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Author Says Modern Life is Good Despite Recession

August 19, 2010 at 12:00 AM EDT
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Author Matt Ridley says life is getting better and better despite the recession. Paul Solman reports on Ridley's optimism as part of his ongoing reporting on Making Sense of financial news.

JEFFREY BROWN: Finally tonight: with bad news coming daily, including today, NewsHour economics correspondent Paul Solman has a case for some optimism over the long haul.

It’s part of his ongoing reporting on Making Sense of financial news.

PAUL SOLMAN: Defying the economic unease of the past few years and weeks, British zoologist, bestselling author and one-time bank chairman Matt Ridley. The pessimists have got it wrong, he says. For more and more humans, life on Earth has just been getting better and better for eons.

Ridley’s new book, “The Rational Optimist,” dates our happy history back to hunter-gatherer society and a fateful economic invention of the Stone Age.

MATT RIDLEY, author, “The Rational Optimist”: Human beings have been making tools for about two million years. And, for a long time, all they made was simple stereotype stone tools like this. And then, suddenly, in the last 50,000 to 100,000 years, they started making more and more sophisticated things, until they had things like this. And I think the answer lies in exchange and specialization.

When our species invented exchanging, it was as if ideas started having sex, because, in biological evolution, sex brings together genetic mutations. It diversifies the gene pool. And the same thing is true of exchange in cultural evolution. It brings together ideas that different people have had.

PAUL SOLMAN: Except for the references to sex, the talented Mr. Ridley is a throwback to 18th century optimism and Adam Smith, who wrote that exchange is the cause of the wealth of nations.

MAN: Give me that which I want, and you shall have this which you want.

PAUL SOLMAN: You specialize through the division of labor, you get better and faster at making what others want, you get more in return. It’s an idea so powerful and durable, it’s printed on England’s 20-pound note.

MATT RIDLEY: That’s what — it’s what we’re always striving for, is to be able to afford more goods and services, to be able to afford to have other people do things for us. And that’s, as it were, the thing that’s been inexorably increasing over history, particularly in the last 200 years.

PAUL SOLMAN: The exchange of goods, services and ideas about how to produce more efficiently has delivered humanity from the limits of old.

MATT RIDLEY: So, you would never get this many people living on an area this size in hunter-gatherer societies, because it took a huge acreage to support a hunter-gatherer tribe. Each person needed about a 1,000 hectares. That’s three Central Parks.

The invention of agriculture, and particularly the invention of intensive modern agriculture, enables us to support these incredibly dense populations that we have.

PAUL SOLMAN: And modern agriculture is a story of increasing specialization, which, as a pencil famously shows, increases cumulative collective knowledge.

MILTON FRIEDMAN, Nobel Laureate: There’s not a single person in the world who could make this pencil.

PAUL SOLMAN: That’s Nobel laureate economist Nobel laureate in his “Free to Choose” PBS series from the ’70s, with an example I borrowed for an economics teaching video made just a few years ago.

The wood is usually California cedar, the eraser made from South American rubber and Italian pumice stone.

The pencil is just one easy example of knowledge run riot.

MATT RIDLEY: And that that knowledge is not in anyone’s head. It’s distributed through thousands of different heads all over the planet.

PAUL SOLMAN: Specialization and exchange, says Ridley, they have brought us all pencils, enabled us all to munch like monarchs.

MATT RIDLEY: Louis XIV of France in the 17th century had 498 people to cook his dinner for him. He was rich. OK? But everybody’s got 498 people to cook their dinner for them now.

Look, you can go to any one of these restaurants. You can go into 400 restaurants around here. You can go to the Bluewater Grill, which is one of the fanciest restaurants in town. And they’re all ready to cook for you at an instant’s notice.

PAUL SOLMAN: Moreover, says Ridley, specialized technology has, time and again, solved its own problems.

MATT RIDLEY: When people depended on horse carriages to get around, the manure was everywhere. The transport was slow. It was cruel. It was painful for a lot of the horses. A lot of horses died. Getting rid of a dead horse off the street was a problem.

PAUL SOLMAN: But cars? Exhaust? Global warming? Noise? Car accidents — 30,000 to 40,000 people a year die in this country alone from cars.

MATT RIDLEY: Cars, though, are wonderful. They’re liberating. They let people live their own lives, go where they want. They’re extraordinarily cheap. They’re amazingly quiet, considering. Haven’t solved all the problems yet, as you point out, with carbon dioxide, et cetera. But we are actually incrementally solving these problems, we’re getting cleaner about the way we make our energy.

PAUL SOLMAN: Perhaps the rational optimist’s favorite Gotham vantage point was the Staten Island Ferry and its view of Ellis Island, through which so many immigrants came to America a century ago.

MATT RIDLEY: The change in human living standards over the period since Ellis Island was at its peak is quite extraordinary, nine times as much per capita income all around the world, twice as much lifespan.

PAUL SOLMAN: And lifespan keeps increasing, though, sadly, for us and those of you watching, we haven’t yet reached the longevity of Lady Liberty, 124 this year and one of Ridley’s favorite icons of progress.

MATT RIDLEY: For me, that symbolizes everything that has been incredible about this country in particular and the world in general for 50,000 years, which is that, when we have let people do what they want, when we have let them get on with their lives, socially, politically, economically, then prosperity just kind of happens. People get better off.

PAUL SOLMAN: Happens, says Ridley, by specializing, in ways often unimaginable.

How many hours a day do you do this?

MAN: One, two, three, four, five, six, seven, eight.

PAUL SOLMAN: Eight hours a day?

MAN: Yes, sir.

MATT RIDLEY: It’s a way of making a living. It’s a way that wouldn’t have worked in the Stone Age, when we were all busy providing ourselves with food, shelter and clothing, and we didn’t have any — anything to spare to give these guys a living.

PAUL SOLMAN: To Ridley, more proof of the inevitable march of progress. Others in Battery Park, though, weren’t so sure.

ANDREW MAXYMILLION-WHEELER, New York: I think we’re the last generation that has it good. We consume too many resources, and our technology is going to screw us. Eventually, we just create computers so complex, we can’t understand them anymore, and they start self-replicating, and, then, before you know, you have Terminator marching around the — the world. And it will be the end.

PAUL SOLMAN: These lunching ladies from Swaziland were skeptical, too.

NONDUMISO QWABE, Swaziland: You’re going to be always giving up something, right? So, like, for instance, we have better infrastructure, but we have — we now have pollution. So, like, there’s always a balance. You get something, you lose something.

LINDIWE DLAMI, Swaziland: We really consider culture very important. And with advancement of technology, globalization, we’re having to let go of so much more, and our values are having to change so much more to be able to accommodate outside cultures and understandings. And, in some ways, it’s not really working out for some of us in Third World countries.

PAUL SOLMAN: And even in First World countries, is all really well? In fact, Ridley’s own optimism might surprise some, given that he helped run British bank Northern Rock, taken over by the government in 2008, after bad loans led to a run and bankruptcy.

MATT RIDLEY: That experience was very traumatic for everybody involved. And we should have been more aware of the fact that asset markets, financial markets are capable of creating bubbles and busts in a way that markets in goods and services don’t.

PAUL SOLMAN: OK, time for one last question, which prompted a surprisingly sobering answer.

Let’s assume you’re right, in the long run, onward and upward. But, at the moment, governments like ours, yours, Europe’s, have bailed out institutions who took enormous risks. And we’re going to pay for that in the future, because we borrowed against the future, as opposed to investing in our future. No?

MATT RIDLEY: I think that’s a fair point. And I think it’s clear that we have been borrowing too much in the West.

It’s not entirely wrong to borrow against the future, because the increase in human prosperity enables the future to be in a position to pay it back. And you can invest in the things that enable it to pay it back. But, yes, in the West, we have overdone it. The rest of the world hasn’t so much, though. And so I think it’s quite possible that you will see an increase in prosperity globally, even if the West loses ground.

PAUL SOLMAN: Prosperity launched long ago by specialization and exchange, which, in the long run, Ridley insists, have yet to let us down.