The Rational Optimist by Matt Ridley

Science journalist Ridley believes there is a reason to be optimistic about the human race and he defies the unprecedented economic pessimism he observes.

The book is about the rapid and continuous change that human society experiences, unlike any other animal group.  Ideas needed to meet and mate for culture to turn cumulative, and “there was a point in human pre-history when big-brained, cultural learning people for the first time began to exchange things with each other and that once they started doing so, culture suddenly became cumulative and the great headlong experiment of human economic progress began.”  Participants in the exchanges improved their lives by trading food and tools.

Ridley believes it is probable that humanity will be better off in the next century than it is today, and so will the ecology of our planet.  He dares the human race to embrace change, be rationally optimistic, and strive for an improved life for all people.

The word “market” tends to set off a religious war.  Opponents accuse proponents of blind faith in the Miracle of the Market.  The proponents too often seem to confirm this accusation by over-promising and under-proving what the market can do.  Matt Ridley argues for markets as the dominant source of human progress.

Ridley does synthesize a great deal of material, spinning the history of humanity from the stone axe to the computer mouse.  He recites colorful stories of successive waves of traders—Ukrainians (who traded for Black Sea shells and Baltic amber as long as 18,000 years ago), Phoenicians, Mongols, Arabs, and Italians, who brought early globalization.

Ridley’s key concept is gains from exchange, which make possible gains from specialization, which in turn make possible technological innovation.  Gains from exchange and specialization certainly rank up there with the most important economic ideas of all time.

The second key idea in the book is, of course,“rational optimism”.  There have been constant predictions of a bleak future throughout human history, but they haven’t come true.  Our lives have improved dramatically—in terms of lifespan, nutrition, literacy, wealth, and other measures—and he believes that the trend will continue.  Too often, this overwhelming success has been ignored in favor of dire predictions about threats—like cancer.

His entertaining account of how such pessimism is always in fashion—whether the subject is overpopulation, genetic engineering, Y2K, or global warming (he thinks we’ll all end up living on a slightly hotter but richer planet)—also predicts that today’s pessimists will ignore his message.

Pessimism is often wrong because people assume a world where there is no change or innovation.  They simply extrapolate from what is going on today, failing to recognize the new developments and insights that might alter current trends.  For too long, population forecasts have ignored the possibility that population growth would ease as the world became better off, because people who are wealthier and healthier do not feel the need to have so many children (See also “Gapminder” website of the development expert Hans Rosling).

Key messages from my perspective:

Prologue: At some point in time, human intelligence became collective and cumulative in a way that happened to no other animal.

The evolutionary biologist Richard Dawkins in 1976 coined the term “meme” for a unit of cultural imitation.  In social evolution, the decisive factor is “selection by imitation of successful institutions and habits”.

Sex is what makes biological evolution cumulative.  Evolution can happen without sex; but it is far, far slower.  Trade exchange is to cultural evolution and to technology, as sex is to biological evolution.  It stimulates novelty.

I am a rational optimist: rational, because I have arrived at optimism, not through temperament or instinct, but by looking at the evidence.

Chapter 1 – A Better Today:

Today, a car emits less pollution travelling at full speed than a parked car in 1970—from leaks.

Life expectancy continues to march upwards at a steady rate of a quarter of a year per year, a rate of change that has altered little in 200 years.  People are not only spending a longer time living, but a shorter time dying.

How long does one have to work for one hour of lighting: From six hours to half a second—43,200-fold improvement: that is how much better off you are than your ancestor was in 1800, using the currency that counts your time.

Happiness: Contrary to common belief, rich people are happier than poor people; rich countries have happier people than poor countries; and people get happier as they get richer.

Hedonic Treadmill = if only because the neighbour—or the people on television—are richer than you are = keeping up with the Joneses (who—by the way—might be heavily indebted and not happy at all behind that façade).

The rich want to get richer, long after the point where it is having much effect on their happiness—they are after all endowed with instincts for “rivalrous competition”, descended from hunter-gatherers whose relative, not absolute, status determined their sexual rewards.  People are programmed to desire, not to appreciate.

The big gains in happiness come from living in a society that frees you to make choices about your lifestyle.  It is that increase in free choice that has been responsible for the increase in happiness in most of the recorded countries since 1981.

Crunch: It is possible that not just the recent credit boom, but the entire post-war rise in living standards was a Ponzi scheme, made possible by the gradual expansion of credit?  That we have in effect grown rich by borrowing the means from our children and that a day of reckoning is now at hand?

In the 2000s, the West misspent much of the cheap windfall of Chinese savings that the United States Federal Reserve sluiced our way.

So long as somebody allocates sufficient capital to innovation, then the credit crunch will not in the long run prevent the relentless upward march of human living standards.

Self-sufficiency is poverty: The concept of “food miles” is a profoundly flawed sustainability indicator.  Getting food from the farmer to the shop causes just 4% of all its lifetime emissions.  Ten times as much carbon is emitted in refrigerating British food as in air-freighting it from abroad, and fifty times as much is emitted by the customer travelling to the shops.  A New Zealand lamb, shipped to England, requires one-quarter as much carbon to get to a London plate as a Welsh lamb.  A Dutch rose, grown in a heated greenhouse and sold in London, has six times the carbon footprint of a Kenyan rose grown under the sun using water recycled through a fish farm, using geothermal electricity and providing employment to Kenyan women.

The interdependence of the world through trade is the very thing that makes modern life as sustainable as it is.

Chapter 2 – The Collective Brain:

About 200,000 years ago, human beings had started for the very first time to exchange things between unrelated, unmarried individuals.  Economics was born.

There are still 7,000 languages spoken on earth and the people who speak each one are remarkably resistant to borrowing words, traditions, rituals, or tastes from neighbors.

Ricardo’s magic trick: The notion of comparative advantage shows that people are better off when they specialize than when they were self-sufficient.  Ricardo’s law has been called the only proposition in the whole of the social sciences that is both true and surprising.

Self-sufficiency was dead about 10,000 years ago.  There is no human tribe that does not trade since then.

Technology was made possible by division of labour: market exchange calls forth innovation.

Chapter 3 – The Manufacture Of Virtue:

No other animal smiles in the way like humans.  The hormone oxytocin is the chemical that evolution uses to make mammals feel good about each other.  It specifically increases trusting, rather than general risk-taking.  It does this partly by suppressing the activity of the amygdala, the organ that expresses fear.

The Internet may be the best forum of crime, but it is also the best forum for free and fair exchange the world has ever seen.   Charitable giving has been growing faster than the economy as a whole in recent decades.  The Internet reverberates with people sharing tips for free.

The lesson of the last two centuries is that liberty and welfare march hand in hand with prosperity and trade.

The Corporate Monster: In America, roughly 15% of jobs are destroyed every year and roughly 15% created.

The increasing specialisation of the human species and the enlarging habit of exchange are the root cause of innovation in both.

Chapter 4 – The Feeding of the Nine Billion:

By grinding grain to flour and baking it, the users would have nearly doubled the energy they could get from it.  So bread is far older than farming.  Agriculture was impossible during the last glacial, but compulsory in the Holocene.

Trade comes first, not last.  Farming works precisely because it is embedded in trading networks.  The denser societies, made possible by agriculture, can realize considerable returns to better exploitation of the potential of co-operation, co-ordination, and the division of labour.

Early farming used probably nine times as much land per head of population as farming does today, so the small populations of that day generated lots of carbon dioxide per head.

Since 1900, the world has increased its population by 400%; its cropland area by 30%; its average yields by 400%, and its total crop harvest by 600%.  So per capita, food production has risen by 50%. Great news—thanks to fossil fuels.

Today, people farm just 38% of the land of the earth, whereas with 1961 yields, they would have to farm 82% to feed today’s population.  Intensification has saved 44% of this planet for wilderness.  Intensification is the best thing that ever happened—from the environmental perspective.

Human beings comprise about 0.5% by weight of the animals on the planet.  Yet they beg, borrow, and steal for themselves roughly 23% of the entire primary production on land plants.

Chickens and fish convert grain into meat three times as efficiently as cattle; pigs are in between.

Between 6,000 to 10,000 years ago, somewhere between the Baltic and the Black Sea, a genetic mutation occurred, substituting G for A in a control sequence upstream of a pigment gene called OAC2.  It gave the adults blue eyes for the first time.  This mutation would eventually be inherited by nearly 40% of Europeans.  Because it went with unusually pale skin, it probably helped those people who were trying to live on vitamin-D-deficient grain in sunless northern climates: sunlight enables the body to synthesise vitamin D.

Once water is properly priced by markets, water is not only used more frugally, but its very abundance increases through incentives to capture and store it.

Organic’s wrong call: Should the world decide to go organic (= nitrogen from plants and fish, rather than direct from the air, using factories and fuels to produce nitrogen fertilizers), then many of the nine billion will starve and all rainforests will be cut down.  Organic farming is low-yield, whether you like it or not.

The calories used to produce a pound of organic lettuce are almost as much as for a conventional lettuce.

Example: Indian cotton is now mostly Bt-cotton sprayed with insect killing bacterium called Bacillus Thuringiensis, resulting in a near doubling of yield and a halving of insecticide use—win/win.

By definition, all crop plants are “genetically modified”.  But modern genetic modification, using single genes, caused irrational fears fanned by pressure groups.  Unsafe?  A trillion GM meals later, with not a single case of human illness caused by GM food, that argument has gone.

Some of the pressure of militant environmentalism is still blocking GMO from being planted in Europe and Africa.  They show “customary indifference to starvation”.  “Blanket opposition to all GM foods is a luxury that only pampered Westerners can afford.”

Chapter 5 – The Triumph of Cities:

Imports are Christmas mornings, exports are January’s MasterCard bills. — P.J.O’Rourke “On the Wealth of Nations”.

Exchange and trade were well established traditions before the first city.

It is common to find that two traders both think their counterparts are idiotically overpaying; that’s the beauty of Ricardo’s magic trick.

The decline of the Roman Empire turned consumer traders back into subsistence peasants.

It was the Pisan trader living in North Africa, Fibonacci, who brought Indian–Arabic decimals, fractions, and the calculation of interest to Europe’s notice, in his book “Liber Abaci” published in 1202.

China was the only region in the world with a lower GDP per capita in 1950 than in 1000.  The blame for this lies squarely with China’s governments.  China’s best moments came when it was fragmented, not united.

Empires, indeed governments, generally tend to be good things at first, and bad things the longer they last.  Because it is a monopoly and brings inefficiency and stagnation to most things it runs; government agencies pursue the inflation of their budgets, rather than the service of their customers.

There is not a single example of a country opening its borders to trade—and ending up poorer.  Free trade works for countries, even if they do it and their neighbours do not.  Every country that tried protectionism suffered.

Two-thirds of economic growth happens in cities.

Chapter 6 – Escaping Malthus’s Trap:

The Malthusian crisis comes not as a result of population growth directly, but because of decreasing specialisation.  Increasing self-sufficiency is the very signature of a civilisation under stress, the definition of a falling standard of living.

There is no country in the world that has a higher birth rate than it had in 1960 and in the less developed world, as a whole, the birth rate has approximately halved.  Nearly half of the world now has a fertility below 2.1 (= the replacement rate).  The rate of increase in world population has been falling since the early 1960s.

Frankly, this is an extraordinary bit of luck.  United Nations’ best estimate is that population will peak at 9”2 billion in 2075 (other sources peak already by 2055 @ 8”7).  Another 2”0 to go from the current 7”2.  The ten billionth inhabitant, it is now officially forecast, will never come at all.

If we save children from dying, people will have smaller families!

Children are consumer goods, but rather time-consuming and demanding ones compared with, say, cars.

Certainly, the correlation between widespread female education and low birth rate is pretty tight.  Probably by far the best policy for reducing population is to encourage female education.

The more independent and well-off we all become, the more population will stabilise well within the resources of the planet.

So far, roughly about 100 billion humans have roamed the earth till today.

Chapter 7 – The Release of Slaves:

Non-renewable resources are finite.  Yes, but they are also vast.  Eg., coal is sufficiently abundant to allow an expansion of both economic activity and population to a point where they can generate sustainable wealth for all the people of the planet without hitting a Malthusian ceiling, and then hand the baton to some other form of energy.

By 1870, the burning of coal in Britain was generating as many calories as would have been expended by 850 million labourers.  It was as if each labourer had twenty servants at his beck and call.  The steam engine capacity alone was equivalent to six million horses.

Two billion people alive today have never turned on a light switch.

The earth receives 174 million billion watts of sunlight, about 10,000 times as much as the fossil-fuel output that human beings use.

A patch of ground roughly five yards by five yards receives as much sunlight as you need to run your techno life.  The average person consumes power at the rate of about 2,500 watts or 600 calories per second.  Since a reasonably fit person on an exercise bicycle can generate about fifty watts, this means that it would take 150 slaves, working eight-hour shifts each, to pedal me to my lifestyle.

One can take this reduction ad absurdum further and conclude that were it not for fossil fuels, 99% of people would have to live in slavery for the rest to have a decent standard of living!

To supply the current 300’0 inhabitants of the USA with their current power demand of roughly 10,000 watts, each would require alternative energy in the form of:

  • Solar panels the size of Spain.
  • Or wind farms the size of Kazakhstan.
  • Or woodland the size of India and Pakistan.
  • Or hayfields for horses the size of Russia and Canada combined.
  • Or hydroelectric dams with catchments one-third larger than all the continents put together.

As it is, a clutch of coal and nuclear power stations supply them energy from an almost laughable small footprint.  Wind turbines require five to ten times as much concrete and steel per watt as nuclear power plants.

Renewables are not green.  How much fuel does it take to grow fuel?  About the same amount. => the mad world of biofuels!

Drilling for and refining oil, by contrast, gets you a 600 % energy return or more on your energy used.

Biofuel releases 17 to 420 times more CO2 than the annual greenhouse gas reductions that these biofuels would provide by displacing fossil fuels. => If you want to reduce carbon dioxide in the atmosphere, replant a forest on former farmland.

The US now uses one-half as much energy per unit of GDP as it did in 1950.  The world is using 1.6% less energy for each dollar of GDP growth every year. => Surely, energy usage will eventually also start to fall!

Chapter 8 – The Invention of Invention:

Whenever you see the word equilibrium in a textbook, blot it out.  It is wrong because it assumes perfect competition, perfect knowledge, and perfect rationality.  None of which do or can exist.

There is no equilibrium in nature; there is only constant dynamism.  Nothing endures but change.

Equilibrium and stagnation are not only avoidable in a free-exchanging world; they are impossible.

The story of the twentieth century was the story of giving everybody access to the privileges of the rich, both by making people richer and by making services cheaper.

The secret of the modern world is its gigantic interconnectedness.  Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity (eg., the phone had sex with the computer and spawned the Internet).  It’s a history of ideas meeting, mixing, mating, and mutating.

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.

Yet if innovation is limitless, why is everybody so pessimistic about the future?

Chapter 9 – Turning Points:

Nowadays, if you say the world is going to go on getting better, you are considered embarrassingly mad.

The pessimists are right when they say that, if the world continues as it is, it will end in disaster for all humanity.  The world will not continue as it is.  That is the whole point of human progress, the whole message of cultural evolution and dynamic change.  The real danger comes from slowing down change.

The pessimists’ mistake is extrapolationism: assuming that the future is just a bigger version of the past.  If something cannot go on forever, then it will not.

The generation that has experienced more peace, freedom, leisure time, education, medicine, travel, movies, mobile phones, and massages than any generation in history is lapping up gloom at every opportunity.

Pessimism has always been big box office due to the collective refusal to believe that life is getting better.  People do not apply this to their own lives, interestingly: they tend to assume that they will live longer, stay married longer, and travel more than they do.  Some 19% of Americans believes themselves to be in the top 1% of income earners.

Individuals tend to be personally optimistic, yet socially pessimistic = Big Cognitive Dissonance!

For 200 years, pessimists have had all the headlines, even though optimists have far more often been right.

Apocaholics exploit and profit from the natural pessimism of human nature.  Too bad no one ever holds the doomsayers accountable for the damage they’ve done.

Cancer: By now, this generation of human beings was supposed to be dying like flies from cancer caused by chemicals.  Starting in the late 1950s, posterity was warned that synthetic chemicals were about to create an epidemic of cancer.  In drinking a single cup of coffee, you encounter far more carcinogenic chemicals than in a year’s exposure to pesticide in food.  This does not mean that coffee is dangerous: the carcinogens are nearly all natural chemicals found in the coffee plant and the dose is too low to cause disease.

Nuclear Armageddon: things have gotten better, not worse.

Famine: It’s largely history.  Where it still occurs, the fault lies with government policy, not population pressures.

Resources: We did underestimate the speed and magnitude of technological change and the generation of new recipes for rearranging the world.  Example: 1970s computer model World3 by the Club of Rome.

Clean Air: Acid rain of the 1980s, but actually the opposite happened.  The biomass of European forests actually increased, when acid rain was supposed to be killing them.

Genes, Plague/AIDS, Bird Flu, H1N1: In the centuries to come, there will certainly be new human diseases, but very few of them will be both lethal and contagious.  Measures to cure and prevent them will come quicker and quicker.

Chapter 10 – The Two Great Pessimisms of Today:

One – Africa’s bottom billion: The IMF was not able to find any evidence that aid resulted in growth in any country.  Ever.

Botswana is consistently the most successful economy in the world in recent decades.  8% p.a. for thirty years.  It has experienced no hyperinflation or debt default.

Basic good property rights are essential, and then enterprise can work its magic.  Give local people the power to own, exploit, and profit from natural resources in a sustainable way and they will usually preserve and cherish those resources.

Allow individuals in the West to make small loans to entrepreneurs in Africa (through websites like Kiva).

Africa is about to reap a “demographic dividend” when its working-age population is large relative to both the dependent elderly and the dependent young; such a demographic bonanza gave Asia perhaps one third of its miracle growth.

Two – Climate: Don’t look at the glass as half empty.  Back in the 1970s, cooling and warming were both predicted to be disastrous which implies that only the existing temperature is perfect.  Yet climate has always varied on our planet.

Evidence suggests that warming will itself reduce the total population at risk from water shortage!  There will probably be some increase in the amount of rain that falls in the most extreme downpours, and perhaps more flooding as a result, but it is a sad truth that the richer people are, the less likely they are to drown, so the warmer and richer the world, the better the outcome.

People move happily from Boston to Miami or London to Singapore and do not die from heat, so why should they die if their home city gradually warms by a few degrees?  Big cities already have, because of the urban heat island effect.

Obesity is killing more than twice as many people as climate change.  So far, so good.

The four horsemen of the human apocalypse, which cause the most premature and avoidable death in poor countries, are and will be for many years the same: hunger (poor food distribution), dirty water, indoor smoke, and malaria.

Economists estimate that a dollar spent on mitigating climate change brings ninety cents of benefits—compared with $20 benefits per dollar spent on healthcare and $16 per dollar spent on hunger.

Keeping climate at 1900 levels, assuming it could be done, would leave more than 90% of human mortality causes untouched.

Each year, more than 200 billion tonnes of carbon are removed from the atmosphere by growing plants and plankton and 200 billion tonnes returned to it by rotting, digestion, and respiration.  Human activity adds less than 10 billion tonnes to that cycle, or 5%.  It cannot be beyond the wit of twenty-first century humankind to nudge the natural carbon cycle into taking up 5% more than it releases, by fertilising desert stretches of the ocean with iron or phosphorous, by encouraging the growth of carbon-rich oceanic organisms called salps, which sink to the bottom of the ocean, or by burying bio-char powered charcoal made from crops.

Prosperity buys survival.  As the world has grown richer in the past ninety years, the death rate per 100,000 people from extreme weather events has fallen by 98% since it peaked in 1920s.  Even the actual number of deaths due to extreme weather has fallen by 93%, despite a quadrupling of the population and an increase in the number of (recorded!) extreme weather events.

I am not here attempting to resolve the climate debate nor saying that catastrophe is impossible.  I am testing my optimism against the facts, and what I find is that the probability of rapid and severe climate change is small.

Chapter 11 – The Catallaxy:

Although such optimism is distinctly unfashionable, history suggests it is actually a more realistic attitude than apocalyptic pessimism.

It is precisely because there is still far more suffering and scarcity in the world that I or anybody else with a heart would wish that ambitious optimism is morally mandatory.

To prevent change, innovation, and growth is to stand in the way of potential compassion.

As Paul Romer puts it, “Every generation has perceived the limits of 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.”

Governments must stop bailing out big corporations and big bureaucraciesand no longer hand them special favors such as subsidies or carbon rationsand regulate them no longer in such a way as to create barriers to entry and by this enable creative destruction.

Dare to be an optimist.  Worry about fewer things while understanding the lessons of the past, including lessons about the importance of innovation.  This might qualify you as a rational optimist, depending on how stringent the criteria are.  But there can be no doubt that excessive pessimism may cause problems with how society plans for the future.

This is not, and will never be, the best of all possible worlds.  But it can get much, much better.

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