The Rational Optimist (P.S.)

by Matt Ridley

A large study by the Organisation for Economic Co-operation and Development concluded that government spending on R&D has no observable effect on economic growth, despite what governments fondly believe. Indeed it ‘crowds out resources that could be alternatively used by the private sector, including private R&D’. This rather astonishing conclusion has been almost completely ignored by governments.

The perpetual innovation machine that drives the modern economy owes its existence not mainly to science (which is its beneficiary more than its benefactor); nor to money (which is not always a limiting factor); nor to patents (which often get in the way); nor to government (which is bad at innovation). It is not a top-down process at all. Instead, I am going to try now to persuade you that one word will suffice to explain this conundrum: exchange. It is the ever-increasing exchange of ideas that causes the ever-increasing rate of innovation in the modern world.

As the economist Paul Romer has argued, human progress consists largely in accumulating recipes for rearranging atoms in ways that raise living standards.

Innovators are therefore in the business of sharing. It is the most important thing they do, for unless they share their innovation it can have no benefit for them or for anybody else.

The secret of the modern world is its gigantic interconnectedness. Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity. The telephone had sex with the computer and spawned the internet.

Technologies emerge from the coming together of existing technologies into wholes that are greater than the sum of their parts. Henry Ford once candidly admitted that he had invented nothing new. He had ‘simply assembled into a car the discoveries of other men behind whom were centuries of work’. So objects betray in their design their descent from other objects: ideas that have given birth to other ideas.

The history of the modern world is a history of ideas meeting, mixing, mating and mutating. And the reason that economic growth has accelerated so in the past two centuries is down to the fact that ideas have been mixing more than ever before.

Throughout history, though living standards might rise and fall, though population might boom and crash, knowledge was one thing that has showed inexorable upward progress.

The wonderful thing about knowledge is that it is genuinely limitless. There is not even a theoretical possibility of exhausting the supply of ideas, discoveries and inventions. This is the biggest cause of all for my optimism. It is a beautiful feature of information systems that they are far vaster than physical systems: the combinatorial vastness of the universe of possible ideas dwarfs the puny universe of physical things. As Paul Romer puts it, the number of different software programs that can be put on one-gigabyte hard disks is twenty-seven million times greater than the number of atoms in the universe.

Yet if innovation is limitless, why is everybody so pessimistic about the future?

It is my proposition that the human race has become a collective problem-solving machine and it solves problems by changing its ways. It does so through invention driven often by the market: scarcity drives up price; that encourages the development of alternatives and of efficiencies. It has happened often in history.

The pessimists’ mistake is extrapolationism: assuming that the future is just a bigger version of the past. As Herb Stein once said, ‘If something cannot go on forever, then it will not.’

Brown is dead right with his extrapolations, but so was the man who (probably apocryphally) predicted ten feet of horse manure in the streets of London by 1950. So was IBM’s founder Thomas Watson when he said in 1943 that there was a world market for five computers, and Ken Olson, the founder of Digital Equipment Corporation, when he said in 1977: ‘There is no reason anyone would want a computer in their home.’ Both remarks were true enough when computers weighed a tonne and cost a fortune.

Competition reigns supreme, with even small children forced to compete against each other and falling ill as a result.’ I have news for him: small children were more overworked, and fell a lot more ill, in the industrial, feudal, agrarian, Neolithic or hunter-gatherer past than in the free-market present.

Pessimism has always been big box office.

Some 19 per cent of Americans believe themselves to be in the top 1 per cent of income earners. Yet surveys consistently reveal individuals to be personally optimistic yet socially pessimistic.

About the future of society and the human race people are naturally gloomy. It goes with the fact that they are risk-averse: a large literature confirms that people much more viscerally dislike losing a sum of money than they like winning the same sum.

Apocaholics (the word is Gary Alexander’s – he calls himself a recovering apocaholic) exploit and profit from the natural pessimism of human nature, the innate reactionary in every person. For 200 years pessimists have had all the headlines, even though optimists have far more often been right.

And there are things that are getting worse, without doubt. Traffic congestion and obesity would be two big ones, yet both are the products of plenty, and your ancestors would have laughed at the idea that such abundance of food and transport was a bad thing.

If you teach children that things can only get worse, they will do less to make it untrue.

The resources and technologies of 1960 could not have supported six billion – but the technologies changed and so the resources changed.

The proportion of the population infected with HIV is falling, even in southern Africa. The epidemic is far from over, and much more could be done, but the news is getting slowly better, not worse.

Where it took more than ten years to understand HIV, it took just three weeks a couple of decades later to sequence the entire genome of the SARS virus and begin a search for its vulnerabilities. It took just months in 2009 to generate large doses of vaccines for swine flu.

Many of today’s extreme environmentalists not only insist that the world has reached a ‘turning point’ – quite unaware that their predecessors have made the same claim for two hundred years about many different issues – but also insist that the only sustainable solution is to retreat, to cease economic growth and enter progressive economic recession.

Of the ‘bottom billion’ left behind by recent booms – Paul Collier’s phrase – more than 600 million are Africans. The average African lives on just $1 a day.

Between 1980 and 2000, the number of Africans living in poverty doubled.

But Botswana did not fail. It succeeded not just moderately well, but spectacularly. In the thirty years after independence it grew its per capita GDP faster on average (nearly 8 per cent) than any other country in the entire world – faster than Japan, China, South Korea and America during that period. It multiplied its per capita income thirteen times so that its average citizens are now richer than Thais, Bulgarians or Peruvians.

Using such technologies, Africa can follow the same route to prosperity that the rest of the world is following: to specialise and exchange. Once two individuals find ways to divide labour between them, both are better off.

Economists estimate that a dollar spent on mitigating climate change brings ninety cents of benefits compared with $20 benefits per dollar spent on healthcare and $16 per dollar spent on hunger. Keeping climate at 1990 levels, assuming it could be done, would leave more than 90 per cent of human mortality causes untouched.

optimism gets a bad press in this debate. Optimists are dismissed as fools, pessimists as sages, by a media that likes to be spoon-fed on scary press releases.

In short, a warmer and richer world will be more likely to improve the well-being of both human beings and ecosystems than a cooler but poorer one.

I have argued that now the world is networked, and ideas are having sex with each other more promiscuously than ever, the pace of innovation will redouble and economic evolution will raise the living standards of the twenty-first century to unimagined heights, helping even the poorest people of the world to afford to meet their desires as well as their needs. I have argued that although such optimism is distinctly unfashionable, history suggests it is actually a more realistic attitude than apocalyptic pessimism. ‘It is the long ascent of the past that gives the lie to our despair,’ said H.G. Wells.

It is a common trick to forecast the future on the assumption of no technological change, and find it dire.

‘Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered.’

Futurology always ends up telling you more about your own time than about the future. H.G. Wells made the future look like Edwardian England with machines; Aldous Huxley made it feel like 1920s New Mexico on drugs; George Orwell made it sound like 1940s Russia with television. Even Arthur C. Clarke and Isaac Asimov, more visionary than most, were steeped in the transport-obsessed 1950s rather than the communication-obsessed 2000s.

‘The online masses have an incredible willingness to share’ says Kevin Kelly. Instead of money, ‘peer producers who create the stuff gain credit, status, reputation, enjoyment, satisfaction and experience’.

human race will continue to expand and enrich its culture, despite setbacks and despite individual people having much the same evolved, unchanging nature. The twenty-first century will be a magnificent time to be alive.