Drake’s Socioeconomic Upgrade: World Edition
Started from the bottom, now we’re here. And entrepreneurs are to thank.
Scott Sumner told me “never to reason from a price change”, but that doesn’t mean prices have no reason.
Prices are powerful, and they shape the market daily. What Adam Smith called the “invisible hand” — is the will of the people through exchange. It’s not invisible, but it may seem that way because ALL of that information is unavailable to any one person or institution, as Nobel Laureate F.A. Hayek points out in The Use of Knowledge in Society. On a daily basis, people make choices on what they will or will not buy depending on many varying factors, and one of those factors is how much something costs.
The Great Enrichment of the past two centuries has had one primary source: the liberation of ordinary people to pursue their dreams of economic betterment. (AKA people were encouraged to be entrepreneurial) (H/T) Deirdre McCloskey
Two centuries ago, the average income per person throughout the planet (in present-day prices) was about $3 a day. Now it’s $33 a day — which is Brazil’s current level and the level of per capita income in the U.S. in 1940.
Over the past 200 years, the average real income per person — even in impoverished places like Chad and North Korea — has grown by a factor of 10. A stunning number to be sure. In countries that adopted trade and economic betterment wholeheartedly, like Japan, Sweden, and the U.S., it is more like a factor of 30 — even more stunning.
So basically if people had stopped being haters sooner, we would have saved millions of resources…and hours…and lives. Man did we fuck up, but of course, hindsight is 20/20.
The funny thing is many people assert that we’re backtracking when it comes to inequality. This is far from the truth according to American Enterprise Institute’s Mark Perry, as he explains here by analyzing prices and wages:
Quite a striking contrast, don’t you think? And keep in mind that today’s minimum wage of $7.25 an hour is actually 13% below the inflation-adjusted minimum wage, which would’ve been $8.60 an hour in 1973. So really today’s teenagers would actually have more than $4,100 to spend on today’s electronic gadgets if the minimum wage was adjusted to $8.60 per hour to make it equal to the 1973 minimum wage on an inflation-adjusted basis.
When people at the top rise, so do the people at the bottom. And by a lot. But here’s the catch, it takes time for products to drop in prices. But why you might ask? Because of innovation!
Without innovation, we would stagnate because the status quo would never change. But that’s what makes America so great — the fluidity of the market and the products and services available allow for people to make choices. But, with great choice, comes great responsibility. If you don’t like how something is priced, or a company’s business practices (like say letting transgender folks choose which bathroom to use), don’t give them your money. It’s that simple. That’s the beauty of the market, you vote with your money.
So the next time you’re reminded you’re not Drake “here” yet — just remember relative to all of human history you’re lucky to live in a time where innovation is celebrated.