The Rational Optimist by Matt Ridley

The central story of human history is the rise of specialization, exchange, and interdependence. When different parties produce whatever they can produce best and trade their surpluses for the surpluses of others, everyone is left better off. Specialists in an exchange economy don’t need to fulfill all of their needs themselves; they only need to solve one problem and solve it well, trusting that others will fulfill their other needs in return. In an economy of specialists, members have specialized production and diversified consumption.

The opposite of specialization is self-sufficiency. Self-sufficient people are limited to using only the natural resources that are locally available and only the technical expertise that they have personally accumulated. They also have no incentive to produce more than they personally need or to make long-term investments in scale or quality.

Specialization is prosperity and self-sufficiency is poverty. Throughout history, the richest societies have been the most interconnected while the poorest have been the most isolated. An interconnected society has a collective brain far more powerful than any individual person’s brain; it’s as if each person has thousands of servants working for them.

Even as hunter-gatherers, humans were already showing a degree of specialization unmatched by any other animal. In hunter-gatherer societies, men tend to specialize in hunting (high risk, high reward, protein-heavy) while women tend to specialize in gathering (low risk, low reward, carb-heavy), with both sexes sharing their yields with the other. Humans are the only species where unrelated individuals barter dissimilar things with one another. Hunter-gatherer trade was informal and small-scale but very widespread; tools are known to have been passed by hand between tribes for hundreds of kilometers from where the raw materials were available. Whereas the tools of all other tool-making animals are stagnant, human tools improved over time.

Agriculture allowed humanity to leverage the specialized abilities of other species and allowed a subset of the population to leave the business of food production altogether. The rise of cities enabled further specialization of workers by supporting economies of scale. Cities offer businesses more suppliers, more workers, and more customers, while offering individual residents more consumer choices and more work opportunities. Transportation, communication, and resource extraction technology improved over time thanks to the exchange of expertise and ideas, allowing for larger and more efficient markets. Global supply chains gave people access to the labor and natural resources of almost everywhere in the world. The economy truly began booming starting around 200 years ago when industrialization freed most people from the business of generating their own energy. Technology and urbanization greatly simplified the job of running a household, freeing women from the business of tending to families full-time and allowing them to become independent producer-consumers themselves. In recent years, modern communication technology enabled the free flow of ideas between historically unconnected people, enabling an explosion of specialization and innovation in intellectual domains.

Like all social animals, people are loyal to their in-group but naturally mistrustful of outsiders. People who cannot trust one another have no choice but to be self-sufficient. Many innovations and developments throughout history have enabled exchange by allowing strangers to trust one another. The rule of law encouraged peaceful commerce by making thuggery and thievery more risky. Systems of property rights put people at ease knowing that their investments and property ownership will be respected. Merchants lubricated markets by connecting buyers and sellers who don’t know one another and never need to. Access to information and customer feedback allowed consumers to detect and avoid dishonest businesses.

Exchange and specialization have long had a civilizing and mellowing effect on humanity. Mutual interdependence caused the decline of small-scale violence and war as strangers became more useful to each other alive than dead. Commerce encouraged people to look past traditional enmities and view strangers as prospective business partners; trade hub cities have long been the most liberal and tolerant places in the world. Demand for human slaves crashed during industrialization as machine power became cheaper than human muscle. As human labor became more productive and therefore more valuable, societies began placing a higher premium on education, health, and safety. Unlike agrarian societies, industrial societies are environmentally conscious and make an effort to clean up after themselves. City dwellers voluntarily have children at sub-replacement levels, preventing the world population from growing without bound.

The journey towards specialized interdependence has been choppy and has had many setbacks. Parasitic political, religious, financial, and criminal classes exist in all societies, extorting surpluses, discouraging innovation, and calcifying existing social structures. Famines, wars, and plagues have occasionally crashed local populations, destroying parts of humanity’s collective brain in the process. Large and established institutions have a tendency to become stagnant and complacent, milking their cash cows and suppressing competition instead of innovating. Governments have repeatedly misallocated society’s resources for war and glory projects, smothered enterprises with excessive bureaucracy, and protected local businesses from superior outside competition in the name of domestic self-sufficiency. Economic surpluses often got eaten up entirely by population growth, creating gluts of labor and shortages of resources that encouraged regressions back to self-sufficiency.

Human progress has often been slow or stagnant for extended periods, only to be jolted back into action. Agriculture spontaneously arose only a few times and industrialization spontaneously arose only once (1800s Britain), but once they appeared they became self-perpetuating.

Specialization and exchange have been unqualified successes for humanity, turning poverty from a majority to a minority state of affairs. The average person today lives a much longer, more prosperous, more leisure-filled, more healthy, and more peaceful life than the people of the distant past; in recent times, improvements can even be observed between generations. The average person today spends a much smaller fraction of time and income tending to basic needs like food, clothing, energy, and shelter. Small groups of specialists are able to fulfill individual needs for all of society, freeing the rest of the population to do other things. No single person today knows how to make a car or a computer from scratch, but thanks to humanity’s decentralized collective brain, nobody needs to.

The economy of today is more global, more specialized, more interconnected, more dynamic, more bottom-up, and more decentralized than ever. More than ever before, the world economy is built around problem-solving rather than around extortion and rent-seeking. The predatory governments, religious institutions, and megacorporations that have dominated history are increasingly struggling to keep themselves relevant. Unlike the resource-based economies of the past, the modern economy is increasingly built upon knowledge, ideas, and expertise, all of which are much more easily scalable and shareable. Scholars have long predicted that the economy is doomed to eventually stagnate or decline due to natural resource constraints, yet economic growth is now accelerating rather than slowing.

Humanity faces many challenges in the short term: a significant minority of the population still lives in poverty, the world population is still growing, the populations of rich countries are ageing, the climate is changing, the economy has unsustainable dependencies on finite non-renewable resources, and humanity’s future energy needs will be huge. Pessimistic projections of the future are ubiquitous, but most of them make the mistake of assuming all current trends will continue indefinitely, that current economic constraints cannot be breached or bypassed, that humanity’s technical abilities will not improve, and that humanity will make no effort to adapt to changing circumstances. In the face of modern uncertainties, it is important to recognize that specialization and interdependence are the cause of our past successes. Throughout history, the most successful societies have always been the ones who doubled down on technology and interconnectedness in the face of change, not the ones who sought comfort in the simplicity and self-sufficiency of the past. As long as the free exchange of expertise is maintained into the future, innovation will continue, human prosperity will increase, and humanity will be able to face future challenges from a position of strength.