In a nine-minute video, Swedish statistician Hans Rosling, who died in 2017, shows just how dramatic the washing machine was to his family. It freed his mother to do other things and his grandmother found it so fascinating that she just sat and watched it perform its tasks. In one of my classes at the Naval Postgraduate School in the late 1990s, I was laying out the data on the entrance of women into the US labor force after World War II. A particularly curious student asked me why that had happened, and I pointed to washing machines, driers, automatic dishwashers, and a range of labor-saving devices that had freed up time mainly for married women. I also referenced a chapter of Robert Caro’s magnificent first book on Lyndon Johnson, The Path to Power. The chapter, titled “The Sad Irons,” told of the incredibly taxing work women in the Texas hill country did to wash laundry before they had electricity: hauling water uphill from a well, hauling wood to burn in a stove, firing up the stove in the middle of hot summers to heat water, and keeping it fired up to heat irons to press shirts. Washing machines were a huge boon to families, especially to women.
This is from David R. Henderson, “What Causes Economic Growth?” Defining Ideas, June 16, 2002.
Another excerpt:
An example of a more recent major breakthrough is Zoom. Zoom has made it so much easier for large groups to communicate remotely. Last fall, I gave a speech in Washington in which I asked the audience of about fifty to raise their hands if they used Zoom a fair amount. Virtually every hand shot into the air. I then asked them to raise their hands if they valued it a lot. Almost every hand stayed in the air.
On this point about Zoom, I didn’t put in the article, because it didn’t nicely fit, the reason I had raised the Zoom example. I was giving a talk to a number of Republican politicians and wanna be politicians who tended to be pro free market but at that point in the talk were pushing back on my pro-immigration views. I asked them if they knew how many times Eric Yuan, the creator of Zoom, had applied to immigrate to the United States before finally getting permission. Of course, they didn’t know. Why would they? I pointed out that it took him 9 tries. I asked if any of them would have wanted it to be easier for him and people like him. Some of them did.
One last excerpt:
What has been particularly important for poorer countries since World War II has been a substantial reduction in trade barriers. Moving toward freer trade causes people to produce the items in which they have a comparative advantage and buy other items from lower-cost producers in other countries. In “Does Trade Reform Promote Economic Growth? A Review of Recent Evidence,” a 2019 PIIE study, Dartmouth economist Douglas A. Irwin, arguably the leading trade economist in the United States, shows that between 1983 and 2009, developing countries dropped their average tariff rate from over 35 percent to about 10 percent. He reports on a range of studies whose answer to the question in the title is “yes.” In a table in the article, Irwin cites studies that find anywhere from a 1 percentage point increase in annual growth up to a whopping 2.7 percentage point increase in annual growth due to reductions in trade barriers. Either of those annual increases, over a decade, leads to a major increase in economic well-being.
Read the whole thing.
READER COMMENTS
Kevin Corcoran
Jun 17 2022 at 12:30pm
I liked the emphasis on consumer surplus. Production creates wealth, but voluntary exchange is also a key ingredient. I’ve encountered a surprising number of people who think (or seem to believe that economists think) the price established by the market is meant to show the “true” value of some good or service. But of course, market prices are not a reflection of what something is “really” worth – they are simply the price that clears the market, where the amount producers want to produce and sell equals the amount consumers want to buy. The more I “disagree” with the market price of something, the better for me. The other day, I spent ten dollars on a book I would have happily bought for thirty dollars. My “disagreement” with the market price for the book meant that by purchasing it, I was able to make myself, in a very real sense, twenty dollars wealthier than I was before. The total volume of consumer surplus I’ve received in this way over the course of my life is mind boggling – I couldn’t even begin to quantify it. But attempting to understand it, if nothing else, fills me with an immense sense of gratitude for market exchanges.
David Henderson
Jun 17 2022 at 3:05pm
Nicely said, Kevin.
Incidentally, on the Hoover site that I link to, a commenter suggested that I call it consumer profit. I think he may be right. I’m noodling it.
Kevin Corcoran
Jun 20 2022 at 8:10am
I like that term – it’s certainly more descriptive of the idea than “consumer surplus” is, at least to my ear.
Jose Pablo
Jun 19 2022 at 5:00pm
Being the consumer surplus so important (and I fully agree it is), why is it so absent in political discussions? (and in economic too)
Why is it nowhere to be found in P&Ls? (that wrongly focus on corporate profits instead of the total utility created and “who” is “getting” paid for what … spoiler alert: the government is getting the biggest part of the price the consumer pay and the consumer are getting the biggest part of the utility created).
Granted it is difficult to measure … but everything is so in a P&L; that’s the reason we have countless accounting rules.
Kevin Corcoran
Jun 20 2022 at 8:10am
I don’t have rock solid answers to those questions, but a few general ideas come to mind.
Regarding why consumer surplus isn’t as highly discussed among economists – it may be due to the fact that it’s considered such an elementary point. This is a major failing among most economists in their public communication, in my opinion. Even elementary points in economics can have implications of major importance, and unfortunately, the vast majority of economic commentary among non-economists is rife with failures to understand even very elementary points about economics.
I suspect it’s absent in political discussion largely because these days, politicians of all major parties run on a platform of “here’s why everything in life is terrible and why you need politicians like me to fix things for you.” Convincing people that things are awful and the only route to a better life for them is for you to have power is, sadly, a very effective means of acquiring that power. Given that, the last thing we’d expect politicians to do is talk about ways life is actually pretty great and better than we might think.
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