Fewer, Richer, Greener

16The Mismeasurement of Growth: Why You Aren’t Driving a Model T

Over the last 250 years, real incomes grew by a factor of about 100 in the richest countries and 30 on average across the world. Do those numbers overstate or understate human progress over that period? The answer depends on what you think is important.

This chapter focuses on why the measured growth rate is an understatement. The most obvious source of understatement is that, for much of the period, if you had certain needs—a shot of penicillin in “poor” Nathan Rothschild’s case—you were out of luck. It hadn’t been invented or discovered yet. So having a hundred or even a million times more money wouldn’t help—likewise if you needed a computer, a ride on an airplane, an air conditioner, or a conversation with your mother who lives in another state.

Chapter 20, on hedonic adaptation, talks about why the mammoth rise in incomes over the last 250 years might overstate the amount of human betterment. Life has always been a mixture of good and bad, happy and sad. That has not changed and it is not about to change, and the ratio of happy to sad has not gone up by a factor of 30 or 100. Human nature, the ability to adapt to some degree to whatever circumstances you find yourself in, causes that ratio to be far more stable than is suggested by money incomes or the quantity and quality of possessions or even health “outcomes” (which are, of course, incomes—each day of good health is a benefit).

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