Tag Archives: the great fact

The Poor Benefit Most

Posted on November 26, 2011 | Comments Off on The Poor Benefit Most

Deirdre McCloskey’s Great Fact is the leaps and bounds that human well-being has made over the last 200 years. The improvement is a factor of at least 16 in monetary terms, and as much as 100-fold when accounting for the improved quality of goods. Think of the difference between a CD and an iPod. Not 16 or 100 percent; 16 or 100-fold. That’s huge.

The improvement is so huge that she believes the Great Fact is the most important event in human history since the Agricultural Revolution asserted itself around 10,000 years ago. And the best news about the Great Fact should bring cheer to anyone who holds a place in their heart for the poor:

In statistics and in substance the very poorest have benefitted the most. Robert Fogel, a careful student of such matters, notes that “the average real income of the bottom fifth of the [American] population has multiplied by some twentyfold since 1890, several times more than the gain realized by the rest of the population.” The bottom 10 percent have moved from undernutrition to overnutrition, and from crowded slum housing to uncrowded slum housing, and from broken-down buses to broken-down automobiles.

Deirdre McCloskey, Bourgeouis Dignity, p. 72.

There’s still a ways to go, obviously. So let’s keep it going. But anyone who denies the significance of the massive gains already made contributes nothing towards the noble cause of eradicating global poverty, and in fact poisons the project.

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Posted in Books, Economics

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Seven Billion People

Posted on October 31, 2011 | Comments Off on Seven Billion People

Sometime today, the UN estimates that world population will hit 7 billion people. Some people are worried about how those 7 billion mouths will be fed. Here’s Paul Ehrlich in 1968’s The Population Bomb, when world population was not yet 4 billion:

The battle to feed all of humanity is over. In the 1970s the world will undergo famines – hundreds of millions of people are going to starve to death in spite of any crash program embarked upon now.

Not so much, thankfully. Ehrlich and other people who live in bed-wetting fear of their fellow man forget that people are more than stomachs; they are also brains. And brains have an increasing return to scale. The more of them there are, and the more they can interact and exchange with one another, the faster they can quiet rumbling stomachs.

That’s why real world per capita GDP is 16 times higher than it was before the Industrial Revolution — even without correcting for the increased quality of goods. Including that omission would bring the increase to something like 100-fold, according to the economist Deirdre McCloskey. And this is per capita; remember, world population has increased about 7-fold since 1800.

The data are simply astonishing. 7 times as many of us are each at least 16 times and as much as 100 times better off than our great-great-great-great grandparents. This is the single most important event in human history since the Agricultural Revolution. It is so important that McCloskey calls it the Great Fact.

And the data show no signs of the Great Fact reversing itself, or even slowing down. if anything, China and India’s recent partial embrace of liberalism has quickened the brain’s still-incomplete conquest over the stomach.

Former CEI Warren Brookes Fellow Ron Bailey has more at Reason. Elsewhere, Steven Landsburg thinks that current human population might be too small.

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The Compassion of Adam Smith

Posted on October 14, 2011 | Comments Off on The Compassion of Adam Smith

It’s much more fashionable to attack Adam Smith these days than to read him. Yes, he favored economic liberalism, which wasn’t exactly in style in his time. Nor is it in ours. History remembers him as cold and calculating. But in real life, he was neither.

There are two main drivers behind Smithian liberalism, neither of them cold or calculating. One is that man is a social animal. The foundation of Smith’s moral theory is the impartial spectator theory. People figure out the right thing to do by asking themselves if an impartial third party would approve of their actions. Empathy — thinking of others and feeling for them — is at the very heart of Smithian morality.

Take trade, for example. Smith is well known for being an ardent free trader. But why? Because trade is an inherently peaceful act. It is moral.

If you have something I want, I’m not going to hit you over the head and steal it. No impartial spectator would approve of that. Instead, I’ll trade it to you for something you value even more. Everyone wins.

If you don’t think you’ll gain from the exchange, then nobody can force you to make it. And no one will trade with you unless you treat them with civility and dignity. Trade is much more moral than the alternative.

These are not the thoughts of a selfish, atomistic, cold-blooded economist. And yet this warmth is the very stuff of economics. We liberals (in the correct sense of the word) get a bad rap.

The second driver of Smith’s brand of market capitalism is compassion for the poor. Liberalism properly understood — free markets, free trade, free migration, etc. — creates more wealth more quickly than any other economic system. And not just for the top one percent, as in other systems.

In Smith’s time, the average person worldwide made around $3 per day. In richer countries like England or the Netherlands, it was something like $5 a day. Today, in countries that have embraced liberalism, you can make $100 a day and consider yourself middle class. That’s a 30-fold increase, and arguably the most significant development in human history since the Agricultural Revolution. Prosperity is no longer a privilege for the few. Everyone can share in it now. Deirdre McCloskey calls this the Great Fact.

Meanwhile, countries that have rejected liberalism are still struggling to escape the $3 trap. Rejecting liberalism means forcing the poor to miss out on the Great Fact.

Smith favored liberalism because it is not only moral, it makes life better for the poor. On that second point, Yeshiva University economics professor James Otteson has more (click here if the video below doesn’t work):

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Posted in Economics

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