Instead of a book review, this is some highlights and commentary on Tim Harford’s 50 Inventions That Shaped the Modern Economy.
The book consists of 50 short discussions on different inventions which ended up having profound effects on modern life. A few chapters stood out to me.
The chapter on elevators describes them as public transit. It’s a funny way to consider them, but they do move hundreds of millions of people each day. Elevators make skyscrapers feasible, which makes high population density possible, leading to all of the benefits of the city. Perhaps finding ways to do this even better can make cities denser and more efficient. Might it also be worth looking into lateral connections between skyscrapers?
Another essential invention for modern life is air conditioning, as it allows for comfortable living in hot places. Improved efficiency of AC units can help populations of developing countries, reduce the impact of climate change, and make cities viable in new places. However, since AC units pump heat out into the public, there may be a need for a system to pump heat out of cities themselves. In the far future, we can imagine needing to pump waste heat out of the planet entirely as global energy use increases.
The chapter on index funds noted that the creation of Dow Jones Industrial Average opened up reporting and discussion on how much the entire market was going up and down. Perhaps having a better index of companies in developing countries could get people talking about economic growth there and increase focus on this problem.
Many innovations such as the gramophone (which made the copying of phonographs possible) increase the scalability of jobs which creates benefits for consumers but also leads to higher inequality. What is the best way to reduce this side effect? Since there are only a few creators in superstar industries such as music, does it make sense to regulate them as monopolies? This is a problem we have not fully reckoned with and will continue to grow as new automation technologies are developed.
One theme throughout the book is that states have very strong influence on innovation. They often fund critical pieces of innovation, but also slow innovation through regulation. Oftentimes, this occurs due to lobbying by special interest groups who would lose out due to the change.
Another common theme is that most innovations are combinations of dozens of smaller innovations, and inventors often don’t recognize the impact their products will have. This implies that today’s innovators should focus less on their expected impact and more on technical problems they are well suited to solving.
Technology takes a while to propagate and become viable. People have to restructure their entire system around the new idea in order to see the benefits. For example, it took a long time for manufacturers to utilize electric dynamos over steam-powered engines since it required restructuring the entire factory to get all of the benefits.
What other things might be like this today? Intermittent energy from renewables seems like something we haven’t fully adapted to. One might imagine having processes which run only when cheap renewable energy is available, thus avoiding the costs of energy storage. Blockchain technology is another innovation which will take decades to propagate through the economy before we fully realize the benefits.
This idea is particularly salient when considering mobile finance in Africa. Systems like M-Pesa are a natural jumping-off point for cryptocurrency-based schemes which could further reduce corruption, prevent theft, increase liquidity, and raise taxes. It also fits nicely with basic income efforts like GiveWell. Due to a large set of users, short history, and lax regulations, places like Kenya have the opportunity to build worlds most advanced financial system.
Land registry is another important area of improvement for developing countries. I had known that it was a pretty important step for emerging economies, but I hadn’t realized the scale of the problem. Hernando de Soto estimates that the total value of “dead capital” (unofficially owned assets) is $10 trillion. Though others believe the figure is more like $4 trillion, the order of magnitude suggests that this is a huge issue. Add to this the fact that people invest less into theor land due to the lack of formal ownership, and the problem becomes even more important. Since land is one of the easiest and best things to tax, a land registry combined with a land-value tax would be well suited to developing countries with low state capacity, especially in the context of mobile payment systems where money is harder to track.
In all, I recommend this book as a light read on the history of underrated innovations that make the modern world possible.
Harsimony 