The Rational Optimist: How Prosperity Evolves. Matt Ridley

after this book is published, humanity will be much, much better off than it is today, and so will the ecology of the planet it inhabits. This book dares the human race to embrace change, to be rationally optimistic and thereby to strive for the betterment of humankind and the world it inhabits.

      Some will say that I am merely restating what Adam Smith said in 1776. But much has happened since Adam Smith to change, challenge, adjust and amplify his insight. He did not realise, for instance, that he was living through the early stages of an industrial revolution. I cannot hope to match Smith’s genius as an individual, but I have one great advantage over him – I can read his book. Smith’s own insight has mated with others since his day.

      Moreover, I find myself continually surprised by how few people think about the problem of tumultuous cultural change. I find the world is full of people who think that their dependence on others is decreasing, or that they would be better off if they were more self-sufficient, or that technological progress has brought no improvement in the standard of living, or that the world is steadily deteriorating, or that the exchange of things and ideas is a superfluous irrelevance. And I find a deep incuriosity among trained economists – of which I am not one – about defining what prosperity is and why it happened to their species. So I thought I would satisfy my own curiosity by writing this book.

      I am writing in times of unprecedented economic pessimism. The world banking system has lurched to the brink of collapse; an enormous bubble of debt has burst; world trade has contracted; unemployment is rising sharply all around the world as output falls. The immediate future looks bleak indeed, and some governments are planning further enormous public debt expansions that could hurt the next generation’s ability to prosper. To my intense regret I played a part in one phase of this disaster as non-executive chairman of Northern Rock, one of many banks that ran short of liquidity during the crisis. This is not a book about that experience (under the terms of my employment there I am not at liberty to write about it). The experience has left me mistrustful of markets in capital and assets, yet passionately in favour of markets in goods and services. Had I only known it, experiments in laboratories by the economist Vernon Smith and his colleagues have long confirmed that markets in goods and services for immediate consumption – haircuts and hamburgers – work so well that it is hard to design them so they fail to deliver efficiency and innovation; while markets in assets are so automatically prone to bubbles and crashes that it is hard to design them so they work at all. Speculation, herd exuberance, irrational optimism, rent-seeking and the temptation of fraud drive asset markets to overshoot and plunge – which is why they need careful regulation, something I always supported. (Markets in goods and services need less regulation.) But what made the bubble of the 2000s so much worse than most was government housing and monetary policy, especially in the United States, which sluiced artificially cheap money towards bad risks as a matter of policy and thus also towards the middlemen of the capital markets. The crisis has at least as much political as economic causation, which is why I also mistrust too much government.

      (In the interests of full disclosure, I here note that as well as banking I have over the years worked in or profited directly from scientific research, species conservation, journalism, farming, coal mining, venture capital and commercial property, among other things: experience may have influenced, and has certainly informed, my views of these sectors in the pages that follow. But I have never been paid to promulgate a particular view.)

      Rational optimism holds that the world will pull out of the current crisis because of the way that markets in goods, services and ideas allow human beings to exchange and specialise honestly for the betterment of all. So this is not a book of unthinking praise or condemnation of all markets, but it is an inquiry into how the market process of exchange and specialisation is older and fairer than many think and gives a vast reason for optimism about the future of the human race. Above all, it is a book about the benefits of change. I find that my disagreement is mostly with reactionaries of all political colours: blue ones who dislike cultural change, red ones who dislike economic change and green ones who dislike technological change.

      I am a rational optimist: rational, because I have arrived at optimism not through temperament or instinct, but by looking at the evidence. In the pages that follow I hope to make you a rational optimist too. First, I need to convince you that human progress has, on balance, been a good thing, and that, despite the constant temptation to moan, the world is as good a place to live as it has ever been for the average human being – even now in a deep recession. That it is richer, healthier, and kinder too, as much because of commerce as despite it. Then I intend to explain why and how it got that way. And finally, I intend to see whether it can go on getting better.

       CHAPTER 1 A better today: the unprecedented present

       On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?

      THOMAS BABINGTON MACAULAY

       Review of Southey’s Colloquies on Society

      By the middle of this century the human race will have expanded in ten thousand years from less than ten million to nearly ten billion people. Some of the billions alive today still live in misery and dearth even worse than the worst experienced in the Stone Age. Some are worse off than they were just a few months or years before. But the vast majority of people are much better fed, much better sheltered, much better entertained, much better protected against disease and much more likely to live to old age than their ancestors have ever been. The availability of almost everything a person could want or need has been going rapidly upwards for 200 years and erratically upwards for 10,000 years before that: years of lifespan, mouthfuls of clean water, lungfuls of clean air, hours of privacy, means of travelling faster than you can run, ways of communicating farther than you can shout. Even allowing for the hundreds of millions who still live in abject poverty, disease and want, this generation of human beings has access to more calories, watts, lumen-hours, square feet, gigabytes, megahertz, light-years, nanometres, bushels per acre, miles per gallon, food miles, air miles, and of course dollars than any that went before. They have more Velcro, vaccines, vitamins, shoes, singers, soap operas, mango slicers, sexual partners, tennis rackets, guided missiles and anything else they could even imagine needing. By one estimate, the number of different products that you can buy in New York or London tops ten billion.

      This should not need saying, but it does. There are people today who think life was better in the past. They argue that there was not only a simplicity, tranquillity, sociability and spirituality about life in the distant past that has been lost, but a virtue too. This rose-tinted nostalgia, please note, is generally confined to the wealthy. It is easier to wax elegiac for the life of a peasant when you do not have to use a long-drop toilet. Imagine that it is 1800, somewhere in Western Europe or eastern North America. The family is gathering around the hearth in the simple timber-framed house. Father reads aloud from the Bible while mother prepares to dish out a stew of beef and onions. The baby boy is being comforted by one of his sisters and the eldest lad is pouring water from a pitcher into the earthenware mugs on the table. His elder sister is feeding the horse in the stable. Outside there is no noise of traffic, there are no drug dealers and neither dioxins nor radioactive fall-out have been found in the cow’s milk. All is tranquil; a bird sings outside the window.

      Oh please! Though this is one of the better-off families in the village, father’s Scripture reading is interrupted by a bronchitic cough that presages the pneumonia that will kill him at 53 – not helped by the wood smoke of the fire. (He is lucky: life expectancy even in England was less than 40 in 1800.) The baby will die of the smallpox that is now causing him to cry; his sister will