MoneyMirage
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MoneyMirage

27. Searching for ‘Better’: Engine of Wealth Creation

When printing was first invented in the 1450s, its impact on society was surprisingly small. Because printing text was so complex and difficult (see my previous blog), printed material was nearly as expensive as hand-written manuscripts. It wasn’t until a hundred years later, when the printed word had been made much more affordable and available, that printing began to make an impact. And what an impact it was!

Like so many such developments, printing created its own snowball effect. It encouraged people to learn how to read. The more literacy grew the greater the demand for books; the more books, the more reasons to learn to read; and so on. New institutions emerged to cater for this need. The number of schools multiplied rapidly. Universities blossomed as books became the means of capturing and spreading knowledge, including new scientific knowledge. Written documents meanwhile moved to the heart of public administration as Governments started keeping records of births, deaths and marriages, licences, contracts and court orders. What had been marginal became central.

The social and political impacts of the printed word were if anything even more far reaching. When people began reading the Bible for themselves (in the vernacular rather than Latin) they began to ask questions such as ‘why doesn’t it mention concepts like purgatory, paying tithes, or the sale of indulgences?’. The Reformation was triggered, challenging the hegemony of the Catholic Church and unleashing far-reaching social, political and institutional turmoil. Battles between different political and religious viewpoints were waged through printed handbills, pamphlets and books. Power struggles broke out as the authorities tried to impose controls on who was allowed to print what. Many argue that democracy and printing marched hand in hand, with printing leading the way by democratising knowledge.

Avalanches of change

Printing is an example of how multiple, far-reaching economic, social, institutional and political changes can flow from the creation of just one new recipe (or ‘module of applied knowhow’). Yet such avalanches of change are common, especially if they involve ‘general purpose technologies’ that can be used in many ways to do many things.

Take iron. In the Middle Ages iron-making advanced by leaps and bounds thanks to new ways of making it cheaper and better (particularly thanks to the invention of ‘blast furnaces’ fed with by water-mill powered bellows that enabled much higher smelting temperatures to be reached).

Compared to bronze and other metals available before, iron provided strength, reliability and durability. As its use spread it changed virtually everything it touched. Iron fitted ploughs and harnesses, along with iron knives and sickles, transformed farming, extending agriculture into wetter climes with heavier soils such as those of northern Europe, thus unleashing far-reaching shifts in the political and economic geography of the times. Iron horse shoes and iron rimmed wheels transformed transportation, enabling the growth of medieval towns. Iron nails, spikes and bars transformed construction. As the Franciscan monk Bartholomew Anglicus (‘the Englishman’) noted in De Proprietibus Rerum (‘On the Properties of Things’) in 1240, “well-nigh no handiwork is rough [wrought] without iron: no field is eared without iron neither tilling craft used, nor building without iron.”

Iron arrows, spear points, spurs, stirrups, chain mail and armour made the horse-based feudal knight possible, and with him, feudalism itself. But firearms and, later, cannon, also rendered feudal knights (and later, their castles) obsolete, triggering a shift in power from baronial landlords to nation states. The cost of equipping professional standing armies with guns and cannons generated further repercussions: the more expensive fighting wars became, the more sovereigns turned to financiers (such as the Bardis, Peruzzis and Medicis) … and to taxation.

Meanwhile, iron-makers’ growing demand for charcoal for their furnaces accelerated the deforestation of Europe, prompting the search for alternative fuels such as coal, which would itself fuel a new industrial age.

Seeing the world differently

Glass provides another example of such avalanches of change. The Romans and Egyptians knew how to make glass, but because of the impurities used in its making at that time, it was coloured, not clear. Initially, the main use of glass was for jewellery and as containers. (Before refrigeration, glass bottles were important for food preservation.)

But the possibilities opened up by glass soon proved endless. Glass mirrors enabled humans to see themselves for the first time. Glass windows made homes both lighter and warmer (while bringing greenhouses to agriculture). Glass-faced instruments like clocks, thermometers and barometers transformed the practice of science. Glass screened machines like motor cars, televisions, computers, smart phones went on to transform our daily lives, as have the glass fibre-optic cables which make much of the Internet possible.

Then there’s the lens. To make glass clear you need silicon dioxide which, in the early days, was best obtained from the ash of certain burned plants. But because these ashes were used directly rather than purified, they contained impurities which clouded the clarity of the final product. Eyeglasses, or spectacles, were first made by northern Italian craftsmen at the end of the 13th century. It took another 200 years for craftsmen to work out how to purify the ingredients, at which point the price of spectacles fell rapidly, leading to rapid uptake. As Robert Friedel comments in his wonderful book A Culture of Improvement, “To don a pair of eyeglasses was to cheat old age … to rewrite the rules of the human condition by prolonging the full participation of men and women in life.”

The lens, in turn, made microscopes and telescopes possible. Harvey used the microscope to understand blood and the heart; Pasteur to invent antibiotics. Galileo famously challenged the received wisdom of the Church thanks to what he saw through a telescope: humans’ understanding of our place in the universe would be impossible without these advances.

In this way, like iron, glass unleashed far-reaching changes in the most unexpected places such as medicine, construction, transportation, communication and the very way we see and understand ourselves and the world around us.

Can you ‘manage’ unforeseen consequences?

If recipes as modules of applied know-how have this tendency to trigger avalanches of change with massive knock-on social, economic and political consequences, it raises a question. Given that none of us can ever imagine what such consequences might be, is there any way we can ‘manage’ them? Can we — should we — try to take them into account when making decisions today?

To a degree, the answer is obvious. If we can foresee a harm (such as pollution) then we should act to avoid it. But without full and complete knowledge of all possible impacts we have to resort to the use of rules of thumb, or ‘heuristics’. And that in turn makes the content of these rules of thumb really important.

Today’s economic orthodoxy pretends it’s found the answer. Humans are (or should be) ‘rational’ in their decision-making, it says. That sounds great. But by defining the term ‘rational’ in a highly peculiar way, to mean sociopathically selfish — ‘don’t worry how your actions might impact other people, just focus on maximising your own self interest!’ — this particular rule of thumb has been disastrous. Those societies that have done most to embrace it (like the US and the UK) are currently descending into endemic corruption and a climate of increasing despair and cynicism.

Positive Heuristics

An alternative rule of thumb could be to “embrace the golden rule (Do Unto Others …) and always seek to find a win-win”. The genius polymath Herbert Simon riffed on this when he suggested three rules of thumb to minimise the risks of unavoidably myopic decision-making:

1. Work on the basis that our safety lies in the safety of others. Our welfare lies in the welfare of others.

2. Give other people the autonomy we seek.

3. When we are overwhelmed by the difficulties of the problems that face us, turn to the simpler problem of keeping the doors open to future solution paths.

Simon said that economies are the product of evolutionary processes. “There is no goal, only a process of searching and ameliorating. Searching is the end.” Such searching is necessarily myopic, he argued. We cannot hope to understand the full implications and consequences of what we do. But what we can do is develop “mechanisms capable of discovering new possibilities that are ‘improvements’ over those attained earlier.” In other words, whatever we are doing, wherever we are, in whatever circumstances, we can simply try to make things better in an ongoing iterative process.

As I pointed out in my last blog, when we make things, we are never ‘only’, ‘just’, making that thing. We are also building capabilities and, as Simon said, making possibilities. Opening up opportunities. These possibilities and opportunities may for good or ill so they in turn need to be ‘ameliorated’ and improved upon. Which means, as Simon also said, we are always searching.

Searching for ‘better’. It is this, not free market forces, that is the engine of wealth creation.

The stories I’ve told about printing, iron and glass illustrate this common theme of the search for ‘better’. I believe it lies at the heart of all human social and economic development. A crucial part of this search is the search for those mechanisms (technologies, organisational processes, institutions, and so on) that help us search in better ways. Have we found all these mechanisms yet? I don’t think so. That’s what the rest of this blog series will be about: the search for ‘better’, including the search for better mechanisms for searching and improving. More to follow!

Next in this series: 28. Why do humans make things?

Previous: 26. Why Economies are like Rainforests

The full contents of this blog series can be found here.

Bibliography

Books and articles I found particularly useful researching this blog include:

  • Alan Macfarlane & Gerry Martin, The Glass Bathyscape: How Glass Changed the World, Profile Books, 2002
  • Paul Seabright, The Company of Strangers: A Natural History of Economic Life, Princeton University Press, 2004
  • Herbert Simon, Administrative Behaviour: A Study of the Decision-Making Processes of Administrative Organisations, 4th Edition, Free Press, 1997
  • Herbert Simon, Reason in Human Affairs, Basil Blackwell, 1983
  • Herbert Simon, Speech to the Illinois Institute of Technology Honorary Degrees Awards, 15 May 1988
  • Robert Friedel, A Culture of Improvement: Technology and the Western Millenium, MIT Press, 2007
  • Ian Mortimer, Centuries of Change: Which Century Saw the Most Change?, Bodley Head, 2014

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