positive externalities tend to be bought at a slower pace than society, as a whole, would prefer.

London’s lawmakers likewise procrastinated—but when they finally acted, they didn’t hang around. It took just eighteen days to rush through the necessary legislation for Bazalgette’s plans.

So what explains this remarkable alacrity? A quirk of geography: London’s parliament is located next to the River Thames. Officials tried to shield lawmakers from the Great Stink, soaking the building’s curtains in chloride of lime in a bid to mask the stench. But it was no use; try as they might, the politicians couldn’t ignore it.

the world consumes absolutely vast quantities of concrete: five tons per person, per year. As a result the cement industry emits as much greenhouse gas as aviation.

But the concrete Pantheon? One of the reasons it has survived for so long is because the solid concrete structure is absolutely useless for any other purpose. Bricks can be reused; concrete can’t.

That’s the fundamental contradiction of concrete: incredibly flexible while you’re making something, utterly inflexible once it’s made.

Reinforced concrete is much stronger and more practical than the unreinforced stuff. It can span larger gaps, allowing concrete to soar in the form of bridges and skyscrapers. But here’s the problem: if cheaply made, it will rot from the inside as water gradually seeps in through tiny cracks in the concrete and rusts the steel. This process is currently destroying infrastructure across the United States;* in twenty or thirty years’ time, China will be next. China poured more concrete in the three years after 2008 than the United States poured during the entire twentieth century, and nobody thinks all of that concrete is made to exacting standards.

Then, in 1687, a coffeehouse opened on Tower Street, near the London docks.

The proprietor saw that his customers were as thirsty for information to fuel their bets and gossip as they were for coffee, and so he began to assemble a network of informants and a newsletter full of information about foreign ports, tides, and the comings and goings of ships. His name was Edward Lloyd. His newsletter became known as Lloyd’s List. Lloyd’s coffeehouse hosted ship auctions, and gatherings of sea captains who would share stories. And if someone wished to insure a ship, that could be done, too: a contract would be drawn up, and the insurer would sign his name underneath—hence the term “underwriter.”

The evidence is growing that insurance doesn’t just provide peace of mind, but is a vital element of a healthy economy.

Today, the biggest insurance market of all blurs the line between insuring and gambling: the market in financial derivatives. Derivatives are financial contracts that let two parties bet on something else—perhaps exchange rate fluctuations, or whether a debt will be repaid or not. They can be a form of insurance. An exporter hedges against a rise in the exchange rate; a wheat-farming company covers itself by betting that the price of wheat will fall.

That suggests that if we want to encourage more good ideas, we can concentrate minds by offering prizes for problem solving. Remember how the Longitude Prize inspired Harrison to create his remarkable clocks? There’s recently been fresh interest in this idea: for example, the DARPA Grand Challenge, which began in 2004, helped kick-start progress in self-driving cars; on the 300th anniversary of the original Longitude Prize, the UK’s innovation foundation Nesta launched a new Longitude Prize for progress in testing microbial resistance to antibiotics; and perhaps the biggest initiative is the pneumococcal Advanced Market Commitment, which has rewarded the development of vaccines with a $1.5 billion pot, supplied by five donor governments and the Gates Foundation.

Things improved a little as the eighteenth and nineteenth centuries unfolded. Candles were made of spermaceti—the milk-hued oily gloop harvested from dead sperm whales.

The labor that had once produced the equivalent of fifty-four minutes of quality light now produced fifty-two years. And modern LED lights continue to get cheaper and cheaper. 6

No wonder that the lightbulb is still the visual cliché for “new idea”—literally, the icon for invention. Yet even iconic status underrates it. Nordhaus’s research suggests that however much we venerate it, perhaps we do not venerate it enough. The price of light alone tells that story: it has fallen by a factor of 500,000, far faster than official statistics suggest, and so fast that our intuition cannot really grasp the miracle of it all.

*The American Society of Civil Engineers noted in its “2017 Infrastructure Report Card” that “56,007—9.1 [percent]—of the nation’s bridges were structurally deficient in 2016,” and that an estimated $123 billion was needed for bridge repair (www.infrastructurereportcard.org).