The Rational Optimist

The Rational Optimist by Matt Ridley

In one line: The progress of human civilization is largely due to specialization (division of labor) and exchange (of goods, services, and ideas).

Specialization and trade
When a person specializes in a certain task, they can get better and more efficient at it. Exchange allows them to trade their good or service for other goods or services he or she needs. Through specialization, two people can together produce more in less time than if they each worked independently. Prosperity is increasing the amount of goods and services one can acquire with the same amount of work. "Self-sufficiency is poverty" (p 41) because it greatly limits the amount of goods or services you can consume. Moving from self-sufficiency to interdependence through specialization and trade leads to prosperity.

Human civilization has become vastly more prosperous than our ancestors, and will continue to increase in prosperity for the foreseeable future.
The four basic human needs (food, clothing, shelter, and fuel) have become much cheaper in the past two centuries. Cost is better measured as the time or amount of work required to afford something, rather than monetary value. Not only do we earn more today than ever before, but we also have many more goods and services available to us.

Human civilization evolved through trade.
"More than any other animal, human beings borrow against their future capabilities by depending on others in their early years." (p 29). Hunter gatherers specialize in food that needs to be extracted and processed, and tools of sharpened rocks and bones and cooking techniques made this more efficient. Being able to more efficiently fuel the brain, allowed it to grow larger in proportion to stomach size. The increasing ability to specialize gave rise to what Friedrich Hayek called the catallaxy, "the ever expanding possibility generated by a growing division of labor" (p 56). Trade enables "collective brains" - collectively, a society with specialization (and hence trade) can learn and contain vastly more knowledge than a group of individuals who all know the same things, but live independently.

Morals from trade.
Trade requires trust, which goes hand in hand with reputation. The claims of products of a company with a reputation to protect can be trusted because it is in the company's self interest to produce a quality product. When people grew dependent on the market in the 19th century, was when slavery, child labor, and many forms of cruelty became unacceptable. Mechanizing housework allowed housewives to spend less time on the same work, giving them more free time, helping give rise to the feminist movement. Without institutional restraints on violence between people, it is normal for it to happen. There is a lot of evidence that primitive societies throughout history were often at war with each other. In developed societies, violence makes the news precisely because it is so rare.

"Trade comes first, not last." p128
Trade made agriculture possible because it encouraged the specialization of farming. Cities grow around centers of trade. Exchange of ideas leads to technological advancement. Trade enables all of the benefits of civilization.

"Merchants make wealth - chiefs nationalize it." p160
Trade doesn't arise from central planning - it emerged from the interactions of individuals and evolves to fit the needs and the products of the time. Monopolies are not good for the economy - it promotes stagnation rather than innovation and a defensive hold on the monopoly. Strong governments are essentially monopolies and stagnate innovation. Political fragmentation of market participants can actually be more helpful than harmful, because it prevents the takeover of a central power. "According to Angus Maddison's estimates, [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" (p180). China was generally more prosperous during times of political instability or fragmentation. united strong governments tended to be highly restrictive.

Markets can fail, but so can governments. 
Markets work well for goods and services for immediate consumption, but not for assets, which are prone to bubbles. Governments, by being monopolies, do not have interests aligned with their citizens. They stifle innovation and seek their own self gain. When population boom forces down the price of manual labor, people replace animals or machines for certain jobs, leading to a reversal of economic progress. Restrictions on immigration and emigration prevent overcrowded people from moving to places where they could better contribute, leading to both populations being more self-sufficient than they otherwise would need to be.

Economic progress and lower mortality is leading the world to lower birth rates, slowing population growth.
There have long been fears of overpopulating the world to unsustainable levels, but declining birth rates are making this risk more remote. The exact reasons for this decline in birthrates is largely not understood, although there are theories on the contributing factors (health, wealth, education, urbanization, and emancipation). Lower mortality means women can have fewer children knowing they are more likely to survive. Increased wealth affords other distractions from making and raising children. Population stabilizes when we become more well off and it appears that birth rates settle around 2 children per woman in highly developed countries

Energy fuels society and its progress.
Before industrialization, societies used mostly renewable resources as fuel (wind, water, sun, trees) but their energy capacities were too low. It wasn't until the use of nonrenewable coal and petroleum that energy sources had the capacity to fuel large economic and technological advances. Renewables produce less energy but don't run out; petroleum is finite (but vast) and produces much more energy. "By 1870, the burning of coal in Britain was generating as many calories as would have been expended by 850 million laborers" (p 231). This energy allowed people to do even more with less effort, increasing propserity, and raising the income across all classes during the industrial revolution. Factory workers in the early industrial revolution had horrible conditions, but people still flocked to factories because their prospects were better than in rural farming communities.

What about environmental impacts?
There is no doubt that fossil fuels harm the environment, but they have vastly increased the prosperity of most people on earth. Fossil fuels also reduced the amount of land required to produce the same amount of energy, sparing deforestation and farmland. 'Green' energies require vastly more landscape to produce. The potential for climate change is the only argument for "green" energies actually being better for the environment than fossil fuels

Innovation: "The more you prosper, the more you can prosper. The more you invent, the more inventions become possible." (p248).
Science does not drive invention, but rather the other way around. "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" (p 269). Innovation responds to needs and opportunities, and thus requires exchange - of ideas, and goods/services with demands/opportunities. "Ptolemaic astronomy was ingenious and precise, if not quite accurate, but it was never used for navigation, because astronomers and sailors did not meet" (p 270). Great minds (scientists, engineers) don't magically appear in the same place - they are drawn there by the ripe conditions for discovery and progress (Britain of the industrial revolution, silicon valley of modern day). Knowledge is not bounded, but can restrict prosperity growth if it stops growing.

Africa and climate change
Warnings of impending doom often result from a simple extrapolation of the current situation, but the world is ever-changing. Climate change has real and impending consequences, but is unlikely to be the cataclysm that many make it out to be. Both global cooling and warming were claimed to be disastrous, implying that the current temperature, which has constantly changed through history, is perfect. A small risk of catastrophic climate change does not warrant the disproportionate attention that it receives over other rare, but large disasters, such as asteroid collision. The deaths caused by pessimistic predictions of global warming are dwarfed by the current deaths from every day causes (traffic death, obesity) and undeveloped societies (malaria).

Much of Africa is in a serious position, caught between poor development and climate change. The poor are hit hardest by natural disasters, but also by high energy prices. Reducing emissions raises energy prices, but the increase in energy consumption required by an increasingly prosperous African economy raises the risk of climate change effects. Foreign aid does not solve the issue, as it encourages corruption within governments rather than entrepreneurship. "Aid to Africa doubled in the 1980s as a percentage of the continent's GDP; growth simultaneously dropped from 2 percent to zero" (p 317). Governments need to change to create the conditions for prosperity. Protected property rights explains much of the economic growth throughout the world, when people can work to build their property rather than protect it from theft. Effective laws that promote growth are not mandated from the top down, but evolve from the bottom up, transforming productive customs into laws.

"The bottom-up world is to be the great theme of this century" p355
People are more informed, have more choices, share and collaborate more, and acquire and disseminate information on demand.