Steve Keen in The Ideas Letter: Daniel Susskind’s new book, Growth: A Reckoning (2024), opens with an important question about a remarkable fact: why did the real incomes of ordinary people in the United Kingdom rise so rapidly from the mid-1700s on, after many millennia of effective stagnation?
People struggling with the cost-of-living crisis today might not believe this is true, but Susskind illustrates this fact with data from the Bank of England’s excellent Millenium of Macroeconomic Data project. Using historical records on basic consumption items, the Bank of England indexed real wages to 100 in 1900, and showed that, though wages fluctuated over time, between 1200 and the late 1800s, the real wage never exceeded 80% of its 1900 level. Then, with a take-off that can be dated back to the mid-1700s, real wages rose dramatically, to six times the 1900 level by the year 2000, as Figure 1 illustrates.
Susskind observes that, though there had been 600 years of dramatic change before 1750, these changes did not increase the standard of living of the ordinary citizen of England:
Six centuries rich in revolutionary moments – the arrival of the printing press in the fifteenth century and the attendant explosion in literacy, the English Reformation in the sixteenth century and a violent religious schism, the Glorious Revolution in the seventeenth century and a new conception of the state – yet economic life was essentially unchanged. According to Figure 1, an Englishman’s living standard, measured by his real wages, was no better in 1809 than back in 1209. (p. 4)
Why did this remarkable change occur? The obvious answer is the Industrial Revolution. But, Susskind asks, why did the Industrial Revolution have this impact, why did it occur when it did (the 1750s), and why did it occur where it did (in Scotland). Channelling Douglas Adams’s The Hitchhiker’s Guide to the Galaxy (1979), Susskind asked “What is the Answer to the Great Question about Growth, Prosperity, and Everything?”
I hope that fans of Hitchhiker’s will forgive me for saying that Susskind’s answer to this ultimate economic question is almost as disappointing as the giant computer Deep Thought’s declaration that “The Answer to the Great Question of Life, the Universe and Everything” was “Forty-two.” Susskind’s answer for what enabled growth to take off in the 1750s, in Scotland, is “ideas.”
The Hitchhiker’s Guide to the Galaxy tells us that Deep Thought arrived at its disappointing answer after seven and a half million years of intense computation. Susskind reached his by channeling about a century’s worth of economic theory.
To the obvious riposte that people had plenty of ideas before the Industrial Revolution—little things like Newton’s Laws of Motion, for example—Susskind says that a change in culture in the 1700s meant that a different form of ideas came to the fore:
“there was a change in collective focus: people were no longer content to understand the world for the sake of intellectual satisfaction or to make abstruse philosophical observations, as in the Scientific Revolution or the Enlightenment, but wanted to use it in the real world ‘to improve mankind’s condition’”… Scotland developed “a ‘scientific culture’ that committed people to use reason in pursuit of real-world problems (like, for example, how to increase output in a factory).” (p. 51. The quotes within this quote come from one of Susskind’s’ three key references, Joel Mokyr’s A culture of growth : the origins of the modern economy (Mokyr 2016))
So, it wasn’t just “ideas,” but a different approach to ideas… We were no longer contemplating the nature of “Life, the Universe, and Everything,” but getting down to brass tacks about how to make more stuff in factories, in order to make people happier.
More here.
