The Hockey Stick of Human Prosperity

In this series, Professor Don Boudreaux explores the question economists have been asking since the era of Adam Smith -- what creates wealth? On a timeline of human history, the recent rise in standards of living resembles a hockey stick -- flatlining for all of human history and then skyrocketing in just the last few centuries. Without specialization and trade, our ancient ancestors only consumed what they could make themselves. How can specialization and trade help explain the astonishing growth of productivity and output in such a short amount of time—after millennia of famine, low life expectancy, and incurable disease?

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- [Don] The astonishing
growth in prosperity

in the last two
or three hundred years

is one of the greatest events
of humankind.

Take the average human
in say the year 1000 BC.

He's poor, fighting to find food
and to fend off diseases.

Fast forward 500 years
to the time of classical Greece.

Still poor still hungry.

How about another
thousand years after that?

It's the dark ages.

Wow. Still poor.

Then jump to the 18th century
and forward.

Things change rapidly.

This phenomenon is known
as the hockey stick

of human prosperity.

Take what is surely one
of the most important measures

of human well-being:
life expectancy.

Before the Industrial Revolution,
life expectancy

was around thirty years.

Today in the United States,
we expect to live

to be about eighty.

Prior to the industrial revolution,
one in four kids would die

before the age of 5.

Today in developed countries,
it is more like one

and two hundred.

Due to better nutrition,
we grow to be four inches taller

than we were just 250 ago.

Remember this disease?

No you don't,
because it was eradicated in 1977.

Look around -- you'll find a roof
over your head

and a hard floor under your feet.

Most of our ancestors
with the huts with dirt floors

and thatched roofs.

Everything was infested
with insects and rodents.

Streets and alleys
were open sewers.

There were none of these.

The filt was horrible
and often toxic.

Our ancestors ate gruel

and wore the same
home-made underwear over and over.

Now, even the least fortunate
Americans

typically have electricity,
running water, toilets,

refrigerators, televisions,
and, yes, cheap washable underwear.

Those of us who live
in modern industrial society

are incredibly, amazingly,
off the charts rich

compared to our ancestors,

and here's yet another
huge difference between us

and our ancestors.

Before the Industrial Revolution,
people knew how to make

from scratch many other things
they consumed.

They made a lot
of their own clothing,

grew most of their own food,
and build their own dwellings.

Fast forward to today
and believe it or not,

none of us is a hint
how to make the majority

of the things that we consume.

Just getting ready in the morning
involves taking many trips

around the globe.

Take this coffee for example.

beans come from Guatemala
and they were brewed

in this coffeemaker
from Switzerland.

The container ship that carried
the beans was built in Korea.

It's insured by a company
from London

and it's captained by a Frenchman
who loves Turkish cigarettes.

We've transitioned from each of us
doing many things

to each of us doing one thing.

Having a job only makes sense
in a modern world

where each individual typically
does only one type of work.

So while we mostly only produce
one thing doing one job

each of us now consumes
a whole bunch of products

that require a whole bunch
of jobs to produce.

The question
where prosperity comes from

launched the field of economics.

It's why Adam Smith
wrote the first book

in modern economics.

An inquiry into the nature
and causes

of The Wealth of Nations.

Back in 1776 when he published it,
Smith was trying to understand

the causes of modern prosperity
that were just starting to appear.

Poverty and starvation
were still normal as they had been

from the beginning,
but in the late 18th century,

for the first time ever,
the masses began to enjoy riches

once reserved only
for the nobility.

It is this mass prosperity
that Adam Smith sought to explain.

Why was it happening?

What was causing wealth
to move from being the exception

to being the norm.

Now look around try to figure out
what causes poverty

instead of what causes prosperity.

You are watching
Everyday Economics,

a course where we use
the lens of Economics

to explore everyday questions.

This section is about trade.

In the upcoming videos,
we will attempt to explain

how trade plays a role
in our prosperity.

You also get to decide
where the course goes.

Maybe you have some questions
related to trade

that you've wondered about.

We'll cover the basics
and then you tell us

what topics come next.

♪ [music] ♪