Explaining Modern Economic Growth – Deirdre McCloskey

Summary

This talk explores the remarkable economic growth since the 1800s, highlighting how average incomes have skyrocketed in countries like England, Russia, China, and India. It challenges traditional materialist explanations for this prosperity, such as foreign trade or capital accumulation, and instead attributes the surge to a profound shift towards liberalism. This change in societal structure, emphasizing equality before the law and human dignity, has unleashed the creativity of ordinary people, fostering innovation and entrepreneurship, which are the true drivers of modern economic growth.

Takeaways

• 🌟 Economic growth has led to a significant increase in average income and living standards worldwide since 1800.
• 🌍 Historically, all countries were poor, but some, like Holland and England, were relatively richer than others such as Russia and China.
• 📈 The average income per person has seen an enormous rise, especially from 1800 to the present, with England's income per day increasing from $6 to about $110.
• 🏛️ The Agricultural Revolution marked an early increase in income, but it was followed by a decrease due to overpopulation, which reduced the average income.
• 🚀 The Industrial Revolution around 1800 was a turning point, with income per head skyrocketing at an unprecedented rate.
• 🤔 The main puzzle in economics is understanding why economic growth took off in this period, overcoming most of scarcity.
• 📚 Materialist explanations such as foreign trade, imperialism, capital accumulation, and resource exploitation have been considered but are not the root causes.
• 💡 The real cause is a change in the spirit of certain societies, allowing ordinary people to innovate and contribute to economic growth.
• 🌱 Liberalism, with its emphasis on equality before the law and human dignity, emerged as the key factor that enabled the creative potential of ordinary people.
• 🌐 The shift towards a more liberal society, starting in Northwestern Europe and spreading globally, is what unlocked the potential for widespread economic growth and innovation.

Q & A

What was the average income per day in Russia around 1800?

The average income per day in Russia around 1800 was equivalent to about $2 in modern terms.

How has the income per head in countries like England, Russia, China, and India changed from 1800 to 2016?

From 1800 to 2016, the income per head in countries like England, Russia, China, and India has increased enormously, with significant improvements in goods and services such as healthcare, housing, food, travel, and entertainment.

What was the average income per day in England in 1800, and how much has it increased by 2016?

In 1800, the average income per day in England was about $6, and by 2016, it had increased to about $110.

What major shift in human history is described as happening around 1800?

Around 1800, there was a major shift in human history where economic growth took off at an unprecedented rate, overcoming most of scarcity.

What is the main puzzle in economics according to the script?

The main puzzle in economics, as mentioned in the script, is understanding the nature and causes of The Wealth of Nations, which refers to the reasons behind the significant increase in wealth and economic growth.

What are some of the material causes that have been suggested for economic growth?

Some material causes suggested for economic growth include foreign trade, exploitation of empires, capital accumulation, education, and resources such as oil and coal.

What does the author of the book 'bgea, dignity' argue is not the cause of economic growth?

The author argues that materialist explanations such as foreign trade, imperialism, capital accumulation, the Protestant ethic, and institutional change are not the causes of economic growth.

What is identified as the key change that allowed ordinary people to innovate and contribute to economic growth?

The key change identified is a change in the spirit of some countries, allowing ordinary people the opportunity to innovate and think of new ways of production and organization, which is attributed to the rise of liberalism.

What does the term 'liberalism' refer to in the context of the script?

In the context of the script, 'liberalism' refers to a political and sociological change that promotes equality before the law and equality of human honor or dignity, allowing people to have opportunities to innovate and contribute to economic growth.

What does the author suggest is the great social discovery of the 19th century?

The author suggests that the great social discovery of the 19th century is not nationalism or socialism, but the realization that ordinary people are creative and can contribute to economic growth when given the opportunity.

How does the script describe the process of modern economic growth?

The script describes modern economic growth as an evolutionary process, where large numbers of people can try out new ideas and innovations without being stopped by restrictive laws, social hierarchies, or other barriers.