Fifty Inventions That Shaped the Modern Economy

by Tim Harford

Trust is an essential component of markets—it’s so essential that we often don’t even notice it, as a fish doesn’t notice water. In developed economies, enablers of trust are everywhere: brands, money-back guarantees,

and of course repeat transactions with a seller who can be easily located. But

the new sharing economy lacks those enablers. Why should we get into a stranger’s car—or buy a stranger’s laser pointer? In 1997, eBay introduced a feature that helped s...

You use a ride-sharing service such as Uber—you rate the driver; the driver rates you. You stay in

Some regulations protect customers, too—for example, from discrimination. Hotels can’t legally

the more people use a platform, the more attractive it becomes. That’s why Uber and its rivals—Didi

It’s hard to remember just how bad search technology

was before Google. In

But as Page and Brin refined their algorithm, it soon became clear that they had stumbled on a new and vastly better way to search the Web.3 Put

It was 2001 when Google found its viability, and in retrospect it seems obvious: pay-per-click advertising.

That’s much more efficient than paying to advertise in a newspaper; even if its readership

There are time savings. Studies

finding a business online is about three times faster than using a traditional, printed directory such as the Yellow Pages. McKinsey put

price transparency—that’s

entrepreneurs can launch niche

products, more confident that they’ll find a market. This all sounds like excellent news for consumers and businesses. But there are problems. One problem is those advertisements. Typically they function as one might expect—if you google “craft beer,” then you’ll get advertisements for craft beer. But if you’ve lost your wallet or need to rebook a flight or need a locksmith, you’re a prime candidate for an AdWords scam. Fly-by-night companies will pay Google handsomely to appear next to certain kinds of searches; they’ll gladly take your money and provide little or no service in return. Some are outright fraudulent; others cleverly tiptoe up to the line without crossing it. Nor is it clear how hard Google is trying to stamp out these dubious tactics.8 Perhaps the bigger issue is that this seems to be Google’s responsibility alone, because the company dominates the search market. Google handles close to 90 percent of searches worldwide; many businesses rely on ranking high in its organic search results.9 And Google constantly tweaks the algorithm that decides them.

Google thinks you’re employing tactics it considers unacceptable, it downgrades your ranking in the search results. One blogger

Google may have an entrenched monopoly. The reason? Among the best ways to improve

anyone else. That suggests it may continue to shape our access to knowledge for generations to come.

For most of history, passports were neither so ubiquitous nor so routinely used. They were, essentially, a threat: a letter from a powerful person requesting anyone a traveler met to let the traveler pass unmolested—or

else.

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 As the nineteenth

You could visit 1890s America without a passport, though it helped if you were white.

the turn of the twentieth century,

only a handful of countries were still insisting on passports to enter or leave. It seemed

can seem like a natural fact of life that the name of the country on our passport determines where we can travel and work—legally,

Yet the passport is a tool designed to ensure that a certain kind of discrimination takes place: discrimination on the grounds of nationality.

practice, all migration creates winners and losers, but research indicates that there are many more winners—in the wealthiest countries, by one estimate, five in six of the existing population are made better off by the arrival of immigrants.17

The benefits—slightly cheaper fruit for everyone—are too widely spread and small to notice, while the costs—some Americans lose their jobs—produce vocal unhappiness. It should be possible

That suggests our world would now be much richer if passports had died out in the early twentieth century. There’s one simple reason they didn’t: World War I intervened. With security

governments around the world imposed strict new controls on movement—and they proved unwilling to relinquish their powers once peace returned. In 1920, the newly formed League of

2016, sales of industrial robots grew about 13 percent a year, which

algorithms have been taking over white-collar drudgery in areas such as bookkeeping and customer service. And more prestigious jobs are far from safe. IBM’s Watson, which hit the

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

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. But it was

ultimate responsibility for ensuring that people don’t starve on the street should lie not with family, or charity, or private insurers, but with government. This

Welfare states don’t make the pie bigger or smaller. But they do change the size of each individual’s slice.6 And that helps keep a lid on inequality.

There’s demographic change: people are living longer after retirement.

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.12

As we’ve seen, technological change has always created winners and losers, and the losers may turn to politics if they’re unhappy with how life is working out for them. In many industries,

The modern welfare state sits uneasily with large-scale international migration. People who instinctively feel that society should

take care of its poorest members often feel very differently if those

poorest members are migra...

In Europe, 1816 became “the year without a summer.”

Liebig invented something else, too, something that millions of people use every day: infant formula. Launched in 1865, Liebig’s Soluble Food

Liebig’s formula hit the market at a propitious time. Germ theory was increasingly well understood.

One credible estimate is that increased breastfeeding rates could save 800,000 children’s lives worldwide each year.17 Justus von Liebig wanted his

Swanson food-processing company, which was looking for ways to keep busy after the business of supplying rations to U.S. troops had dried up after World War II. Cronin herself, as an ambitious young

H. J. Heinz started to sell precooked canned macaroni in the 1880s.6 But such innovations didn’t,

It was only in the 1960s that the industrialization of food really started to have a noticeable impact on the amount of housework that women did.