Sunday, April 15, 2012

Quote of the Week from Matt Ridley’s superb book, The Rational Optimist: How Prosperity Evolves (P.S.)
Today, of Americans officially designated as ‘poor’, 99 percent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 per cent air conditioning. Cornelius Vanderbilt had none of these.
Last week I decided to buck the recent trend of pessimistic posts and show that I remain a long-term rational optimist in the post, Forecasting Errors are Optimistic for Life. Ridley’s book is a remarkable attempt to recognize how many obstacles humans have overcome throughout history and provide a solid foundation for understanding why the future remains just as bright.

The quote above is not meant to diminish current problems of inequality but rather to point out that ‘poor’ Americans today have access to many goods that were unthinkable only a generation or two ago. In my view, these comparisons to the past are too frequently neglected in light of the income and wealth inequality we see today. The prosperity of Americans is not simply due to luck, but rather the comparatively unrestricted ability to innovate and exchange ideas. As Ridley points out:  
The more you prosper, the more you can prosper. The more you invent, the more inventions become possible. How can this be possible? The world of things – of pecans or power stations – is indeed often subject to diminishing returns. But the world of ideas is not. The more knowledge you generate, the more you can generate. And the engine that is driving prosperity in the modern world is the accelerating generation of useful knowledge.
Looking at the world today, new forms of social media (e.g. Google, Facebook, Twitter) are permitting ideas to be shared across the globe in ways few could have envisioned. These technologies have already helped topple oppressive regimes in the Middle East and will almost certainly lead to miraculous advances in medicine. As new individuals come online each day, the potential for new ideas continues to grow. Ridley notes:
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.
Considering the history of humans and America, I share Ridley’s optimism for the future even though very real problems are present in our world today.
As Paul Romer puts it: ‘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.’
Therefore I would encourage others to remember how far we’ve come and all that we have today, when bombarded by pessimistic headlines about a falling American empire or an end to global prosperity. We live in an incredibly creative and dynamic world, from which new ideas will continuously develop to overcome our problems. The future remains as bright, if not brighter than ever.

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