All Commentary
Monday, July 1, 2002

The Great Breakthrough and Its Cause

What Creates Rapid Increases in Living Standards?

Reviewed by Robert Lawson

Julian Simon’s final work before his untimely death is perhaps his most ambitious undertaking. He wants to explain why at least some parts of humanity, after millennia of virtual stagnation, suddenly began a rapid increase in living standards around the years 1750-1800. Simon labels this phenomenon Sudden Modern Progress (SMP). His explanation? People. Yes, Simon argues that population growth and density are the most important causal factors that led to the “breakthrough” in the late 1700s.

This is a shocking hypothesis even to those of us who reject the doom and gloom of the Malthusian crowd. The Malthusians argue that population growth leads to human degradation as our resources fail to keep pace with the number of mouths to feed. Others, including Simon, have argued that technology offsets the effects of increased population so that we can feed the larger population without difficulty. And indeed technology can increase so fast that we not only can feed the larger population but also provide good housing, clothing, computers, cellular phones, and so on. But to argue that increased population itself is the cause of the increased technology, not just a problem to overcome, seems at first glance to push the argument too far.

First, Simon needs to convince us that SMP has even occurred. That is, he must demonstrate that “starting in the eighteenth century, the increases in rates of change of the most important magnitudes pertaining to human welfare are breathtakingly large.” On this front, he succeeds. Using data culled from a wide range of sources, he demonstrates that the period from 1750 to 1800 was indeed a period of amazingly fast progress compared to previous eras.

Second, Simon needs to demonstrate that the “modern surge of population began earlier than the surge of the consumption variables.” The population of the world (particularly in Europe which led the SMP) did begin to rise around 1600 after the worst of the epidemics were dealt with. So he seems to take that point.

Third, Simon needs to explain how population growth (and density) can lead to technological progress. A partial answer is that necessity is the mother of invention. Rising populations require more food to avoid Malthusian starvation, and people look for ways to avoid that. Eventually, someone succeeds in finding a solution to the food (or any other) problem, and the solution leaves humanity better off than before the problem arose.

One of the most challenging aspects of Simon’s thesis is his lack of emphasis on institutional arrangements, property rights and the like. These are things libertarians have long emphasized. Simon acknowledges that institutions matter, but argues that they are not so much the cause of progress as the result of human population’s need for better institutions.

Consider the development of private property rights. In prehistoric times, land was not very scarce and hence there was no need to develop private property. As time went on, however, property became necessary to deal with competing claims for resources among the larger, denser population. Simon also rejects short-term political institutional arrangements as being important in explaining SMP: “the political-economic structure can be, and often is, quickly altered by various events. A factor that is so malleable is not a good candidate to be the primary determinative variable in the very-long run system under consideration.”

One tough part of Simon’s argument is China and India. Those countries had levels of population and population density comparable with Europe. Why did SMP begin in Europe instead of China and India? Simon devotes a whole chapter to this issue. His answer is that institutions do matter in determining where SMP can occur, but not so much when it occurs. Europe, China, and India did reach the necessary population levels that could lead to SMP, but the institutions of Europe were superior from the standpoint of wealth creation. But Simon argues that European (especially Anglo-Saxon) institutions would have been useless in a sparsely populated society. So population still is the determining critical factor.

Overall, this is an impressive work and I found myself drawn to the argument. But there are problems. As Simon himself notes, it is very difficult to disentangle the mutually reinforcing effects of population and technology. Population grows so technology expands to deal with the increased numbers, and the technology increase allows the population numbers to increase still further and so on. It’s all a bit circular.

The book is written in a fairly technical style that may present difficulties to the average lay reader. But Simon’s technical writing is interspersed with enough clear statements that dedicated readers should find the book manageable.

Julian Simon’s final work certainly lives up to his reputation as an original and audacious thinker. While not everyone will come away convinced that he’s right, he brings enough evidence and logic to bear that no one will be able to disregard his thesis easily.

Robert Lawson is the George H. Moor Chair and professor of economics at Capital University in Columbus, Ohio and co-author (with James Gwartney) of Economic Freedom of the World 2000.