Unit 1 Prosperity, inequality, and planetary limits

1.14 Summary

• For most of human history, living standards remained at what we would today consider to be a low level with temporary ups and downs associated with variations in weather, disease, and social conflicts.
• Beginning in the 1700s in Great Britain, rising average material living standards have become a continuous feature of economic life in many countries; but one in ten people in the world still live in extreme poverty.
• The rising level of global output has contributed to climate change, biodiversity loss, and other threats to the environment, especially since the beginning of the twentieth century.
• Contributing to both rising affluence and environmental threats was the introduction of new methods of production, increasing the amount a person can produce in an hour by harnessing energy based on burning carbon.
• The technological revolution and resulting continuous increases in output were facilitated by a new economic system called capitalism, which combines three institutions: private property, markets, and firms hiring others to produce goods in order to make a profit.
• Differing forms of capitalism and differing political systems have led to differences in economic performance between countries.
• Many countries that were colonized, like India, did not experience substantially rising living standards until well after independence. For other countries, many in Latin America, for example, independence from colonial rule (in the early nineteenth century) did not bring about a change in economic fortunes.
• Economics is the study of how people interact with each other and with the natural environment in producing their livelihoods.
• Climate change and biodiversity loss mean that we need new non-carbon technologies and new policies and institutions to sustain our planet, and at the same time eliminate global poverty.
• Malthus’s economic model, combining the concept of the diminishing average product with a theory of population growth, helps explain the long, flat part of history’s hockey stick. It shows why (under the conditions Malthus described) technological improvement does not raise income permanently.