The true engine of capitalism

Tim Harford’s latest book, Thirty Inventions that Shaped the Modern Economy (Conecta, 2018), offers a complete mosaic of some of the gadgets, devices, techniques or simply improvements that, to a large extent, account for the great progress, in terms of growth and social welfare, accumulated by our specifies, especially from the Renaissance and, with a remarkable intensity, since the irruption of the Industrial Revolution.

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s Nassim Taleb, quite insightfully, puts it, history does not crawl, it makes jumps. Besides, it is almost never linear, but advances disruptively, alternating rhythms and periods of more or fewer breakthroughs, often impossible to interpret by its own contemporaries. The main driving force for these jumps is called “ideas”; ideas that have an impact, for good or for bad (thank God, generally the former) on economic, political and social changes. The most tangible dimension of economic changes is what we call innovations. Tackling the capital relevance of some of the innovations with the strongest impact on humankind is the purpose behind Tim Harford’s latest book Thirty Inventions that Shaped the Modern Economy (Conecta, 2018). With the same fresh and lively style from the author of The Undercover Economist (DeBolsillo, 2016), Harford offers a complete mosaic of some of the gadgets, devices, techniques or simply improvements that, to a large extent, account for the great progress, in terms of growth and social welfare, accumulated by our specifies, especially from the Renaissance and, with a remarkable intensity, since the irruption of the Industrial Revolution.

Harford, author of the celebrated informational blog on economy-related issues The Undercover Economist (actually, the blog of its namesake book, The Undercover Economist), starts off the text analysing the relevance of an apparently simple technical breakthrough as the plough: this agricultural invention, when agriculture accounted for the entire economy, enabled multiplying crops, making better use of resources and generating surplus that could cater for a remarkable expansion of the urban area.

Harford explains other technological breakthroughs like: the electric dynamo, another invention that contributed to driving down the cost of generating electricity and allowed expansion of other sectors at a time when the economy was dropping; the elevator allowed building skyscrapers; the clock made it possible to manage time and, in turn, better coordinate the economic activity; the battery, the spinal cord of consumer electronics –by the way, where is my mobile charger?; the radar, without which civil aviation would have never been possible; lead-free petrol prevented us from global-scale health crisis; paper, clearly the most anti-fragile technology for storing and transmitting human knowledge; or, more recently, iPhone, which put within our grasp the internet universe, thus changing mostly everything.  And these are just some of my personal favourite chapters.

Behind these innovations, there are real flesh and blood people who, supported by the appropriate technologies, or simply by virtue of serendipia (involving hard and endless working hours), gave an answer to challenges and problems of our species, triggered new solutions, often to problems whose existence we were not fully aware of, and even posed new challenges. For each case, the author has the ability to explain through anecdotes, while the underlying essential message gets through.

Each story is different. Some of these cases represent highly successful entrepreneurial landmarks, like iPhone, a disruptive breakthrough which represents a true milestone; in other cases, their impact is only appreciated over time. For example, the origin of modern banking, i.e. attracting mass funds and using them to conduct credit operations. This business market is deeply rooted in the religious order of the Templars and there remain several visible traces from the north of Europe to Jerusalem.

The mosaic offered by the author is nothing but a small sampling of some of the main visible changes in the spontaneous order of the markets. All the innovations enrich each other, and their concentration generates exponential advances of welfare and progress. Concentrating capital determines the advance of human civilization, from the Stone Age to the Silicon Age, and other ages that will come after. For example, banking and risk management upgrades improved credit and expanded the horizons of exchange: the possibilities of economy became then higher, as well as those of generating more savings and accumulating more capital. And this has been so until the present time.

Harford describes other innovations like limited liability companies, insurances, intellectual property and registers, or paper money. In some cases, these are individual inventions, with names and surnames; others are collective and result from a slow and long-term process of decantation and synthesis: all of them include entertaining anecdotes and portions of scholarly information that, in some cases, shed light on our recent technological history. Beyond the small stories, or near-tales that could well be the reading stock of primary students, the book allows reflecting on what makes innovation possible, beyond the genius of its inventor. In a nutshell, how we generate an appropriate framework for everyone to benefit from those with bright minds and how we pave the way for talent. In fact, this is what capitalist economy is all about.