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Abundance Doesn’t End

Blog Post | Energy & Natural Resources

Abundance Doesn’t End

Ideas are not like a jar of jellybeans. We’ll never reach the bottom and go hungry.

This article was originally published in The Spectator.

It is political decisions that limit growth and freedom.

Speaking to his ministers at the Élysée Palace last Thursday, the très sérieux Emmanuel Macron called for unity and sacrifice as he announced the end of the age of abundance because of a parade of horrors, including global warming, war in Ukraine, and the ongoing supply problems.

“What we are currently living through is a kind of major tipping point or a great upheaval,” said Macron. “We are living through the end of what could have seemed an era of abundance…the end of the abundance of products, of technologies that seemed always available…the end of the abundance of land and materials including water.”

What is abundance, though? It is the product of modernity – a singular episode in the 300,000-year history of our species that gradually lifted humanity from starvation, disease, early death, ignorance, and permanent war toward historically unprecedented plentitude of food, trebling of life expectancy, management, or complete eradication of a plethora of diseases, close to universal literacy and numeracy, and ‘merely’ episodic outbreaks of war.

The fact that people in the West were shocked by Russia’s invasion of Ukraine attests to a completely different mindset of us—the moderns—from that of our ancestors, who expected armies to cross borders every spring. The same can be said of our approach to the Covid pandemic. Europeans of yore ascribed pandemics to God’s wrath or the passage of Saturn, not tiny organisms that could be defeated with mRNA vaccines.

Modernity started in the Low Countries and in the United Kingdom some 300 years ago, before spreading to much of the rest of the world. Many factors set the stage for this salubrious break with our brutish past, including the Age of Discovery and the introduction of the New World staples to the Continent, the Scientific Revolution that elevated empirical evidence and practical experimentation above the wisdom of the ancients or pronouncements from authority, the Enlightenment that insisted on the primacy of logic and reason, and the Industrial Revolution that harnessed new sources of energy to make humanity much more productive and vastly richer.

The thread that ties different aspects of modernity—technology, science, medicine, production processes, and so on—together is the notion of “continuous innovation.” Of course, man always innovated (we gained control of fire perhaps as early as 1.7 million years ago, for example), but our discoveries were sporadic and, sometimes, reversible. Efflorescences of relative prosperity—Rome of the Antonines and China under the Song dynasty spring to mind—occasionally arose but always petered out, and “dark ages” often followed. All that changed in the second half of the 18th century, when the Western world chanced upon a sustained process of generating, accumulating, and actuating new knowledge. We have been scaling the ladder of human progress ever since.

The process of sustained innovation is chiefly driven by population growth and freedom. Knowledge creation starts with new ideas that originate in the human mind. More minds generate more ideas. It is these ideas that lead to new inventions, which are then tested by the market forces to separate the more valuable from the less valuable. At the end of the market test, humans are left with innovations that drive productivity, economic growth, and large increases in the standards of living. But large populations are not enough to sustain abundance. To innovate, people must be allowed to think, speak, publish, associate, and disagree. They must be allowed to save, invest, trade, and profit. In a word, they must be free.

The social environment, then, provides the incentives that either encourage or discourage individuals to manifest and actuate their ideas. Individuals, who lack equal legal rights, and face onerous regulatory burdens, confiscatory taxation, or insecure property rights, will be disincentivized from turning their ideas into inventions and innovations. Conversely, people who function under conditions of legal equality, sensible regulation, moderate taxation, and secure property rights will apply their talents to their benefit and, ultimately, to that of society.

The modernity of prosperity happened because western Europe and its offshoots stopped disincentivizing innovation and allowed their citizens to contend with new ideas without fear of ostracism, imprisonment, mutilation, or death. Similarly, they allowed for greater freedom of investment and trade without the fear of predation by the nobility or the suffocating hand of a government bureaucrat. Where Holland and the United Kingdom pioneered the way, the United States followed.

Consider an American manufacturing worker. Relative to his wages, the price of pork, rice, cocoa, wheat, corn, coffee, lamb, and beef fell by 98.4 percent, 97.6 percent, 97.1 percent, 96.7 percent, 96.1 percent, 93.8 percent, 78.6 percent, and 75.5 percent respectively between 1900 and 2018. That means that the same length of time that bought 1 pound of each commodity in 1900, bought 62.6, 41.1, 34.8, 30.5, 25.6, 16.2, 4.7, and 4 pounds in 2018.

While people cannot eat rubber, aluminum, potash, or cotton, the prices of these commodities are valuable inputs in the production processes that impact the prices of goods and services, and hence the overall standard of living. Their prices fell by 99.4 percent, 98.9 percent, 98.2 percent, and 95.8 percent, respectively. All the while, the population of the United States rose from 76 million to 328 million.

When the growth of freedom and the accumulated stock of human knowledge mixed with the massively expanding population of the planet in the post-World War II era, abundance went global. Relative to income per person, the average price of the most widely used commodities fell by an average of 84 percent between 1960 and 2018.

The personal abundance of the average inhabitant of the globe rose from 1 to 6.27 or 527 percent. Put differently, for the same amount of time that one needed to work to buy one unit in a bucket of resources in 1960, one could get more than six in 2018. Over that 58-year period, the world’s population increased from 3 billion to 7.6 billion. Moreover, as Gale L. Pooley and I found in our upcoming book, Superabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet, personal resource abundance increased faster than population in all 18 datasets that we analyzed. We call that relationship “superabundance.” Simply put, on average, every additional human being created more value than he consumed.

By our count, abundance has been doubling every 20 years or so. So, a 60-year-old Westerner has seen his standard of living rise from one to two, from two to four, and from four to 8 in his lifetime. Too slow, you say? That’s the modern mind speaking. Prior to the mid-18th century, life remained pretty much the same for millennia and no one thought that unusual. Generations of people lived and died without seeing or experiencing even the tiniest of improvements in their lives. What’s more, the scope for future improvements is immense.

Consider the future discovery of useful materials. The periodic table consists of roughly 100 elements. It took our tiny population of Earth dwellers (14 million in 3,000 BC) to discover that combining copper and tin could produce a useful metal that gave its name to the Bronze Age. A recipe for a useful two-element compound requires up to 9,900 combinations (100 x 99) and a four-element compound up to 94,109,400 combinations (100 x 99 x 98 x 97). Once you get to 10-element compounds, the Nobel Prize-winning economist Paul Romer wrote: “There are more recipes than seconds since the big bang created the universe. As you keep going, it becomes obvious that there have been too few people on earth and too little time since we showed up, for us to have tried more than a minuscule fraction of all the possibilities.”

The world, in other words, is a closed system in the way that a piano is a closed system. The instrument has only 88 keys, but those keys can be played in a nearly infinite variety of ways. The same applies to our planet. The Earth’s atoms may be fixed, but the possible combinations of those atoms are infinite. The American economist Thomas Sowell once observed that: “The cavemen had the same natural resources at their disposal as we have today, and the difference between their standard of living and ours is a difference between the knowledge they could bring to bear on those resources and the knowledge used today.” What matters, then, is not the physical limits of our planet, but human freedom to experiment and reimagine the use of resources that we have.

And that’s where Emmanuel Macron re-enters the picture. For all the doom and gloom emanating from the Élysée, there are no material reasons why humanity must come to experience the end of abundance. Shortages today in large part are consequences of bad government decisions. Those include the shutdown of the global economy for a better part of two years and yes, excessive environmental zeal. Or, as Tyler Cowen, one of America’s most highly regarded economists noted last Thursday: “It is hard to regard European energy policy as anything other than a huge unforced error. Keep in mind that energy supplies are far more important than their percentage of GDP might suggest. Energy is the lifeblood of modern civilisation.”

Macron’s shortages are also, most likely, temporary. Many British readers of this fine publication will recall the Winter of Discontent in 1979, while readers in the United States will no doubt remember President Jimmy Carter’s “Malaise” speech of the same year. Things looked bad back then and despondency reigned. The good news is that bad politicians can be replaced, and bad government decisions can be reversed—just think of the Reagan and Thatcher revolutions of the 1980s. And, after an adjustment period, the marvelous wealth-creating machine that is global capitalism can start to hum again. Ideas are not like a jar of jellybeans. We’ll never reach the bottom and go hungry. Nor have we misplaced almost all our copper and iron. They are still here: every ounce of them. Just like the Stone Age man would have remembered. So long as the world continues to provide a safe home for free people, be it in Britain or America, human lives shall grow ever more abundant.

Blog Post | Economics

Capitalism, the Keystone of Modern Prosperity

Despite the rise of anti-capitalism across the political spectrum, Johan Norberg sheds important light on the benefits and major advances brought about by capitalism.

This article was originally published at Contrepoints on 11/1/2023.

Good news for fans of bipartisanship: even in today’s hypercharged political environment, an increasing number of people on both sides of the aisle agree on something! Unfortunately, it’s a notion that, if incorrect, could undermine the policies and institutions that form the very foundation of the modern world. The newfound area of agreement is the idea that capitalism, globalization, and free markets have failed.

Indeed many of the ideas expressed by Karl Marx and Friedrich Engels in their magnum opusThe Communist Manifesto, are gaining ground. Obsession with class warfare now transcends political tribes, dominating both the halls of deep blue academia and the lyrics of the chart-topping anthem of the “new right,” Rich Men North of Richmond. A swelling bipartisan chorus of voices dismiss laissez-faire economics as out-of-date. The complexities of the modern world, they claim, require robust government action to support domestic industries, repatriate risk-ridden globalized supply chains, and protect domestic markets from the vicissitudes of international competition.

Recent polling shows that only around 21 percent of Americans hold a very positive view of capitalism, dropping to just 11 percent among those under age 30. Mounting skepticism toward capitalism is not restricted to the United States; from Latin America to Europe, anticapitalism is all the rage. For example, a majority of French adults, 62 percent, express a negative view of capitalism.

In this age of growing derision toward the system of free enterprise, there is a man who stands athwart the anticapitalist zeitgeist declaring, “The global free market will save the world.” Who is this individual who dares to express such an unfashionable view? “No one is particularly keen on globalization now,” observed journalist Po Tidholm on Swedish Public Radio in 2020, “except possibly Johan Norberg.”

Norberg, a Swedish author and historian of ideas and a colleague of mine at the Cato Institute, wears the accusation with pride, quoting it at the start of his latest book, The Capitalist Manifesto. Given the current intellectual climate, the timing of the U.S. release of the book could not be better.

He was not the first to come up with the title; prior Capitalist Manifesto authors include Robert Kiyosaki, Andrew Bernstein, Louis Kelso and Mortimer Adler. As Norberg notes, there is only one Communist Manifesto, but there are many capitalist manifestos—appropriately, as capitalism allows for a diversity of thought.

Norberg’s prior books include In Defense of Global Capitalism, which, as its title suggests, mounted a defense of free enterprise—against the system’s vocal leftist critics. But in the two decades since that book’s publication, expressing hatred of capitalism has become a bipartisan pastime in vogue among populists on both the left and right alike. In light of this trend, The Capitalist Manifesto presents an updated, sorely needed, and eloquent restatement of the principles of free market.

The book addresses the most frequent criticisms leveled against markets today and generally seeks to rehabilitate capitalism’s image in the mind of the skeptical modern reader. As business magnate Elon Musk put it in a recent post, “This book is an excellent explanation of why capitalism is not just successful, but morally right.”

How can Norberg, Musk, or indeed anyone remain enthusiastic about a system that so many people spanning the political spectrum now agree has been a failure? Examining the last couple of decades, the book acknowledges they have been filled with shocks, wars, and failures. Examining the problems of the last 20 years, including financial crises, violence in the Middle East, an industrial-scale war in Europe, various other disasters, and of course a global pandemic, Norberg never shies away from recognizing the bad. But, the last 20 years, he argues, despite so many devastating catastrophes, have nonetheless been the best years in all of human history.

How is that possible? Step back and examine the trendlines. A third of all wealth ever created was created over these last two decades alone. Over the last 20 years, during every minute of complaining about how global capitalism has wrecked the world, over 90 people climbed out of destitution. Child mortality has fallen so dramatically that the number of annual child deaths is down by millions compared to a decade ago even as the total population has grown.

The greatest progress occurred in the countries that most integrated into the global economy. Why is that? The miraculous problem-solving capacity of human beings that allows us to improve our conditions—if given the freedom to do so. Hence countries in the economically freest quartile enjoy more than twice the average per capita income of less free countries.

Capitalism’s haters fail to recognize modern prosperity’s origins. Norberg characterizes well-off anticapitalist thinkers such as Thomas Piketty this way: “taking pride in ignoring what’s going on down there, in garages, in shops and factories, and how that might relate to the fact he lives in history’s richest civilization.”

But, the anticapitalist might protest, modern abundance rests atop a proverbial house of cards. Surely the pandemic revealed the unacceptable fragility of globalized markets?

Yet pandemic shortages proved short-lived as entrepreneurs found ways to adjust the manufacturing process to changing conditions. In many cases, companies with more complex supply chains actually adjusted faster than those with less complex supply chains, because they had more options and found alternative suppliers or manufacturers who weren’t under lockdown. Concentrations of supply chains, Norberg warns, in fact pose a greater risk of disruption than diversified ones, due to their total reliance on a smaller number of suppliers–having all their eggs in one basket. Domestically produced goods were often more likely to see shortages than imported ones; recall that it was international trade that alleviated the United States’ baby formula shortage when policymakers lifted import restrictions in response to the crisis.

The book defends capitalism from charges that it simply represents theft and exploitation, pointing out that it in fact embodies the opposite of those things: enrichment and freedom of choice. Replacing markets with a system of more centralized government control concentrates decision-making power in the hands of a small elite.

Substituting the collective wisdom produced by billions of people with the preferences of a few bureaucrats whose own money isn’t on the line tends to spell disaster. Norberg cites numerous examples including Quaero, the stillborn dream of a government-backed search engine from 2005. Quaero was intended to outcompete Google. Despite the best efforts of numerous European politicians and bureaucrats, and despite the French and German governments wasting millions of taxpayer dollars on the project, Quaero collapsed within a year. Its implosion demonstrates what happens, again and again, when decision makers are divorced from the reality of market signals and financial consequences.

With abundant data and memorable examples, Norberg shows the historical ignorance of the new vogue for anticapitalism. He unmasks it as nothing new at all, but something wizened and old that has reared its ugly head again. Tariffs, industrial policy, repatriation, and price-setting have repeatedly failed. Will policymakers on the left and right alike heed Norberg’s warning, or will humanity relearn the lesson the hard way?

The Communist Manifesto ends with the words, “The Communists … openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. The proletarians have nothing to lose but their chains. They have a world to win. Working men of all countries, unite!” Instead of a call for violent revolution, The Capitalist Manifesto ends with a plea for the peaceful preservation of the system of global capitalism endangered by unwise policies: “We pro-capitalists of the world have nothing to lose but our chains, tariff barriers, building regulations and confiscatory taxes. We have a world to win.”

The Washington Post | Housing

Alexandria Ends Single-Family-Only Zoning

“Alexandria lawmakers voted unanimously early Wednesday to eliminate single-family-only zoning in this Northern Virginia city, a functionally limited but symbolic and controversial move that opens the door for the construction of buildings with as many as four units in any residential neighborhood.”

From The Washington Post.

Blog Post | Infrastructure & Transportation

The Race to the Sky: How Competition Pushes Humanity Forward

Cities could still be growing quickly upward, but regulations are limiting their growth.

“I would give the greatest sunset in the world for one sight of New York’s skyline.”

—Ayn Rand, The Fountainhead

The story of how the Empire State Building came to dominate Manhattan’s skyline—defeating 40 Wall Street and the Chrysler Building for the title of the tallest building in the world—is an illustration of the power of competition and innovation.

In 1929, the successful businessman George Ohrstrom hired architect H. Craig Severance to design 40 Wall Street. Severance was a well-known architect in New York City and together with William van Alen had built amazing constructions, such as the Bainbridge Building on W. 57th Street and the Prudence Building at 331 Madison Avenue. Van Alen was an innovator and a revolutionary who often challenged the classical and Renaissance styles that had influenced most American cities since the beginning of the 20th century. He often ran into problems with clients who rejected his modern styles. Severance, worried about losing clients, decided that he no longer needed Van Alen’s partnership, and they ended their business relationship in 1924. In 1929, Walter Chrysler hired Van Alen to design a monument to his name, the Chrysler Building.

Competition Incentivized Innovation

In April 1929, Severance learned that his former partner was designing a structure of 809 feet. Ohrstrom and Severance, worried about falling behind, announced that they would add two additional floors to their original design so that 40 Wall Street would end up with a total height of 840 feet. That same year, Empire State Inc., led by former General Motors executive John Jakob Raskob, entered the race—putting pressure on Severance and Van Alen. To keep pace with the other two projects, architectural firm Shreve, Lamb & Harmon and builders Starrett Brothers & Eken accelerated the construction process. According to architectural historian Carol Willis, the framework of the Empire State Building rose four and a half stories per week due to an A-team design approach in which architects, builders, and engineers collaborated closely with each other.

Troubled by both Severance and the Empire State project, Van Alen designed the famous chrome-steel art deco crown for the top of the Chrysler Building and a sphere to stand on top of the crown. The sphere was built inside the crown, hidden from the public, and it was never announced to the press or explicitly mentioned. On the other hand, Severance modified his design one more time and asked permission to add a lantern and a flagpole at the top of the tower, increasing the height by 50 feet. Severance planned to have 40 Wall Street reach the 900-foot mark to secure its place as the tallest building in the world.

On October 23, 1929, the sphere of the Chrysler Building was lifted from the inside of the crown, reaching 1,046 feet and surpassing the final height of 927 feet of 40 Wall Street. The crash of Wall Street on October 28 distracted the press from the trick played by Van Alen, and it was not reported immediately. When Severance found out, it was too late to change his design—40 Wall Street held the title for one month from its opening in the first week of May 1930 to the opening of the Chrysler Building on May 27. The Chrysler Building held the title for only 11 months until the Empire State Building was completed in 1931 and became the new tallest building.

Regulations Limit Us

The Empire State Building held the title of tallest building in the world for 40 years, and it was built in only one year and 45 days. Bryan Caplan, professor of economics at George Mason University, believes that excessive restrictions slow construction today. Regulations such as height restrictions prevent cities from going up. Humanity now has better technology than in the time of New York’s race to the sky, but getting permits to build upward is extremely difficult. Excessive restrictions also generate artificial scarcity, which is slowing the growth of cities and making it difficult (and expensive) to live in them. Cities could grow upward, but regulations limit their growth.

However, we continue to see competition in many industries; technology companies fighting for the dominance of artificial intelligence are creating better and more efficient tools. The race between SpaceX, Blue Origin, and Virgin Galactic is improving the development of innovative technologies. Soon we might even have commercial flights to the moon. History has shown that when brilliant minds have freedom to compete, humanity moves forward.

Reuters | Health & Medical Care

UK Authorises Gene Therapy for Blood Disorders in World First

“Britain has authorised a gene therapy that aims to cure sickle-cell disease and another type of inherited blood disorder for patients aged 12 and over, the country’s medical regulator said on Thursday, becoming the first in the world to do so.

Casgevy is the first medicine to be licensed that uses the gene-editing tool CRISPR, which won its inventors the Nobel Prize in 2020.”

From Reuters.