The Rational Optimist (P.S.)

by Matt Ridley

In the early days of the internet, eBay was just one of many online auction companies. It succeeded where its competitors failed because it realised that a sense of shared community, not a competitive auction process, was key.

Whereas the typical firm was once a team of workers, hierarchically arranged and housed on a single site, increasingly it is a nebulous and ephemeral coming together of creative and marketing talent to transmit the efforts of contracting individuals towards the satisfying of consumer preferences.

for anybody who thinks great art and great philosophy have nothing to do with commerce, let him visit Athens and Baghdad to ask how Aristotle and al-Khwarizmi had the leisure time to philosophise. Let him visit Florence, Pisa and Venice and inquire into how Michelangelo, Galileo and Vivaldi were paid. Let him go to Amsterdam and London and ask what funded Spinoza, Rembrandt, Newton and Darwin. Where commerce thrives, creativity and compassion both flourish.

Even if the world is indeed becoming a more trusting and less violent place as it becomes more commercial, that does not mean that commerce is in itself either the only way to make the world trusting, or enough on its own to create trust. As well as new tools, there had to be new rules. The innovations that made the world nicer, it may be argued, are institutions, not technologies: things like the golden rule, the rule of law, respect for private property, democratic government, impartial courts, credit, consumer regulation, the welfare state, a free press, religious teaching of morality, copyright, the custom that you do not spit at the table and the convention that you always drive on the right (or left if in Japan, Britain, India, Australia and much of Africa). These rules made trustful, safe commerce possible, at least as much as vice versa.

Human history is driven by a co-evolution of rules and tools. The increasing specialisation of the human species, and the enlarging habit of exchange, are the root cause of innovation in both.

Friedrich Engels was the first to argue, agriculture may have worsened sexual inequality. It is certainly painfully obvious that in many peasant farming communities, men make women do much of the hard work. In hunter-gathering, men have many tiresome sexist habits, but they do at least contribute. When the plough was invented around 6,000 years ago, men took over the work of driving the oxen that cultivated fields, because it required greater strength, but this only exacerbated inequality. Now women were treated increasingly as the chattels of men, loaded with bracelets and ankle rings to indicate their husband’s wealth.

polygamy enables poor women to share in prosperity more than poor men.

‘Where there are no institutional restraints on such behaviour, systematic killing of unrelated individuals is so common among human beings that, awful though it is, it cannot be described as exceptional, pathological or disturbed.’

the power of fertiliser, made with fossil fuels. Since 1900 the world has increased its population by 400 per cent; its cropland area by 30 per cent; its average yields by 400 per cent and its total crop harvest by 600 per cent. So per capita food production has risen by 50 per cent. Great news – thanks to fossil fuels.

‘mutation breeding’ using gamma rays and carcinogenic chemicals. Did you know that this was the way many crops were produced over the last half-century? That much pasta comes from an irradiated variety of durum wheat? That most Asian pears are grown on irradiated grafts? Or that Golden Promise, a variety of barley especially popular with organic brewers, was first created in an atomic reactor in Britain in the 1950s by massive mutation of its genes followed by selection? By the 1980s, scientists had reached the point where, instead of this random scrambling of the genes of a target plant with unknown result and lots of collateral genetic damage, they could take a known gene, with known function, and inject it into the genome of a plant, where it would do its known job. That gene might come from a different species, so achieving the horizontal transfer of traits between species that happens relatively rarely among plants in nature (though it is common-place among microbes).

A cooperative trade network seems to have turned into something much more like colonialism. Tax and even slavery soon began to rear their ugly heads. Thus was set the pattern that would endure for the next 6,000 years – merchants make wealth; chiefs nationalise it.

reason that a nationalised industry stagnates: monopoly rewards caution and discourages experiment, the income is gradually captured by the interests of the producers at the expense of the interests of the consumers, and so on. The list of innovations achieved by the pharaohs is as thin as the list of innovations achieved by British Rail or the US Postal Service.

The Philistines invented iron; the Canaanites the alphabet; and their coastal cousins, the Phoenicians, glass.

All around the Mediterranean, markets grew into towns and ports into cities. Travelling farther afield, the Phoenicians’ innovations multiplied: better keels, sails, navigational knowledge, accounting systems, log-keeping. Trade, once more, was the flywheel of the innovation machine. To the south, steeped in their religious obsessions, the Israelite pastoralists looked on in puritan horror at the explosion of wealth thus created.

there is something beneficial to the growth of the division of labour when governments are limited (though not so weak that there is widespread piracy), republican or fragmented. The chief reason is surely that strong governments are, by definition, monopolies and monopolies always grow complacent, stagnant and self-serving. Monarchs love monopolies because where they cannot keep them to themselves, they can sell them, grant them to favourites and tax them. They also fall for the perpetual fallacy that they can make business work more efficiently if they plan it rather than allow and encourage it to evolve. The scientist and historian Terence Kealey points out that entrepreneurs are rational and if they find that wealth can more easily be stolen than created, then they will steal it: ‘Humanity’s great battle over the last 10,000 years has been the battle against monopoly.’

the plundering, the lack of invention, the barbarians and above all Diocletian’s red tape did for Rome in the end.

As Europe sank back into self-sufficiency, Arabia was discovering gains from trade. The sudden emergence of an all-conquering prophet in the middle of a desert in the seventh century is rather baffling as the tale is usually told – one of religious inspiration and military leadership. What is missing from the story is the economic reason that Arabs were suddenly in a position to carry all before them. Thanks to a newly perfected technology, the camel, the people of the Arabian Peninsula found themselves well placed to profit from trade between East and West. The camel caravans of Arabia were the source of the wealth that carried Muhammad and his followers to power. The camel had been domesticated several thousand years earlier, but it was in the early centuries AD that it was at last made into a reliable beast of burden. It could carry far more than a donkey could, go to places a wheeled bullock cart could not, and because it could find its own forage en route, its fuel costs were essentially zero – like a sailing ship. For a while even the Byzantine sailing ships of the Red Sea, waiting for the right winds and running the gauntlet of increasingly numerous pirates, found themselves at a competitive disadvantage compared with ‘ships of the desert’. With the route down the Euphrates disrupted by wars between Sassanid Persia and Byzantine Constantinople, the way was open for the people of Mecca, like dry Phoenicians, to become rich through trade. Spices, slaves and textiles w...

governments gradually employ more and more ambitious elites who capture a greater and greater share of the society’s income by interfering more and more in people’s lives as they give themselves more and more rules to enforce, until they kill the goose that lays the golden eggs. There is a lesson for today. Economists are quick to speak of ‘market failure’, and rightly so, but a greater threat comes from ‘government failure’. Because it is a monopoly, government brings inefficiency and stagnation to most things it runs; government agencies pursue the inflation of their budgets rather than the service of their customers; pressure groups form an unholy alliance with agencies to extract more money from taxpayers for their members.

Yes, of course, trade is disruptive. Cheap imports can destroy jobs at home – though in doing so they always create far more both at home and abroad, by freeing up consumers’ cash to buy other goods and services. If Europeans find their shoes made cheaply in Vietnam, then they have more to spend on getting their hair done and there are more nice jobs for Europeans in hair salons and fewer dull ones in shoe factories. Sure, manufacturers will and do seek out countries that tolerate lower wages and lower standards – though, prodded by Western activists, in practice their main effect is then to raise the wages and standards in such places, where they most need raising. It is less of a race to the bottom, more of a race to raise the bottom. Nike’s sweatshops in Vietnam, for example, pay wages three times as high as local state owned factories and have far better facilities. That drives up wages and standards. During the period of most rapid expansion of trade and out-sourcing, child labour has halved since 1980: if that is driving down standards, let there be more of it.

Trade draws people to cities and swells the slums. Is this not a bad thing? No. Satanic the mills of the industrial revolution may have looked to romantic poets, but they were also beacons of opportunity to young people facing the squalor and crowding of a country cottage on too small a plot of land. As Ford Madox Ford celebrated in his Edwardian novel The Soul of London, the city may have seemed dirty and squalid to the rich but it was seen by the working class as a place of liberation and enterprise. Ask a modern Indian woman why she wants to leave her rural village for a Mumbai slum. Because the city, for all its dangers and squalor, represents opportunity, the chance to escape from the village of her birth, where there is drudgery without wages, suffocating family control and where work happens in the merciless heat of the sun or the drenching downpour of the monsoon. Just as Henry Ford said he was driven to invent the gasoline buggy to escape the ‘crushing boredom of life on a midwest farm’, so, says Suketa Mehta, ‘for the young person in an Indian village, the call of Mumbai isn’t just about money. It’s also about freedom.’

On the way up the graph, abundant food encourages some people to specialise in something other than growing or catching food, while others produce food for sale not for self-sufficiency. The division of labour increases. But when the food supply becomes tight, near the top of the graph, fewer people will be prepared to sell their food or will have a surplus to sell. They will feed it to their families and make do without the goods they were wont to buy from others. The non-farmers, finding both food and customers for their services harder to come by, will have to give up their jobs and return to growing their own food themselves. So there is a cycle of rising and falling specialisation in human populations. The economist Vernon Smith, in his memoirs, recalls how in the Depression his family moved in the 1930s from Wichita, Kansas, to a farm when his father was laid off as a machinist, because ‘we could at least grow most of our own food and participate in a subsistence economy.’ This return to subsistence happens often in human history.

Increasing self-sufficiency is the very signature of a civilisation under stress, the definition of a falling standard of living. Until 1800 this was how every economic boom ended: with a partial return to self-sufficiency driven by predation by elites, or diminishing returns from agriculture.

the Black Death was not caused by overpopulation, but by a bacterium. Ironically, the plague may have been one of the sparks that lit the Renaissance, because the shortage of labour shifted income from rents to wages as landlords struggled to find both tenants and employees. With rising wages, some of the surviving peasantry could once more just afford the oriental luxuries and fine cloth that Lombard and Hanseatic merchants supplied. There was a rash of financial innovation: bills of credit to solve the problem of how to pay for goods without transporting silver through bandit country, double-entry book-keeping, insurance. Italian bankers began to appear all across the continent, financing kings and their wars, sometimes at a profit, sometimes at a disastrous loss. The wealth that the Italian trading towns had generated soon found its way into scholarship, art or science, or in the case of Leonardo da Vinci, all three. Per capita income in England was probably higher in 1450 than it would be again before 1820.

In 1300, Europe was probably on a trajectory towards a labour-intensive ‘industrious’ revolution of diminishing returns. Remember the miller of Feering who halved his wage by sharing his job with his son in the 1290s? Or consider the women who were paid half what their menfolk earned when they carried water (for making mortar) to the site of a new windmill being constructed at Dover Castle in 1294. No doubt they were delighted to have a job and earn a little cash, but they came so cheap they provided their employer with an incentive not to buy a cart and bullock. Yet by 1400, Europe had partly switched to a labour-saving ‘industrial’ trajectory instead, and the pattern was repeated after the cold and brutal seventeenth century, when famine, plague and war once more reduced the European population: in 1692–4, perhaps 15 per cent of all French people starved to death. Unlike Mesopotamia, Egypt, India, Mexico, Peru, China and Rome, early modern Europe became capital-intensive, not labour-intensive. That capital was used to get work out of animals, rivers and breezes, rather than people. Europe was, in Joel Mokyr’s words, ‘the first society to build an economy on non-human power rather than on the backs of slaves and coolies’.

Not only did the Americas ship back their produce; they also allowed a safety valve for emigration to relieve the Malthusian pressure of the population boom induced by industrialisation. Germany, in particular, as it industrialised rapidly in the nineteenth century, saw a huge increase in the birth rate, but a flood of emigrants to the United States prevented the division of land among multiple heirs and the return to poverty and self-sufficiency that had afflicted Japan two centuries before. When Asia experienced a population boom in the early twentieth century, it had no such emigration safety valve. In fact, Western countries firmly and deliberately closed the door, terrified by the ‘yellow peril’ that might otherwise head their way. The result was a typical Malthusian increase in self-sufficiency. By 1950 China and India were bursting with the self-sufficient agrarian poor.

‘The Tragedy of the Commons’ (remembered these days as being about collective action, but actually a long argument for coerced population control), found ‘freedom to breed intolerable’, coercion ‘a necessity’ and that ‘the only way we can preserve and nurture other and more precious freedoms is by relinquishing the freedom to breed, and that very soon.’ Hardin’s view was nearly universal. ‘Adding a sterilant to drinking water or staple foods is a suggestion that seems to horrify people more than most proposals for involuntary fertility control,’ wrote John Holdren (now President Obama’s science adviser) and Paul and Anne Ehrlich in 1977, but not to worry: ‘It has been concluded that compulsory population-control laws, even including laws requiring compulsory abortion, could be sustained under the existing Constitution if the population crisis became sufficiently severe to endanger the society.’ All right-thinking people agreed, as they so often do, that top-down government action was needed: people must be ordered or at least bribed to accept sterilisation and punished for refusing it. Which is exactly what happened. Egged on by Western governments and pressure groups such as the International Planned Parenthood Foundation, coerced sterilisation became a pattern in many parts of Asia in the 1970s. ‘Dalkon Shield’ contraceptive devices, the subject of safety lawsuits in America, were bought in bulk by the American federal government and shipped to Asia. Chinese women were f...

Bangladesh today is the most densely populated large country in the world, with more than two thousand people living on every square mile; it has a population greater than Russia living on an area smaller than Florida.

Throughout the world, birth rates are falling. There is no country in the world that has a higher birth rate than it had in 1960, and in the less developed world as a whole the birth rate has approximately halved. Until 2002, the United Nations, when projecting future world population density, assumed that birth rates would never fall below 2.1 children per woman in most countries: that is the ‘replacement rate’, at which a woman produces enough babies to replace her and her husband, with 0.1 babies added in to cover childhood deaths and a slightly male-biased sex ratio. But in 2002, the UN changed this assumption as it became clear that in country after country the decline in baby-making went straight through the 2.1 level and kept on dropping. If anything, the decline may accelerate as the effect of small family size compounds. Nearly half the world now has fertility below 2.1. Sri Lanka’s birth rate, at 1.9, is already well below replacement level. Russia’s population is falling so fast it will be one-third smaller in 2050 than it was at its peak in the early 1990s.

Everybody knows the population of the world is growing. But remarkably few people seem to know that the rate of increase in world population has been falling since the early 1960s and that the raw number of new people added each year has been falling since the late 1980s. As the environmentalist Stewart Brand puts it, ‘Most environmentalists still haven’t got the word. Worldwide, birth-rates are in free fall ... On every part of every continent and in every culture (even Mormon), birth rates are headed down. They reach replacement level and keep on dropping.’ This is happening despite people living longer and thus swelling the ranks of the world population for longer, and despite the fact that babies are no longer dying as frequently as they did in the early twentieth century. Population growth is slowing even while death rates are falling.

the entire world is experiencing the second half of a ‘demographic transition’ from high mortality and high fertility to low mortality and low fertility. It is a process that has occurred in many countries, starting with France at the end of the eighteenth century then spreading to Scandinavia and Britain in the nineteenth century and to the rest of Europe in the early twentieth century. Asia began to follow the same path in the 1960s, Latin America in the 1970s and most of Africa in the 1980s. It is now a worldwide phenomenon: with the exception of Kazakhstan, there is no country where birth rate is high and rising. The pattern is always the same: mortality falls first, causing a population boom, then a few decades later, fecundity falls quite suddenly and quite rapidly. It usually takes about fifteen years for birth rate to fall by 40 per cent. Even Yemen, the country with the highest birth rate in the world for most of the 1970s with an average of nearly nine babies per woman, has halved the number. Once the demographic transition starts happening in a country it happens at all levels of society pretty well at the same time.

Demographic transition theory is a splendidly confused field. The birth-rate collapse seems to be largely a bottom-up thing that emerges by cultural evolution, spreads by word of mouth, and is not commanded by fiat from above. Neither governments nor churches can take much credit. After all, the European demographic transition happened in the nineteenth century without any official encouragement or even knowledge. In the case of France, it happened in the teeth of official encouragement to breed. Likewise, the modern transition began without any government family-planning policies in many countries, especially Latin America. China’s highly coerced (‘one child’) birth-rate decline since 1955 (from 5.59 to 1.73 children, or 69 per cent) is almost exactly mirrored by Sri Lanka’s largely voluntary one over the same time period (5.70 to 1.88, or 67 per cent). As for religion, Italy’s plunging birth rate (now 1.3 children per woman) in the pope’s backyard has always seemed moderately amusing to non-Catholics. Of course, the provision of family planning advice surely helps, and in parts of Asia may have accelerated the transition, but on the whole it seems to help women cheaply and easily achieve what they wish to achieve anyway. The onset of Britain’s demographic transition in the 1870s coincided with the publication of bestsellers on contraception by Annie Besant and Charles Bradlaugh – but which caused which? So what might be the cause of these episodes of quite extraordinary ...

If we save children from dying, people will have smaller families.

Another factor is wealth. Having more income means you can afford more babies, but it also means you can afford more luxuries to divert you from constant breeding. Children are consumer goods, but rather time-consuming and demanding ones compared with, say, cars. The transition seems to kick in as countries grow richer, but there is no exact level of income at which it happens, and the poor and the rich within any country start reducing their birth rate about the same time.

female emancipation? Certainly, the correlation between widespread female education and low birth rate is pretty tight, and the high fecundity of many Arab countries must in part reflect women’s relative lack of control over their own lives. Probably by far the best policy for reducing population is to encourage female education. It is evolutionarily plausible that in the human species, females want to have relatively few children and give them high-quality upbringing, whereas males like to have lots of children and care less about the quality of their upbringing. So the empowerment of women through education gives them the upper hand.

urbanisation? Certainly, as people move from farms, where children can help in the fields, to cities where housing is expensive and jobs are outside the home, they find large families to be a drawback. Most cities are – and always have been – places where death rates exceed birth rates. Immigration sustains their numbers.

the best that can be said for sure about the demographic transition is that countries lower their birth rates as they grow healthier, wealthier, better educated, more urbanised and more emancipated.

Human beings are a species that stops its own population expansions once the division of labour reaches the point at which individuals are all trading goods and services with each other, rather than trying to be self-sufficient. The more interdependent and well-off we all become, the more population will stabilise well within the resources of the planet. As Ron Bailey puts it, in complete contradiction of Garrett Hardin: ‘There is no need to impose coercive population control measures; economic freedom actually generates a benign invisible hand of population control.’

the news on global population could hardly be better, though it would be nice if the improvements were coming faster. The explosions are petering out; and the declines are bottoming out. The more prosperous and free that people become, the more their birth rate settles at around two children per woman with no coercion necessary. Now, is that not good news?

abolish the slave trade, the largest factory complex in the world had just opened at Ancoats in Manchester. Powered by steam and lit by gas, both generated by coal, Murrays’ Mills drew curious visitors from all

The Lancashire cotton industry was rapidly converting from water power to coal. The world would follow suit and by the late twentieth century, 85 per cent of all the energy used by humankind would come from fossil fuels. It was fossil fuels that eventually made slavery – along with animal power, and wood, wind and water – uneconomic. Wilberforce’s ambition would have been harder to obtain without fossil fuels. ‘History supports this truth,’ writes the economist Don Boudreaux: ‘Capitalism exterminated slavery.’

The story of energy is simple. Once upon a time all work was done by people for themselves using their own muscles. Then there came a time when some people got other people to do the work for them, and the result was pyramids and leisure for a few, drudgery and exhaustion for the many. Then there was a gradual progression from one source of energy to another: human to animal to water to wind to fossil fuel. In each case, the amount of work one man could do for another was amplified by the animal or the machine. The Roman empire was built largely on human muscle power, in the shape of slaves. It was Spartacus and his friends who built the roads and houses, who tilled the ground and trampled the grapes. There were horses, forges and sailing ships as well, but the chief source of watts in Rome was people. The period that followed the Roman empire, especially in Europe, saw the widespread replacement of that human muscle power by animal muscle power. The European early Middle Ages were the age of the ox. The invention of dried-grass hay enabled northern Europeans to feed oxen through the winter. Slaves were replaced by beasts, more out of practicality than compassion one suspects. Oxen eat simpler food, complain less and are stronger than slaves. Oxen need to graze, so this civilisation had to be based on villages rather than cities. With the invention of the horse collar, oxen then gave way to horses, which can plough at nearly twice the speed of an ox, thus doubling the prod...

Hay, water and wind are ways of drawing upon the sun’s energy: the sun powers plants, rain and the wind. Timber is a way of drawing on a store of the sun’s energy laid down in previous decades – on solar capital, as it were. Peat is an older store of the sunlight – solar capital laid down over millennia. And coal, whose high energy content enabled the British to overtake the Dutch, is still older sunlight, mostly captured around 300 million years before. The secret of the industrial revolution was shifting from current solar power to stored solar power. Not that human muscle power disappeared: slavery continued, in Russia, the Caribbean and America as well as many other places. But gradually, erratically, more and more of the goods people made were made with fossil energy.

For all their brilliance, there are Watts, Davys, Jenners and Youngs galore in every country at every time. But only rarely do sufficient capital, freedom, education, culture and opportunity come together in such a way as to draw them out. Two centuries later, somebody could paint a picture of the great men of Silicon Valley and posterity will stand amazed at the thought that giants like Gordon Moore and Robert Noyce, Steve Jobs and Sergey Brin, Stanley Boyer and Leroy Hood all lived at the same time and in the same place.

at the Vienna exhibition of 1873. There is a stand exhibiting the work of the splendidly named semi-literate Belgian inventor Zénobe Théophile Gramme, and it is manned by his business partner, the equally euphonious French engineer Hippolyte Fontaine. They are showing off the Gramme dynamo, the first electricity generator that can produce a smooth current, and a steady light, when set spinning by hand or by a steam engine. Over the next five years, their dynamos will power hundreds of new industrial lighting installations all over Paris. In the Vienna exhibition, one of the workmen makes a careless mistake. He connects the wires from the spinning dynamo accidentally to the spare dynamo that is there to provide a backup in case the first one fails. The reserve dynamo immediately begins to spin all by itself, in effect it becomes a motor. Fontaine’s mind starts spinning too. He calls for the longest wire that can be found and connects the two dynamos by a wire that is 250 metres long. The reserve dynamo springs to life as soon as it is connected. Suddenly it became clear that electricity can transmit power over a distance far greater than belts, chains or cogs could.

a clutch of coal and nuclear power stations and a handful of oil refineries and gas pipelines supply the 300 million Americans with nearly all their energy from an almost laughably small footprint – even taking into account the land despoiled by strip mines. For example, in the Appalachian coal region where strip mining happens, roughly 7 per cent of twelve million acres is being affected over twenty years, or an area two-thirds the size of Delaware. That’s a big area, but nothing like the numbers above. Wind turbines require five to ten times as much concrete and steel per watt as nuclear power plants, not to mention miles of paved roads and overhead cables. To label the land-devouring monsters of renewable energy ‘green’, virtuous or clean strikes me as bizarre. If you like wilderness, as I do, the last thing you want is to go back to the medieval habit of using the landscape surrounding us to make power. Just one wind farm at Altamont in California kills twenty-four golden eagles every year: if an oil firm did that it would be in court. Hundreds of orang-utans are killed a year because they get in the way of oil-palm biofuel plantations. ‘Let’s stop sanctifying false and minor gods,’ says the energy expert Jesse Ausubel, ‘and heretically chant “Renewables are not green”.’

There is no equilibrium in nature; there is only constant dynamism. As Heraclitus put it, ‘Nothing endures but change.’

In a lecture on serendipity in 2007, the Cambridge physicist Sir Richard Friend, citing the example of high-temperature superconductivity – which was stumbled upon in the 1980s and explained afterwards – admitted that even today scientists’ job is really to come along and explain the empirical findings of technological tinkerers after they have discovered something.

Though they may start out full of entrepreneurial zeal, once firms or bureaucracies grow large, they become risk-averse to the point of Luddism. The pioneer venture capitalist Georges Doriot said that the most dangerous moment in the life of a company was when it had succeeded, for then it stopped innovating.

I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage. JOHN STUART MILL Speech on ‘perfectibility’

it seems that pessimism genes might quite literally be commoner than optimism genes: only about 20 per cent of people are homozygous for the long version of the serotonin transporter gene, which possibly endows them with a genetic tendency to look on the bright side. (Willingness to take risks, a possible correlate of optimism, is also partly heritable: the 7-repeat version of the DRD4 gene accounts for 20 per cent of financial risk taking in men – and is commoner in countries where most people are descended from immigrants.)