The Rational Optimist_ How Prosperity Evolves - Matt Ridley [117]
The possibility of new knowledge makes the steady state impossible. Somewhere somebody will have a new idea and that idea will enable him to invent a new combination of atoms both to create and to exploit imperfections in the market. As Friedrich Hayek argued, knowledge is dispersed throughout society, because each person has a special perspective. Knowledge can never be gathered together in one place. It is collective, not individual. Yet the failure of any particular market to match the perfect market no more constitutes ‘market failure’ than the failure of a particular marriage to match the perfect marriage constitutes ‘marriage failure’.
In an exactly analogous way, the science of ecology has an enduring fallacy that in the natural world there is some perfect state of balance to which an ecosystem will return after disturbance. This obsession with ‘the balance of nature’ runs right through Western science, since even before Aristotle, and sees its recent expression in concepts like ecological climax, the natural vegetation that will clothe an area if it is left for long enough. But it is bunk. Take the place where I am sitting. Supposedly, its climax vegetation is oak forest, but the oaks only arrived a few thousand years ago, replacing the pines, the birch and before that the tundra. Just 18,000 years ago, where I sit was under a mile of ice, and 120,000 years ago it was a steaming swamp complete with hippos. Which of these is its ‘natural’ state? Besides, even if the climate settled down to an unvarying stability (something it has never done), oak saplings cannot thrive under oaks (oak-eating pests rain down on them), so after a few thousand years of oak domination an oak forest gives way to something else. Lake Victoria was bone-dry 15,000 years ago. The Great Barrier Reef was partly a range of coastal hills 20,000 years ago. The Amazon rainforest is in a state of constant perturbation: from tree falls to fires and floods, its diversity requires it to be constantly changing. There is no equilibrium in nature; there is only constant dynamism. As Heraclitus put it, ‘Nothing endures but change.’
Innovation is like a bush fire
To explain the modern global economy, then, you have to explain where this perpetual innovation machine came from. What kick-started the increasing returns? They were not planned, directed or ordered: they emerged, evolved, bottom-up, from specialisation and exchange. The accelerated exchange of ideas and people made possible by technology fuelled the accelerating growth of wealth that has characterised the past century. Politicians, capitalists and officials are flotsam bobbing upriver on the tidal bore of invention.
Even so, the generation of new useful knowledge is very far from routine, uniform, steady or continuous. Although the human race as a whole has experienced incessant change, individual peoples saw a much more intermittent flickering progress because the pace and place of that change was itself always changing. Innovation is like a bush fire that burns brightly for a short time, then dies down before flaring up somewhere else. At 50,000 years ago, the hottest hot-spot was west Asia (ovens, bows-and-arrows), at 10,000 the Fertile Crescent (farming, pottery), at 5,000 Mesopotamia (metal, cities), at 2,000 India (textiles, zero), at 1,000 China (porcelain, printing), at 500 Italy (double-entry book-keeping, Leonardo), at 400 the Low Countries (the Amsterdam Exchange Bank), at 300 France (Canal du Midi), at 200 England (steam), at 100 Germany (fertiliser); at 75 America (mass production), at 50 California (credit card), at 25 Japan (Walkman). No country remains for long the leader in knowledge creation.
At first blush, this is surprising, especially if increasing returns to innovation are possible. Why must the torch be passed elsewhere at all? As I have argued in the previous three chapters, the answer lies in two phenomena: institutions and population.