Friday, June 20, 2008

Lets compare the life of an average American in 1900 and today. On every dimension you can think of, we all are orders of magnitude wealthier today (by wealth, I mean the term broadly. I mean not just cash, like Scrooge McDuck's big vault, but also lifespan, healthiness, leisure time, quality of life, etc).
In 1900, the average person started their working life at 13, worked 10 hours a day, six days a week with no real vacation right up to the day they died in their mid-forties. Today, the average person works 8 hours a day for five days a week and gets 2-3 weeks of vacation. They work from the age of 18, and sometimes start work as late as 25, and typically take at least 10 years of retirement before they die.
But what about the poor? Well, the poor are certainly wealthier today than the poor were in 1900. But in many ways of the 19th century. Today, even people below the poverty line have a good chance to live past 70. 99% of those below the poverty line in the US have electricity, running water, flush toilets, and a refrigerator. 95% have a TV, 88% have a phone, 71% have a car, and 70% have air conditioning. Cornelius Vanderbilt had none of these, and his children only got running water and electricity later in life.

To anticipate the zero-summer's response, I presume they would argue that the US somehow did this by "exploiting" other countries. Its hard to imagine the mechanism for this, especially since the US did not have and in fact the US net gave away more wealth to other nations in the last century (in the form of outright grants as well as money and lives spent in their defense) than every other nation on earth combined. I won't go into the detailed proof here, but you can do the same analysis we did for the US for every country in the world: Virtually no one has gotten worse, and 99.9% of the people of the world are at least as wealthy (again in the broad sense) or wealthier than in 1900. Yes, some have slipped in relative terms vs. the richest nations, but everyone is up on an absolute basis.
Which leads to the obvious conclusion, that I shouldn't have had to take so much time to prove: The world, as a whole and in most of its individual parts, is wealthier than in was in 1900. Vastly more wealthy. Which I recognize can be disturbing to our intuition honed on the physical world. I mean, where did the wealth come from? Out of thin air? How can that be?
Interestingly, in the 19th century, scientists faced a similar problem in the physical world in dating the age of the Earth There was evidence all around them (from fossils, rocks, etc) that the earth had to be hundreds of millions, perhaps billions of years old. The processes of evolution Darwin described had to occur over untold millions of years. Yet no one could accept an age over a few million for the solar system, because they couldn't figure out what could fuel the Sun for longer than that. Every calculation they made showed that by any form of combustion they understood, the sun would burn out in, at most, a few tens of millions of years. If the sun and earth was so old, where was all that energy coming from? Out of thin air?
It was Einstein that solved the problem meant that there were new processes (e.g. fusion) where very tiny amounts of mass were converted to unreasonably large amounts of energy. Amounts of energy so large that it tends to defy human intuition. Here was an enormous, really huge source of potential energy that no one before even suspected.
Which gets me back to wealth. To balance the wealth equation, there must be a huge reservoir out there of potential energy, or I guess you would call it potential wealth. This source is the human mind. All wealth flows from the human mind, and that source of energy is also unreasonably large, much larger than most people imagine.
But you might say - that can't be right. What about gold, that's wealth isn't it, and it just comes out of the ground. Yes, it comes out of the ground, but how? And where? If you have ever traveled around the western US, say in Colorado, you will have seen certain hills covered in old mines. It always fascinated me, how those hills riddled with shafts looked, to me, exactly the same as the 20 other hills around it that were untouched. How did they know to look in that one hill? :
I seldom use the term "natural resource." With the possible exception of water, no resource is natural. Usefulness is not an objective and timeless feature ordained by nature for those scarce things that we regard as resources. That is, all things that are resources become resources only after individual human beings creatively figure out how these things can be used in worthwhile ways for human betterment.
Consider, for example, crude oil. A natural resource? Not at all. I suspect that to the pre-Columbian peoples who lived in what is now Pennsylvania, the inky, smelly, black matter that oozed into creeks and streams was a nuisance. To them, oil certainly was no resource.
Petroleum’s usefulness to humans – hence, its value to humans – is built upon a series of countless creative human insights about how oil can be used and how it can be cost-effectively extracted from the earth. Without this human creativity, oil would objectively exist but it would be either useless or a nuisance.

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