The Fine Details of Economic Growth

A few days ago I posted about Peter Thiel’s off-base criticism of the Boskin Commission’s proposed adjustment of the Consumer Price Index for new products and quality improvements.

I didn’t address his point that we aren’t seeing the major technological changes that he, as a young man, had hoped to see.

I think he misses the small picture. By that, I mean that he misses the thousands and thousands of ways that our lives get better due to new products that are slightly better than old products. Donald Boudreaux has a metaphor for this: the prosperity pool.

In an article titled “The Prosperity Pool,” Econlib, April 4, 2016, Don wrote:

These [Pool] Noodles are an ideal symbol for an amazing and wonderful—but often ignored—feature of a modern, prosperous market economy. That feature is that such an economy is largely the result of many small innovations, each of which is not very significant but the massive accumulation of which produces our unprecedented modern prosperity.

Another excerpt:

Look closely around your home. There, you will find rolls of disposable paper towels that make cleaning your kitchen much easier. Those rolls of towels were not invented until 1931. Moreover, unlike Arthur Scott’s original paper towels,3 today’s towels are two- and sometimes three-ply, and they are textured and embossed—all to increase their strength and absorbency. How much poorer would you be if your paper towels were flat and one-ply? Indeed, how much poorer would you be if no one had ever invented disposable paper towels to begin with? Somewhat, but not much.

Continue looking around your home. That can of soup in your pantry can be easily opened by a simple pull on the pull-tab that is now a common feature on canned goods. (When I was young, opening cans always required a can opener.) And the contents of that can are ready to eat, unlike a few decades ago when, to produce edible soup from a can, the consumer had to add water. Of course, these days, you can heat your soup in a microwave oven in a fraction of the time required to heat it using a burner on your stove.

Don’s article is well worth reading or re-reading.