Why we are so much better off than 200 years ago? Explained in 3 minutes. Check out the video by Prof. Dierdre McCloskey:

[youtube=http://www.youtube.com/watch?v=a0nsKBx77EQ&feature=player_embedded]

(Cross-posted from my other blog, Outrun Change.)

Here’s my 200 word summary of the video:

Until 1800, the average person made the inflation-adjusted equivalent to $3 a day. It’s been that way for thousands of years. Starting in 1800, a graph of average income looks like a hockey stick, going almost straight up after being flat for thousands of years.

Why?

In the U.S. today, the average income is $130 a day. That’s a fantastic increase.

She says the percentage of people making only $3 a day has fallen by half in the last 30 years.

Why?

What caused income to make like the space shuttle?

Exploitation isn’t the cause. The video points out there has been exploitation since forever. It didn’t raise living standards before 1800.

I am a Christian. As a result of my study of the bible,  I have a modest familiarity with the era of the Roman Empire. The exploitation 2,000 years ago was brutal. Both the Roman government and priestly class were severely exploitative. Yet that didn’t make anyone other than a handful of rulers better off.

So exploitation isn’t the cause.

Instead, she says it is innovation. That’s new inventions. New ideas. Adding more new ideas to previous new ideas.

Dierdre McCloskey identifies two critical elements in England:

Economic Liberty”

“Social Honor” for inventors, merchants, and entrepreneurs. Previously those were not honored ways to make a living.

Those two factors produced a burst of innovation that had been suppressed previously.

And that is how we got to the place where 1% of history has 99% of the wealth across history.

If we know how we got here, we can figure out how to get better. I will continue to explore that idea.


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