A picture is worth 10,000 words: a review of abundance

The idea that economic freedom defined by secure property rights, limited government, free trade, and free trade, is important to economic development and growth has never been an unpopular idea in economics. A few economists have opposed the claim, for example, that property rights are important for economic growth. Several articles and books are devoted to proving this importance or discussing the nuances. Despite the centrality of the concept, one had to wait until the late 80s to see the emergence of measures Economic freedom.

When the measurements first came out, Milton Friedman was thrilled. The excitement was not due to the complex nature of the Index of Economic Freedom. In fact, the indicator follows standard mathematical logic to combine variables with different units of measure. Friedman’s excitement was due to the fact that the index collected large data to create a measurement that was insightful and easy to understand. For Friedman, the picture he unveiled by measuring economic freedom was worth a thousand words—many of which he wrote himself in books like capitalism and freedom And the You have the freedom to choose.

Jill Polly and Marian Toby’s latest books, Abundance , It follows a similar story and produces a similar lesson.

Economists widely accept the idea that the state of the world is getting better because we live longer, healthier, and more comfortable lives than our ancestors did. They have written many books and articles that show these improvements. A large section of these economists (most notably Julian Simon and Michael Kramer) have also argued that these improvements can be linked to population growth. More people means more ideas and more innovation, so population growth is a good thing. This is especially true if the ideas and innovations are “non-competing” inputs that everyone can use. If that’s the case, more people mean faster The growth of living standards. It is this thesis that Polly and Toby adhere to.

Their innovation wasn’t just adding an extra book to the pile. They innovate using “time prices” that represent the length of time people have to work to buy something. Time quotes are especially useful, as they allow us to capture the impact of the world’s richest on the demand for goods. For example, imagine that income increases by 20 percent which leads us to consume more of the goods that use copper. The price of copper, as a result of the income-driven increase in demand, rose by 5%. Only based on the price change, one can say that copper is now more expensive. However, this would be incomplete. In fact, the time price indicates that one needs 12.5 percent less Time to get a certain amount of copper. Yes, copper is more expensive now but only because we can satisfy more cravings! As such, he talks about a temporal price drop Larger Abundance.

By themselves, the time quotes for Polly and Toby are nothing new. Historians such as Fernand Braudel in the 1960s used the term “wages of wheat” by assuming that the number of working days needed to purchase a bushel of wheat could speak to differences in living standards over time and across countries. Contemporary economic historians have established something similar in using “welfare ratios” that divide annual income by the cost of a basket of goods that ensure a living. Others simply changed the ratio to see how long it took to buy the basket.

Polly and Toby’s new task was to analyze hundreds of goods, merchandise, and services over two centuries in more than forty countries. By compressing this data into just a few numbers, it confirms dramatic improvements in living standards. Economists and economic historians have always been familiar with the prices of time. They simply never took on the task of collecting and presenting data in a straightforward and engaging way. Economists understand the tools to provide measurement. All they needed to do was the gruesome task of compiling and presenting the data in a way that allowed Milton Friedman to say that a picture is worth a thousand words. in AbundanceA picture is a novel and it is worth a thousand words.

But there is another picture in the book that may be worth ten thousand words! Time prices can be combined with other variables to correlate changes in abundance changes with population growth. To do this, Pooley and Tupy create a measure of the time-price elasticity of the population, or a measure of the change in the time-price as the population changes. Overall, they found that each one percent increase in population corresponds to a roughly one percent decrease in the price of time. This formula is elegantly simple and conveys the crucial point that population growth is a good thing.

Typically, economists use simple or complex models of production that include ideas as non-competing inputs. For economists and the mathematically literate, this may be compelling enough, but this is a small group. Even simple models are alien to many non-beginners, and their attention has been lost. More are confused when they are told that economists measure ideas indirectly or by imperfect proxies. In the end, only a few listened, and some remain unconvinced. In contrast, the concept of population time price elasticity takes a faster and more direct path to show the point where more people generate more ideas which in turn generate faster economic growth and greater abundance. As such, the time-price elasticity of the population is equal to ten thousand words, because it relates population growth directly to economic abundance.

These developments are made Abundance One of the greatest books on economic development and growth of the last decade. The data and results contained therein could fuel years of research by enterprising researchers and think tanks.

Vincent jealous

Vincent jealous

Vincent Geluso, Senior Fellow at AIER, is Assistant Professor of Economics at George Mason University. He holds a PhD in economic history from the London School of Economics.

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