The great enrichment

For most of history average income stayed around $2–3 a day; since about 1800 it has risen thirty-fold or more in the richest countries and about fifteen-fold worldwide.

This is the central fact of economic history. Anything that claims to explain prosperity has to explain why it began so recently and spread where it did.

Maddison Project Database (2020)

Before 1800, gains in productivity mostly turned into more people rather than higher incomes, so living standards stayed near subsistence.

It explains the long flat handle of the hockey stick, and why escaping it required ideas to grow faster than population.

Thomas Malthus, An Essay on the Principle of Population (1798)

McCloskey's name for the rise in real income per person since 1800: roughly 3,000% in places like Britain, more once you count better goods.

She argues it is too big to be explained by trade, exploitation, capital accumulation or institutions alone; it needs an explosion of innovation.

Bourgeois Equality (2016)

The process by which new products, methods and firms make old ones obsolete. Schumpeter called it “the essential fact about capitalism”.

Growth doesn't come from more of the same but from replacing the old. The losses are concentrated and visible; the gains are spread out and arrive later.

Capitalism, Socialism and Democracy (1942)

The innovator who carries out “new combinations”: a new good, method, market, source of supply or organisation.

For Schumpeter the entrepreneur disrupts equilibrium; profit is the temporary reward until imitators compete it away.

The Theory of Economic Development (1911); Capitalism, Socialism and Democracy (1942)

Subsidies, licences and barriers that shield established firms and industries from new competitors.

It preserves visible jobs today at the cost of unseen innovations that never arrive. Schumpeter also feared big bureaucratic firms and hostile intellectuals would slowly smother capitalism.

Capitalism, Socialism and Democracy (1942)

The ability to notice opportunities nobody has noticed yet, such as a good selling cheap here and dear there.

Kirzner's entrepreneur needs no capital or special knowledge, only alertness. That is why the market process works even though no one has the full picture.

Competition and Entrepreneurship (1973)

A pure profit opportunity exists because someone made a mistake: something is underpriced or overpriced.

Acting on it corrects the error and moves prices toward coordination. Unlike Schumpeter's disruptor, Kirzner's entrepreneur pulls the market toward equilibrium.

Competition and Entrepreneurship (1973); Discovery and the Capitalist Process (1985)

Buying where a good is cheap and selling where it is dear, which closes the gap.

It is the simplest case of entrepreneurship, and it shows how profit-seeking spreads information: the price gap disappears because someone acted on it.

Competition and Entrepreneurship (1973)

In 1980 Julian Simon bet Paul Ehrlich that five metals Ehrlich chose would be cheaper, after inflation, in 1990. All five were.

It became the symbol of the debate over whether population growth exhausts resources. Over some other decades Ehrlich would have won, so the long-run trend matters more than one bet.

Julian Simon & Paul Ehrlich, wager of 1980

The hours of work needed to earn enough to buy something.

It measures scarcity from a human point of view and grows more meaningful as wages rise. By this measure most commodities have become much cheaper as population grew.

Pooley & Tupy, Superabundance (2022)

Simon's claim that human ingenuity, not raw material, is the resource that matters, so more people means more problem-solvers.

Scarcity raises prices, which rewards finding substitutes and better methods. The claim depends on free prices and institutions; critics note it fits less well for unpriced goods like clean air or fisheries.

The Ultimate Resource (1981)

Leonard Read's 1958 essay, narrated by a pencil, showing that no single person knows how to make one.

Millions cooperate without a master mind, each knowing only a sliver, coordinated by prices. It is Hayek's knowledge problem told as a story.

Leonard Read, “I, Pencil” (1958)

Matt Ridley's image for innovation as the recombination of existing ideas, which exchange makes possible.

The more ideas are in circulation and the more people trade, the more combinations are possible, which is why growth can accelerate rather than taper off.

Matt Ridley, The Rational Optimist (2010)

The social honour given to merchants, inventors and ordinary people trying out new things.

McCloskey argues that what changed around 1700 was not capital or institutions so much as rhetoric: how people talked about the bourgeoisie. Words and ideas, not just material incentives, made innovation respectable.

Bourgeois Dignity (2010)

The shift, first in Holland and then in Britain, from despising trade to admiring it, together with new liberty for ordinary people.

It is her answer to ‘why then, why there?’: a new combination of liberty and dignity for commoners. Critics say she underweights coal, institutions and empire.

Bourgeois Equality (2016)

McCloskey's preferred name for ‘capitalism’: improvements that are tested by whether people voluntarily buy them.

It puts the focus on innovation tested by consent in the marketplace, rather than on capital, which every society has always accumulated.

Bourgeois Equality (2016)