Tuesday, 9 October 2018

QotD: 'Modern society is like a gigantic prosperity pool. Nobody today feels that rich because the growth in that pool occurs gradually, drip by drip.'

"Modern society is like a gigantic prosperity pool. This pool is filled gradually, drop by drop, with small improvements in our standard of living. And just as the collection of an enormous number of water drops leads to a much higher water level in a real pool, in the prosperity pool, the collection of an enormous number of prosperity drops creates much higher living standards.
    "While it is often sensible to discuss a society’s overall level of material prosperity—such as U.S. GDP in 2016—these discussions promote insensibility to the countless tiny components of that prosperity. These discussions can blind us to the reality that our prosperity consists overwhelmingly of many tiny drops of prosperity...
    "Of course such innovations are driven chiefly by the quest for profit. And profit is indeed the reward that successful innovators reap. Yet while the profit that each successful innovator reaps might be huge in absolute terms, it typically is only a tiny fraction of the total social value of the innovations. [Nobel-Prize winning] economist William Nordhaus found that only “2.2 percent of the total present value of social returns to innovation are captured by innovators.” Each successful innovator, in effect, personally “drinks” only two drops of prosperity for every 100 drops he or she adds to the prosperity pool...
    "Ordinary Americans in 2016 likely live better than did American billionaires in 1916. Yet almost no ordinary American today feels that rich. The reason, I believe, is that the growth in our living standards occurs gradually, drip by drip. The resulting insensibility to this gradual growth is an important reason for those of us who celebrate and understand it to keep highlighting its phenomenal reality."

        ~ Don Boudreaux, from his post 'The Prosperity Pool'

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