Bryan Caplan  

Economic Growth: Can You Give an Answer a Five-Year-Old Could Understand?

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When I teach undergraduate labor, I lecture on "Why the Standard Story of Labor Is Wrong." Here's the standard story, according to me:

1. In the days before the minimum wage, unions, etc., life was terrible for workers because employers paid them whatever they felt like paying them.

2. But then government became more progressive, and changed the laws.

3. Life is now better for workers because employers' greed has been tamed.

Does anyone really believe such a silly story? Well, a couple days ago, I came across a perfect example while reading If You Lived 100 Years Ago to my kids. After going into grisly detail on the harsh living conditions of the poor (and the opulence of the rich), the book ends with the question "When Did Life For the Poor Get Better?" The book's answer:
Not all rich people were selfish. Many cared about the poor. A newspaper reporter, Jacob Riis, wrote a book called How the Other Half Lives. Riis's photographs showed people living and working in miserable conditions. Men and women who cared about the way the poor lived began to work for changes.

They started settlement houses where poor people had classes in health and education. The poor could even take baths in bathtubs! They could listen to music and see paintings.

In the 1900s, laws were finally passed to protect children. New laws said all children under the age of fourteen had to go to school. They were laws that called for better housing, safer foods and medicines, shorter working hours, and improved public schools. Things began to look up for many people.

In short, life got better for the poor because of philanthropy and regulation. Economic growth? Higher labor productivity? Negative side effects of labor market regulation? Blank out.

In fairness, the next paragraph says:

More people of the middle class began to enjoy new inventions, such as washing machines, that made their lives easier. More and more people bought furniture and clothing made in factories.
But the process of economic growth and rising labor productivity that made these advances affordable to more and more people? No mention.

Now you could say that the Standard Story of Labor is simply easier to explain. Maybe so, maybe not. So, dear readers, here's my challenge: In the comments, can you write an economically sound answer to the question "When Did Life For the Poor Get Better?" that a five-year-old could understand? 150 words or less!

I'll read the best one to my sons on Monday morning.


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TRACKBACKS (2 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/761
The author at Sacred Stew in a related article titled Wrongheadedness: Nature or nurture? writes:
    ...are people innately stupid or are they taught things that stifle critical thought? It would seem as though the answer is "yes" to both: man has rather nasty instincts left over from our days spent in tribal societies with nearly zero-sum economie... [Tracked on September 28, 2007 5:40 PM]
The author at sbw in a related article titled Economic history for a five-year-old writes:
    The assignment given is to correct educationalist professional non-answers: When did life get better for the poor? (Not quite for 5-year-olds) Life got better for the poor around the late Middle Ages when they learned they could take responsibility for th [Tracked on September 30, 2007 6:01 PM]
COMMENTS (20 to date)
Giovanni writes:

You keep picking on the same small set of easy targets.

Move on to something different.

Heather writes:

But isn't the rising labor productivity a result of the increased educational level of the average worker? A worker who can read will be far more productive than one who can't. From what I've seen in the global economy, one of the best ways to increase productivity in a country is to increase the average education of the population. The story does mention this, although it could be further emphasized.

Make a Choice! writes:

Life for the poor got better when the poor decided that they didn't want to be poor and did something about it.

Right now son, you are very poor. Poorer than the poorest people in this country. But you don't think of yourself as poor. You are learning to clean and dress yourself, learning to read, do chores, and to look for opportunities to improve yourself and what you can do. All of these things mean that you are doing something about being poor. One day, you will use all of the things you learn to provide for yourself, your family, and others who just decided that they did not want to use what they learned, or could have learned, to make opportunities to improve themselves and other around them.

Matt writes:

The poor got better when outlook increased from about 20 years to 30 years with the advent of sanitation and nutrition, around 1850.

Economists underestimate the gains in productivity when we can plan careers over longer periods. We can estimate the long term value of investment in tools. We can sort out long term trends from short term trends as we estimate trends farther back and farther out. And, importantly, we can plan longer child raising periods before we let the offspring loose.

The effect of longer term outlooks should show up in the tendency to invest in longer term maturities, though I have not checked the data.

As you know, my complaint about Brian's bias theory is that he is not seeing bias, but he is seeing the long update cycle for government and large organizations, a serious problem indeed. Government, in particular, often waits every 16 years to update its major prgrams, and the resulting economic turbulence is almost unbearable. But it is not bias that is the cause, it is price fixing attempts by various political factions.

mhowell writes:

Not sure I made it under the 150 word limit but here goes ...

Life for the poor was tough all over the world 100 years ago, including America. The big difference in America, however, was that through hard work and smart thinking, a poor person could rise above his station in life. This was not the case in most other places in the world.

So, in the last half of the 1800's thru the first 25 years of the 1900's poor people from all over the world began to leave their homes and come to America. In the beginning many of them were farmers and miners. They fanned out across the country to help settle the west. Later on many of the immigrants came to build the railroads, work in steel mills and factories.

The owners who risked their money to build the railroads, machine shops, stores, and factories sometimes got very rich. And, since there were so many new Americans competing for jobs, the owners did not have to pay them very much or provide a safe work place to attract workers. Life was very hard for many of them.

Over time, however, some owners (like Henry Ford) discovered that if you treat workers better you can attract better workers, make better products, grow your business, and help the whole economy. The government also added some laws which helped but, in the end, it was economic growth that improved the lives of most American workers.

Caliban Darklock writes:

Life got better for the poor because life got better for the rich.

Basically, poor people are at the bottom and rich people are at the top, but the top keeps getting higher. The bottom stays where it always is: at zero. But everyone who isn't all the way at the bottom does better when the top grows.

Try this experiment. Tack one end of a rubber band to a cork board, and make several marks on the rubber band. When you pull the other end of the rubber band upward, all of the marks move upward, too. The ones close to the top move farther than the ones close to the bottom, but they still all move up.

The market is really more like a flower. You can't make a flower grow, you let it grow. Government interference comes from the idea that regulation can make flowers grow.

(Woohoo! 149!)

Floccina writes:

Heather illiterate Mexican immigrant construction workers in the USA are about as productive as native literate construction workers.

Unit writes:

150 years ago people had very little money but also did not have the opportunity to buy much. They had to make almost everything from scratch. The things that mommy and poppa are today able to buy at the store for you, they would have to make themselves instead: clothes, dinner, the house. Trips were also harder to make and often had to be made on foot. But 150 years ago things were starting to change. Because of several inventions and the enlightened rule of leaders who stayed out of the way and let people go about their business of offering services to each other in exchange for money or other goods, the gain from progress started to compound and produced the greatest revolution known to mankind: it goes under the name of Industrial Revolution. But I'll tell you about that another night, it's time to turn off the (electric) light now. Good night.

mike writes:

The POOR's chance of a better life is the result of Gov'ts insistance and enforcement of childrens education and work rules, and Unions fair recognition of all participants during the maturation of the industrial revolution.

John writes:

Son,

Everybody wants things and everybody has things. So people trade to get stuff they want. Some people sell food. Some people sells toys. Some people sell their time, like Daddy. I teach people and I get paid. With the money people make they buy things they want. When more people do this, we all have more stuff and can buy more stuff and new, cool stuff get invented.

Now, a long time ago, people had to make more stuff by themselves So, there was a lot less stuff to buy and people has less money.

That's why Daddy teaches and uses some of the money to buy your cereal and your toys. I can get you more cereal and toys and lots of other stuff by teaching than if I try to make them myself.

A long time ago, Daddy wouldn't be able to buy as much and it would cost a lot more.

That's why people are richer today.

liberty writes:

Some people are good at doing some things - like sewing sweaters, chopping wood or growing vegetables - and other people are good at doing other things. A long time ago people used to have to do all of those things for themselves just with their families. Mother would sew and daddy would chop wood and the children would take care of the vegetables. But over time people figured out that they could each take on the job that they were best at. So, one person did all the sewing and traded with someone else who did all the chopping wood. And they could each trade those things for for vegetables. This made it easier for each of them to get really good at the one job and think up ways to do it faster and more easily. Over time this has made everybody better off, even the poorest people.

Snorri Godhi writes:

It occurs to me that the question is basically the same that Gregory Clark has tried to answer. Should be really teach five-year olds ideas that economic historians do not yet agree on? And yet, it is possible to stay on the safe side with 150 words. My contribution is based on my belief in the primary role of the agricultural revolution. I have avoided any mention of "goods" and "wealth", limiting myself to food, clothes, houses, toys, money, etc. It's a bit over the 150 word limit, and there is some redundancy.

=------------------------------------------------
Until about 300 years ago, almost all of the people had to work very hard in the farms to get enough food to eat. There was little time to do anything else. If there was bad weather, people went hungry*. So people searched for ways to grow more food with less work. Over time, they found better and better ways to grow more and more food with less and less work. Now, very few people grow food, but there is enough food for everybody to get fat. The people who do not grow food now can do other work, for instance, write books like Dad does.

People wanted to grow more food because they could sell it. The more food they had, the more money they would get selling it. With this money, they could buy houses, clothes, furniture, and toys, and pay the doctors if they were ill. So they tried very hard to find ways to grow more food. But we don't know why they only started trying hard 300 years ago.

* mention of starving to death optional

Burt writes:

Labor cost is the same as anything else in the free world. it is based on supply and damaned. I cant tell my workers what they will work for. I may ask for $8.00 an hour some say yes some say No. If I ask a person that has a skill to work for me. that person knows what the going rate is for that skill. But a person that is poor. That has no skill. Will take whatever is offered. So learn a skill Son.

Smmurph writes:

When Wal-Mart came to town!

PJens writes:

Everyone gets a better life when new ideas are shared. Think of when a kid brings a new game to school. All the kids get to experience it, or are exposed to it. Of course some kids are going to be better than others, but that is a talent difference.

When computers were first invented, only a few people could have one. But everyone in the world benefits from computers today.

There will always be people who have more stuff, or better advantage than others. But good ideas help everyone have a better life. Don't dwell on those less or more fortunate than you, concentrate on creating new ideas. That is the most fun, and it helps everyone!

sbw writes:

When did life get better for the poor? (Not quite for 5-year-olds)

Life got better for the poor around the late Middle Ages when they learned they could take responsibility for their lives, resolved to learn how, and acted on that resolve.

Since then, the quality of life for the poor has gotten better or worse according to time and place depending on the direction of science, education, and social institutions. Mathematics fostered invention of money and science. Understanding science advanced agriculture, improved tools, techniques, and shelter, harnessed energy, and advanced sanitation and medicine. That gave people the leisure to learn to see the universe more clearly, the better understand one's place in it, and advance the social institutions that allow people both liberty and responsibility. Whether life stays better is a choice people make every day by their thoughts and actions.

mark gould writes:

life for the poor got better when they got better paying jobs and became wealthier making their way of life easier. they could afford more things and had a higher quality of living. but they had to work hard to get a good job and had to keep that job. otherwise they would be back where they started.

Faré writes:

At no point in time did life "start" to get better for the poor. At most any point in space and time, those who were "poor" were much better off than the poor of two centuries before -- the earlier society earlier could not have fed them all, and would have treated survivors more harshly. Since the dawn of man, tremendous progress has come from inventions, be them technical or social. Techniques that seem primitive today, like salting food so it doesn't rot, once revolutioned the life of generations. So did trading routes across regions with different resources: salt, game, wood, metal. Or money as an universal intermediate for barter between strangers. Or techniques and social mores that ensured increased hygiene. Countless innovations have always served to improve life for everyone. Even Slavery was once progress for the victims - over anthropophagy. Obstacles to progress are political oppression and superstition.

Karl Smith writes:

A long time ago almost everyone lived on a farm and did almost everything for themselves. There was a problem though, more people kept being born but there was no more farm land. These people starved.

One day people invented machines that could do some of the work farmers used to do for themselves. Farmers could spend more time growing crops and then trade some of the crops with the machine owners.

The machine owners gave those crops to the starving people and in return the starving people worked the machines. Over time the machine owners invented better and better machines, which meant more and more crops and fewer starving people. Eventually the machines got so good that almost no one starved and there was plenty of stuff left over for everyone.

Everyone was happy because the starving people had enough to eat and the farmers didn't have to do everything themselves.

Faré writes:

Will you announce the winner (or lack thereof) as a blog post? If there is no winner, can you post what you've read to your child instead?

NB: a revised version of my answer is on my blog: http://fare.livejournal.com/115441.html

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