The Rational Optimist || notes from the book

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Disclaimer: As with the other articles in the ‘Notes from the book’ series, the primary reader I had in mind when writing this is me. I use these notes as an online Journal, with the act of writing a way to learn better, and the act of publishing, a driver to be very clear in my views and to create an easy to access reference source from wherever I am.

You may find some of the quotations longer than a typical book review, and this is by design. The notes are those I highlighted when reading the book using my Amazon Kindle – I outline how I sync these to my publishing workflow in this article.

Introduction

Much of one’s attitude toward – and outcome from – life depends on levels of optimism. The long term trend is up – and people that play long term games and invest for the long term invariably win. However, the news cycle and a lot popular conception focus on the negative.

The Rational Optimist – by Matt Ridley – explores the concept of optimism through the lens of economics, history, and evolution. The book is structured around the 12 key themes below:

1. Ideas & collective intelligence
2. Trade
3. Trust and values
4. Agriculture
5. Cities / Urbanisation
6. Government
7. Demographics
8. Energy
9. Industrialisation
10. Technology & invention
11. Pessimistic fallacies
12. The future

“The Rational Optimist” is a manifesto for the power of human progress and a call to embrace the potential for future advancements. Ridley’s arguments are grounded in historical analysis and a deep faith in the capacity for human ingenuity to solve problems and create a better world.

The book has been recommended by many of the people i look up to the most. It’s well worth a read.

Key points I took for each theme, and my favourite quotes are set out below:

Ideas and collective intelligence

Key Points:

• The cornerstone of human progress is the exchange of ideas, which Ridley likens to sexual reproduction among ideas. This exchange leads to innovation and improvements in society.
• Humanity’s success is attributed to our ability to work collectively and share knowledge across generations and geographies.

Key quotes:

• At some point, human intelligence became collective and cumulative in a way that happened to no other animal.
• Specialisation encouraged innovation, because it encouraged the investment of time in a tool-making tool. That saved time, and prosperity is simply time saved, which is proportional to the division of labour. The more human beings diversified as consumers and specialised as producers, and the more they then exchanged, the better off they have been, are and will be. And the good news is that there is no inevitable end to this process. The more people are drawn into the global division of labour, the more people can specialise and exchange, the wealthier we will all be.
• The cumulative accretion of knowledge by specialists that allows us each to consume more and more different things by each producing fewer and fewer is, I submit, the central story of humanity.

Trade & specialism

Key Points:

• Ridley discusses how trade and commerce foster cooperation and trust among individuals, leading to a more virtuous society.
• Trade is the ultimate peacemaker, aligning economic interests and reducing the incentive for conflict.

Key quotes

• Time: that is the key. Forget dollars, cowrie shells or gold. The true measure of something’s worth is the hours it takes to acquire it. If you have to acquire it for yourself, it usually takes longer than if you get it ready-made by other people.
• This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work.
  • As late as the mid-1800s, a stagecoach journey from Paris to Bordeaux cost the equivalent of a clerk’s monthly wages; today the journey costs a day or so and is fifty times as fast.
  • A half-gallon of milk cost the average American ten minutes of work in 1970, but only seven minutes in 1997.
  • A three-minute phone call from New York to Los Angeles cost ninety hours of work at the average wage in 1910; today it costs less than two minutes.
• Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft.…. 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.
• This is the diagnostic feature of modern life, the very definition of a high standard of living: diverse consumption, simplified production. Make one thing, use lots.
• Ricardo’s law [of comparative advantage] has been called the only proposition in the whole of the social sciences that is both true and surprising.
• The lesson is stark. Self-sufficiency was dead tens of thousand years ago. Even the relatively simple lifestyle of a hunter-gatherer cannot exist without a large population exchanging ideas and skills. The importance of this notion cannot be emphasised too strongly. The success of human beings depends crucially, but precariously, on numbers and connections. A few hundred people cannot sustain a sophisticated technology: trade is a vital part of the story.
• The characteristic signature of prosperity is increasing specialisation. The characteristic signature of poverty is a return to self-sufficiency.

Trust and values

Key points:

• Trust as the Foundation of Prosperity: Historical and modern examples illustrate that trust, often starting within families and extending to broader communities, underpins successful commerce and societal prosperity. This is evident from the role of familial trust in international trade and finance, such as the Rothschilds’ financing of Wellington’s armies, to the trust mechanisms in modern market transactions, including warranties, brands, and customer feedback systems like eBay’s.
• Commerce as a Catalyst for Virtue and Social Progress: Commerce not only fosters trust and mutual benefit, leading to societal prosperity, but also drives moral and ethical improvements. This includes the decline of violence and cruelty, the rise of philanthropy alongside market booms, and the evolution towards more individual freedom and less corporate dominance. The narrative suggests that capitalism, in its evolving form, promotes not just economic growth but also social welfare and liberty, challenging the notion that markets inherently teach selfishness.

Key quotes

• Money is not metal. It is trust inscribed. (Nial Ferguson)
• Commerce and trade naturally encourage the virtues of honesty, trust, and kindness.
• As a broad generalisation, the more people trust each other in a society, the more prosperous that society is, and trust growth seems to precede income growth.
• Almost invisible, the guarantors of trust lurk beneath every modern market transaction: the sealed packaging, the warranty, the customer feedback form, the consumer legislation, the brand itself, the credit card, the ‘promise to pay the bearer’ on the money.
• The remarkable thing about the early days of the internet was not how hard it proved to enable people to trust each other in the anonymous reaches of the ether, but how easy. All it took was for eBay to solicit feedback from customers after each transaction and post the comments of buyers about the sellers. Suddenly every deal lay under the shadow of the future
• Those of libertarian bent often prove more generous than those of a socialist persuasion: where the socialist feels that it is government’s job to look after the poor using taxes, libertarians think it is their duty. I am not saying that the market is the only source of charity. Clearly not: religion and community provide much motivation to philanthropy too. But the idea that the market destroys charity by teaching selfishness is plainly wide of the mark. When the market economy booms so does philanthropy.
• Today there is much argument about whether democracy is necessary for growth, China seeming to prove that it is not. But there can be little doubt that China would – indeed may yet – see either more revolution or more repression if its growth rate were to fall to nothing.
• Good rules reward exchange and specialisation; bad rules reward confiscation and politicking.

Agriculture

Key Point:

• Ridley addresses the challenge of feeding a growing global population, arguing that innovation in agriculture can and will meet the demand.

Key quotes:

• Innovation, not rationing, is the key to feeding the world.
• America’s horse population peaked at twenty-one million animals in 1915; at the time about one-third of all agricultural land was devoted to feeding them. So the replacement of draught animals by machines released an enormous acreage of land to grow food for human consumption.
• If the average yields of 1961 had still prevailed in 1998, then to feed six billion people would have required the ploughing of 7.9 billion acres, instead of the 3.7 billion acres actually ploughed in 1998: an extra area the size of South America minus Chile.
• Intensification has saved 44 per cent of this planet for wilderness. Intensification is the best thing that ever happened – from the environmental perspective. There are now over two billion acres of ‘secondary’ tropical rainforest, regrowing after farmers left for the cities, and it is already almost as rich in biodiversity as primary forest. That is because of intensive farming and urbanisation.
• Other trends too have made modern farming better for the planet. Now that weeds can be controlled by herbicides rather than ploughing (the main function of a plough is to bury weeds), more and more crops are sown directly into the ground without tilling. This reduces soil erosion, silt run-off and the massacre of innocent small animals of the soil that inevitably attends the ploughing of a field – as flocks of worm-eating seagulls attest. Food processing with preservatives, much despised by green-chic folk, has greatly reduced the amount of food that goes to waste.
• There is one respect in which the environmental critique of modern agriculture has force. In the pursuit of quantity, science may have sacrificed nutritional quality of food. Indeed, the twentieth-century drive to provide a growing population with an ever faster-growing supply of calories has succeeded so magnificently that the diseases caused by too much bland food are rampant: obesity, heart disease, diabetes, and perhaps depression.
• Consumers will rightly be looking to the next generation of plant varieties to redress these deficiencies. They could do so by eating more fish, fruit and vegetables. But not only would this be a land-hungry option, it would suit the wealthy more than the poor, so it would exacerbate health inequalities.

Cities / Urbanisation

Key point:

• Cities are hubs of innovation and progress, where ideas can combine and recombine most effectively.

Key Quote

• Cities exist for trade. They are places where people come to divide their labour, to specialise and exchange. They grow when trade expands – Hong Kong’s population grew by thirty times in the twentieth century – and shrink when trade dries up. Rome declined from a million inhabitants in 100 BC to less than 20,000 in the early Middle Ages. Since people have generally done more dying than procreating when in cities, big cities have always depended on rural immigrants to sustain their numbers.

Governments

Key point:

• The book highlights the detrimental effects of strong, monopolistic governments on innovation and economic growth, contrasting this with periods of prosperity under fragmented or limited governance.

Key quotes:

• The value of fragmented government: Plainly, there is something beneficial to the growth of the division of labour when governments are limited (though not so weak that there is widespread piracy), republican or fragmented. The chief reason is surely that strong governments are, by definition, monopolies and monopolies always grow complacent, stagnant and self-serving.
• The Moloch State: China’s best moments came when it was fragmented, not united. The economy first truly prospered in the unstable Zhou dynasty of the first millennium BC. Later, after the Han empire fell apart in ad 220, the Three Kingdoms period saw a flourishing of culture and technology. When the Tang empire came to an end in 907, and the ‘Five Dynasties and Ten Kingdoms’ fought each other incessantly, China experienced its most spectacular burst of invention and prosperity yet, which the Song dynasty inherited. Even the rebirth of China in the late twentieth century owes much to the fragmentation of government and to an explosion of local autonomy.
• Economists are quick to speak of ‘market failure’, and rightly so, but a greater threat comes from ‘government failure’. Because it is a monopoly, government brings inefficiency and stagnation to most things it runs; government agencies pursue the inflation of their budgets rather than the service of their customers; pressure groups form an unholy alliance with agencies to extract more money from taxpayers for their members. Yet despite all this, most clever people still call for government to run more things and assume that if it did so, it would somehow be more perfect, more selfless, next time.
• Victorian Britain’s great good fortune was that at the moment of industrial take-off Robert Peel embraced free trade, whereas Yong-Le had banned it. Between 1846 and 1860, Britain unilaterally adopted a string of measures to open its markets to free trade to a degree unprecedented in history. It abolished the corn laws, terminated the navigation acts, removed all tariffs and agreed trade treaties with France and others incorporating the ‘most favoured nation’ principle – that any liberalisation applied to all trading parties.
• The message from history is so blatantly obvious – that free trade causes mutual prosperity while protectionism causes poverty – that it seems incredible that anybody ever thinks otherwise.
• Yet in the aftermath of the First World War, one by one countries tried beggaring their neighbours in the twentieth century. As currencies devalued and unemployment rose in the 1930s, government after government sought self-sufficiency and import substitution: Greece under Ioannis Metaxas, Spain under Francisco Franco, America under Smoot-Hawley. Global trade fell by two-thirds between 1929 and 1934. In India in the 1930s, the British government imposed tariffs to protect wheat farmers, cotton manufacturers and sugar producers against cheap imports from Australia, Japan and Java respectively. These protectionist measures exacerbated the economic collapse. In five years from 1929, Japanese silk exports collapsed from 36 per cent of the total to 13 per cent. Little wonder that with a rapidly growing population but a shrinking opportunity to export both goods and people, the Japanese regime began seeking imperial space instead.
• Yes, of course, trade is disruptive. Cheap imports can destroy jobs at home – though in doing so they always create far more both at home and abroad, by freeing up consumers’ cash to buy other goods and services. If Europeans find their shoes made cheaply in Vietnam, then they have more to spend on getting their hair done and there are more nice jobs for Europeans in hair salons and fewer dull ones in shoe factories. Sure, manufacturers will and do seek out countries that tolerate lower wages and lower standards – though, prodded by Western activists, in practice their main effect is then to raise the wages and standards in such places, where they most need raising. It is less of a race to the bottom, more of a race to raise the bottom.

Demographics

Key points

• Positive Impact of Population Growth: Ridley argues that a larger population can lead to greater technological progress and innovation. This is because more people mean more ideas, and the exchange of these ideas drives human advancement.
• Sustainability of Population Growth: Ridley often challenges the pessimistic views regarding overpopulation. He suggests that human ingenuity and the ability to innovate will address the challenges posed by growing populations, such as food production and resource management. His optimism extends to the belief that market-driven solutions and technological advancements will continue to improve living standards and manage the environmental impacts of a larger global population.

Key quotes

• [explaining reduction in birth rates in developing countries as they did in developed countries following the industrial revolution]…. Only when women think their children will survive do they plan and complete their families rather than just keep breeding. This remarkable fact seems to be very poorly known. Most Western, educated people seem to think, rationally enough, that keeping babies alive in poor countries is only making the population problem worse and that…well, the implication is usually left unspoken. Jeffrey Sachs recounts that on ‘countless occasions’ after a lecture a member of the audience has ‘whispered’ to him ‘if we save all those children, won’t they simply starve as adults?’ Answer: no. If we save children from dying, people will have smaller families.
• Probably by far the best policy for reducing population is to encourage female education.

Energy

Key point

• The history and future of energy consumption are set out, emphasizing the transition towards more efficient and cleaner energy sources.

Key quotes:

• Humanity’s ingenuity has continually found new ways to harness and use energy more efficiently
• Fossil fuels cannot explain the start of the industrial revolution. But they do explain why it did not end. Once fossil fuels joined in, economic growth truly took off, and became almost infinitely capable of bursting through the Malthusian ceiling and raising living standards. Only then did growth become, in a word, sustainable.
• This leads to a shocking irony. I am about to argue that economic growth only became sustainable when it began to rely on non-renewable, non-green, non-clean power. Every economic boom in history, from Uruk onwards, had ended in bust because renewable sources of energy ran out: timber, cropland, pasture, labour, water, peat. All self-replenishing, but far too slowly, and easily exhausted by a swelling populace. Coal not only did not run out, no matter how much was used: it actually became cheaper and more abundant as time went by, in marked contrast to charcoal, which always grew more expensive once its use expanded beyond a certain point, for the simple reason that people had to go further in search of timber.
• Thanks mainly to new energy technologies, what took a textile worker twenty minutes in 1750 took just one minute in 1850. He could therefore either supply twenty times as many people in a day’s work, or supply each customer with twenty times as much cloth, or free his customer to spend 19/20ths of his income on something other than shirts. That was in essence why the second half of the industrial revolution made Britain rich. It made it possible for fewer people to supply more people with more goods and more services – in Adam Smith’s words, to make ‘a smaller quantity of labour produce a greater quantity of work’.
• Oil, coal and gas are finite. But between them they will last decades, perhaps centuries, and people will find alternatives long before they run out. Fuel can be synthesised from water using any source of power, such as nuclear or solar. At the moment, it costs too much to do so, but as efficiency increases and oil prices rise, then the equation will look different.
• Wind turbines require five to ten times as much concrete and steel per watt as nuclear power plants, not to mention miles of paved roads and overhead cables. To label the land-devouring monsters of renewable energy ‘green’, virtuous or clean strikes me as bizarre. If you like wilderness, as I do, the last thing you want is to go back to the medieval habit of using the landscape surrounding us to make power. Just one wind farm at Altamont in California kills twenty-four golden eagles every year: if an oil firm did that it would be in court. Hundreds of orang-utans are killed a year because they get in the way of oil-palm biofuel plantations. ‘Let’s stop sanctifying false and minor gods,’ says the energy expert Jesse Ausubel, ‘and heretically chant “Renewables are not green”.’
• Be in no doubt: the biofuel industry is not just bad for the economy. It is bad for the planet, too. The chief reason it gained such a stranglehold on American politicians is because of the lobbying and political funding supplied by big companies.
• A sustainable future for nine billion people on one planet is going to come from using as little land as possible for each of people’s needs. And if food yields from land continue to increase at the current rate, the current acreage of farmland will – just – feed the world in 2050, so the extra land for growing fuel will have to come from rainforests and other wild habitats.

Industrialisation

Key point

• Matt Ridley views industrialization as a pivotal force in human prosperity, arguing that it has led to unprecedented improvements in living standards, health, and wealth across the globe. He emphasizes that the exchange of ideas and specialization, which are accelerated by industrial processes, have been crucial in driving innovation, efficiency, and economic growth, ultimately leading to a better quality of life for a larger number of people. Ridley’s perspective challenges the notion that industrialization has purely negative environmental and social impacts, suggesting instead that technological progress and market-driven solutions can address these challenges effectively.

Key quotes

• The industrial revolution caused a leap in the wealth-generating capacity of the population that greatly outstripped its breeding potential but it thereby also caused an increase in compassion, much of which was expressed through the actions of charities and governments.
• A famous print entitled ‘The Distinguished Men of Science of Great Britain Living in the Year 1807–8’, the year that Parliament abolished the slave trade, depicts fifty-one great engineers and scientists all alive at the time – as if they were gathered together by an artist in the library of the Royal Institution. Here are the men who made canals (Thomas Telford), tunnels (Marc Brunel), steam engines (James Watt), locomotives (Richard Trevithick), rockets (William Congreve), hydraulic presses (Joseph Bramah); men who invented the machine tool (Henry Maudslay), the power loom (Edmund Cartwright), the factory (Matthew Boulton), the miner’s lamp (Humphry Davy) and the smallpox vaccine (Edward Jenner). Here are astronomers like Nevil Maskelyne and William Herschel, physicists like Henry Cavendish and Count Rumford, chemists like John Dalton and William Henry, botanists like Joseph Banks, polymaths like Thomas Young, and many more. You look at such a picture and wonder, ‘How did any one country have so much talent in the same place?’
• The premise is false, of course, because it was the aura of the time and place that drew forth (and attracted from abroad – Brunel was French, Rumford American) such talent. For all their brilliance, there are Watts, Davys, Jenners and Youngs galore in every country at every time. But only rarely do sufficient capital, freedom, education, culture and opportunity come together in such a way as to draw them out. Two centuries later, somebody could paint a picture of the great men of Silicon Valley and posterity will stand amazed at the thought that giants like Gordon Moore and Robert Noyce, Steve Jobs and Sergey Brin, Stanley Boyer and Leroy Hood all lived at the same time and in the same place.
• Just as the Californian is today, so in 1700 the British manufacturing entrepreneur was unusually free, compared with both European and Asian equivalents, to invest, invent, expand and reap the profits. His huge capital city was unusual in being dominated by merchants, not the government, and always had been. He also had a world market thanks to the British ships that were plying the tropics of the world. His rural hinterland was filled with people free to sell their labour to the highest bidder. Most of the continent was still dominated by change-resistant lords and serfs neither of whom had an incentive to be more productive.
• The Englishman, by contrast, did not have to answer to petty bureaucrats and pesky tax collectors to the same extent. For this he could partly thank the upheavals of the previous century, including a civil war and a ‘glorious revolution’ against James II’s arbitrary government. The latter event was more than a king-swap; it was in effect a semi-hostile management buy-in of the entire country by Dutch venture capitalists, which resulted in a rush of Dutch capital investment, a lurch towards foreign trade as the engine of state policy in emulation of Holland, and a constitutional shake-up that empowered a parliament of merchants. William III had to settle for respecting his people’s property rights if he was to keep the throne. Add in that Britain did not support a standing army, that a heavily indented coastline allowed seaborne trade to reach most parts of the country, and that the administrative capital of the country was also its commercial capital, and it becomes clear that this was not a bad place to start or expand a business in say 1700. ‘Nowhere else,’ says David Landes, ‘was the countryside so infused with manufacture; nowhere else, the pressures and incentives to change greater, the forces of tradition weaker.’

Technology & Invention

Key points

• Technological Advancements have progressively liberated humanity from hard labor, improving quality of life.
• Ridley argues:
  • Locations of innovation change very quickly
  • Most technology improvements happen on the shop floor, not from scientists.
  • that it’s exchange of Ideas which generates innovation – not capital, IP or governments.

Key quotes:

• 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.
• Innovation is like a bush fire that burns brightly for a short time, then dies down before flaring up somewhere else. At 50,000 years ago, the hottest hot-spot was west Asia (ovens, bows-and-arrows), at 10,000 the Fertile Crescent (farming, pottery), at 5,000 Mesopotamia (metal, cities), at 2,000 India (textiles, zero), at 1,000 China (porcelain, printing), at 500 Italy (double-entry book-keeping, Leonardo), at 400 the Low Countries (the Amsterdam Exchange Bank), at 300 France (Canal du Midi), at 200 England (steam), at 100 Germany (fertiliser); at 75 America (mass production), at 50 California (credit card), at 25 Japan (Walkman). No country remains for long the leader in knowledge creation.
• Few of the inventions that made the industrial revolution owed anything to scientific theory. It is, of course, true that England had a scientific revolution in the late 1600s, personified in people like Harvey, Hooke and Halley, not to mention Boyle, Petty and Newton, but their influence on what happened in England’s manufacturing industry in the following century was negligible. Newton had more influence on Voltaire than he did on James Hargreaves. The industry that was transformed first and most, cotton spinning and weaving, was of little interest to scientists and vice versa. The jennies, gins, frames, mules and looms that revolutionised the working of cotton were invented by tinkering businessmen, not thinking boffins: by ‘hard heads and clever fingers’. It has been said that nothing in their designs would have puzzled Archimedes.
• The inescapable fact is that most technological change comes from attempts to improve existing technology. It happens on the shop floor among apprentices and mechanicals, or in the workplace among the users of computer programs, and only rarely as a result of the application and transfer of knowledge from the ivory towers of the intelligentsia.
• Capital? Perhaps money is the answer to the question of what drives the innovation engine. The way to incentivise innovation, as any Silicon Valley venture capitalist will tell you, is to bring capital and talent together. For most of history, people have been adept at keeping them apart. Inventors will always go where the money can be found to back them. One of Britain’s advantages in the eighteenth century was that it was accumulating a collective fortune, made from foreign trade, and a comparatively efficient capital market to distribute funds to innovators. More specifically, the industrial revolution required long-term investment in capital equipment that could not easily be liquidated – factories and machines, for the most part. More than other countries, Britain’s capital markets were in a position to supply this investment in the eighteenth century. London had managed to borrow from Amsterdam and nurture in the eighteenth century joint-stock, limited liability companies, liquid markets in bonds and shares, and a banking system capable of generating credit. These helped to give inventors the wherewithal to turn their ideas into products.
• Far from being able to spend their way into novelty and growth, companies are perpetually discovering that their R&D budgets get captured by increasingly defensive and complacent corporate bureaucrats, who spend them on low-risk, dull projects and fail to notice gigantic new opportunities, which thereby turn into threats.
• Though they may start out full of entrepreneurial zeal, once firms or bureaucracies grow large, they become risk-averse to the point of Luddism. The pioneer venture capitalist Georges Doriot said that the most dangerous moment in the life of a company was when it had succeeded, for then it stopped innovating.
• One solution is for companies to try to set their employees free to behave like entrepreneurs. Sony did this after it discovered in the 1990s that its famously pioneering technologists had succumbed to a ‘not-invented-here’ mentality. General Electric under Jack Welch managed it for a while by fragmenting the company into smaller competing units. 3M – flush with success after its employee Art Fry dreamed up the idea of non-stick sticky notes (Post-its) while trying to mark the place in his hymn book in church in 1980 – told its technologists to spend 15 per cent of their time working on their own projects and by harvesting customers’ ideas.
• Intellectual property? Inventors will not invent unless they can keep at least some of the proceeds of their inventions. After all, somebody will not invest time and effort in planting a crop in his field if he cannot expect to harvest it and keep the profit for himself – a fact Stalin, Mao and Robert Mugabe learned the hard way – so surely nobody will invest time and effort in developing a new tool or building a new kind of organisation if he cannot keep at least some of the rewards for himself. Yet intellectual property is very different from real property, because it is useless if you keep it to yourself. The abstract concept can be infinitely shared. This creates an apparent dilemma for those who would encourage inventors. People get rich by selling each other things (and services), not ideas. Manufacture the best bicycles and you profit handsomely; come up with the idea of the bicycle and you get nothing because it is soon copied. If innovators are people who make ideas, rather than things, how can they profit from them? Does society need to invent a special mechanism to surround new ideas with fences, to make them more like houses and fields? If so, how are ideas to spread? There are several ways to turn ideas into property. You can keep the recipe secret, as John Pemberton did for Coca-Cola in 1886. This works well where it is hard for rivals to ‘reverseengineer’ your secrets by dismantling your products. Machinery, by contrast, betrays its secrets too easily. The British pioneers of industrial textile manufacture largely failed in their attempts to use trade secrecy laws to protect themselves.
• Intellectual property is an important ingredient of innovation, when innovation is happening, but it does very little to explain why some times and places are more innovative than others.
• Government? A large study by the Organisation for Economic Co-operation and Development concluded that government spending on R&D has no observable effect on economic growth, despite what governments fondly believe. Indeed it ‘crowds out resources that could be alternatively used by the private sector, including private R&D’. This rather astonishing conclusion has been almost completely ignored by governments.
• Exchange! The perpetual innovation machine that drives the modern economy owes its existence not mainly to science (which is its beneficiary more than its benefactor); nor to money (which is not always a limiting factor); nor to patents (which often get in the way); nor to government (which is bad at innovation). It is not a top-down process at all. Instead, I am going to try now to persuade you that one word will suffice to explain this conundrum: exchange. It is the ever-increasing exchange of ideas that causes the ever-increasing rate of innovation in the modern world.
• Technologies emerge from the coming together of existing technologies into wholes that are greater than the sum of their parts.
• The history of the modern world is a history of ideas meeting, mixing, mating and mutating. And the reason that economic growth has accelerated so in the past two centuries is down to the fact that ideas have been mixing more than ever before.

Pessimistic fallacies

Key points

• Persistent Pessimism Despite Progress: Ridley observes a consistent trend of pessimism throughout modern history, with dire predictions ranging from famines and plagues to global warming and asteroid impacts. Despite these fears, he notes that humanity has continually adapted and overcome challenges through innovation and market-driven solutions, suggesting that pessimism often overlooks human ingenuity and problem-solving capabilities.
• Critique of Environmentalism and the Woke: Ridley argues against the notion of turning back economic progress, emphasizing that prosperity, free enterprise, and technological innovation have historically led to improvements in health, wealth, and environmental stewardship, contrary to the pessimistic views that advocate for a return to more restrictive and less prosperous times.

Key quotes

• The bookshops are groaning under ziggurats of pessimism. The airwaves are crammed with doom. In my own adult lifetime, I have listened to implacable predictions of growing poverty, coming famines, expanding deserts, imminent plagues, impending water wars, inevitable oil exhaustion, mineral shortages, falling sperm counts, thinning ozone, acidifying rain, nuclear winters, mad-cow epidemics, Y2K computer bugs, killer bees, sex-change fish, global warming, ocean acidification and even asteroid impacts that would presently bring this happy interlude to a terrible end. I cannot recall a time when one or other of these scares was not solemnly espoused by sober, distinguished and serious elites and hysterically echoed by the media. I cannot recall a time when I was not being urged by somebody that the world could only survive if it abandoned the foolish goal of economic growth.
• The fashionable reason for pessimism changed, but the pessimism was constant. In the 1960s the population explosion and global famine were top of the charts, in the 1970s the exhaustion of resources, in the 1980s acid rain, in the 1990s pandemics, in the 2000s global warming. One by one these scares came and (all but the last) went. Were we just lucky? Are we, in the memorable image of the old joke, like the man who falls past the first floor of the skyscraper and thinks ‘So far so good!’? Or was it the pessimism that was unrealistic?
• It is my proposition that the human race has become a collective problem-solving machine and it solves problems by changing its ways. It does so through invention driven often by the market: scarcity drives up price; that encourages the development of alternatives and of efficiencies. It has happened often in history. When whales grew scarce, petroleum was used instead as a source of oil. (As Warren Meyer has put it, a poster of John D. Rockefeller should be on the wall of every Greenpeace office.) The pessimists’ mistake is extrapolationism: assuming that the future is just a bigger version of the past. As Herb Stein once said, ‘If something cannot go on forever, then it will not.’
• The craze for eugenics that swept the world, embraced by left and right with equal fervour, after 1900 and caused the passage of illiberal and cruel laws in democracies like America as well as autocracies like Germany, took as its premise the deterioration of the blood lines caused by the overbreeding of the poor and the less intelligent. A huge intellectual consensus gathered around the idea that a distant catastrophe must be averted by harsh measures today (sound familiar?). ‘The multiplication of the feeble-minded’ said Winston Churchill in a memo to the prime minister in 1910, ‘is a very terrible danger to the race.’ Theodore Roosevelt was even more explicit: ‘I wish very much that the wrong people could be prevented entirely from breeding; and when the evil nature of these people is sufficiently flagrant, this should be done.
• After the Second World War, led by Konrad Adenauer’s West Germans, Europeans enthusiastically followed America down the path of free enterprise. There dawned a golden age after 1950 of peace (for most), prosperity (for many), leisure (for the young) and progress (in the form of accelerating technological change).
• An unspoken alliance, Leadbetter argued, developed between reactionaries and radicals, between nostalgic aristocrats, religious conservatives, eco-fundamentalists and angry anarchists, to persuade people that they should be anxious and alarmed.
• Horrified by the rate of change, and the undermining of the status of noble intellectuals relative to brash tradesmen, ‘the stasis-craving social critics who have shaped the western zeitgeist for decades’ (in Virginia Postrel’s words) lashed out at the new and yearned for stability.
• Today, the drumbeat has become a cacophony. 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.
• Even the good news is presented as bad news. Reactionaries and radicals agree that ‘excessive choice’ is an acute and present danger – that it is corrupting, corroding and confusing to encounter ten thousand products in the supermarket, each reminding you of your limited budget and of the impossibility of ever satisfying your demands.
• Good news is no news, so the media megaphone is at the disposal of any politician, journalist or activist who can plausibly warn of a coming disaster.
• ‘Hysteria over an avian flu pandemic has been very good for the Chicken Little media, authors, ambitious health officials, drug companies…But even as many of the panic-mongers have begun to lie low, the vestiges of hysteria remain – as do the misallocations of billions of dollars from more serious health problems. Too bad no one ever holds the doomsayers accountable for the damage they’ve done.’
• Many of today’s extreme environmentalists not only insist that the world has reached a ‘turning point’ – quite unaware that their predecessors have made the same claim for two hundred years about many different issues – but also insist that the only sustainable solution is to retreat, to cease economic growth and enter progressive economic recession. What else can they mean by demanding a campaign to ‘de-develop the United States’, in the words of President Obama’s science adviser John Holdren; or ‘isn’t the only hope for the planet that the industrialised civilisations collapse? Isn’t it our responsibility to bring that about?’, in the words of Maurice Strong, first executive director of the United Nations Environment Programme (UNEP); or that what is needed is ‘an ordered and structured down-sizing of the global economy’ in the words of the journalist George Monbiot? This retreat must be achieved, says Monbiot, by ‘political restraint’. This means not just that growing your company’s sales would be a crime, but failing to shrink them; not just that travelling further than your ration of miles would be an offence, but failing to travel fewer miles each year; not just that inventing a new gadget would be illegal, but failing to abandon existing technologies; not just that growing more food per acre would be a felony, but failing to grow less – because these are the things that constitute growth.
• Here’s the rub: this future sounds awfully like the feudal past. The Ming and Maoist emperors had rules restricting the growth of businesses; forbidding unauthorised travel; punishing innovation; limiting family size. They do not say so, but that is the inevitable world the pessimists want to return to when they speak of retreat.
• As for fresh water, the evidence suggests, remarkably, that, other things being equal, warming will itself reduce the total population at risk from water shortage. Say again? Yes, reduce. On average rainfall will increase in a warmer world because of greater evaporation from the oceans, as it did in previous warm episodes such as the Holocene (when the Arctic ocean may have been almost ice-free in summer), the Egyptian, Roman and medieval warm periods. The great droughts that changed history in western Asia happened, as theory predicts, in times of cooling: 8,200 years ago and 4,200 years ago especially. If you take the IPCC’s assumptions and count the people living in zones that will have more water versus zones that will have less water, it is clear that the net population at risk of water shortage by 2100 falls under all their scenarios.
• 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 1990 levels, assuming it could be done, would leave more than 90 per cent of human mortality causes untouched.
• Although green campaigners are wont to argue that raising the cost of energy is a good thing, by definition it destroys jobs by reducing investment in other sectors. ‘The suggestion that we can lift ourselves out of the economic doldrums by spending lavishly on exceptionally expensive new sources of energy is absurd,’ writes Peter Huber.
• But the obvious way to go low-carbon is nuclear. Nuclear power plants already produce more power from a smaller footprint, with fewer fatal accidents and less pollution than any other energy technology. The waste they produce is not an insoluble issue. It is tiny in volume (a Coke can per person per lifetime), easily stored and unlike every other toxin gets safer with time – its radioactivity falls to one-billionth of the starting level in two centuries. These advantages are growing all the time. Better kinds of nuclear power will include small, disposable, limited-life nuclear batteries for powering individual towns for limited periods and fast-breeder, pebble-bed, inherent-safe atomic reactors capable of extracting 99 per cent of uranium’s energy, instead of 1 per cent as at present, and generating even smaller quantities of short-lived waste while doing so. Modern nuclear reactors are already as different from the inherently unstable, uncontained Chernobyl ones as a jetliner is from a biplane. Perhaps one day fusion will contribute, too, but do not hold your breath.
• The way to choose which of these technologies to adopt is probably to enact a heavy carbon tax, and cut payroll taxes (National Insurance in Britain) to the same extent. That would encourage employment and discourage carbon emissions. The way not to get there is to pick losers, like wind and biofuel, to reward speculators in carbon credits and to load the economy with rules, restrictions, subsidies, distortions and corruption.

The future / Conclusion

Key Points:

• Ridley concludes by reiterating his belief in the power of human innovation and the exchange of ideas to overcome challenges and improve the human condition.

Key quotes

• Optimism is rational because it is the innovators, not the pessimists, who have shaped the modern world.
• In this book I have tried to build on both Adam Smith and Charles Darwin: to interpret human society as the product of a long history of what the philosopher Dan Dennett calls ‘bubble-up’ evolution through natural selection among cultural rather than genetic variations, and as an emergent order generated by an invisible hand of individual transactions, not the product of a top-down determinism.
• I have tried to show that, just as sex made biological evolution cumulative, so exchange made cultural evolution cumulative and intelligence collective, and that there is therefore an inexorable tide in the affairs of men and women discernible beneath the chaos of their actions. A flood tide, not an ebb tide.
• ‘It is the long ascent of the past that gives the lie to our despair,’ said H.G. Wells.
• It is a common trick to forecast the future on the assumption of no technological change, and find it dire. This is not wrong. The future would indeed be dire if invention and discovery ceased. 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.’ By far the most dangerous, and indeed unsustainable thing the human race could do to itself would be to turn off the innovation tap. Not inventing, and not adopting new ideas, can itself be both dangerous and immoral.
• How good could it get? The bottom-up world is to be the great theme of this century. Doctors are having to get used to well-informed patients who have researched their own illnesses. Journalists are adjusting to readers and viewers who select and assemble their news on demand. Broadcasters are learning to let their audiences choose the talent that will entertain them. Engineers are sharing problems to find solutions. Manufacturers are responding to consumers who order their products à la carte. Genetic engineering is going to become open-source, where people, not corporations, decide what combinations of genes they want.