Economists have long been fascinated by a 1930 essay written by John Maynard Keynes called "Economic Possibilities for Our Grandchildren" (available various places like here and here). Writing in the opening storms of what would become the Great Depression, Keynes maintained that the main issues facing the economy in the long run was an adjustment to ongoing technological progress. He wrote: "We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another." He added: "I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of afar greater progress still."
That growth projection may sound crazily optimistic. But as I pointed out here, it assumes only an average annual growth rate of 1.5-2.0% per year. Seemingly slow annual rates of growth, sustained over a century, are a powerful force.
Perhaps it is well-known among the cognoscenti that Thomas Babington Macaulay, the British historian, essayist, and politician, made essentially the same claim about the power of long-run economic growth in 1830, exactly 100 years before the essay by Keynes. But I had not known it until a few weeks ago. So I'll share with you some of the Macaulay's commentary, which appeared in an 1930 review essay about "Southey's Colloquies on Society" in the Edinburgh Review. I quote here from the version of the article available at the always-useful Library of Economics and Liberty website.
Perhaps the best-known passage from the essay is Macaulay's comment: "We know of no country which, at the end of fifty years of peace and tolerably good government, has been less prosperous than at the beginning of that period."
But the passage of most interest to me here is when Macauley looks back more than a century to 1720, and also ahead 100 years from 1830 to 1930--when Keynes was writing. Macauley wrote:
"Hence it is that, though in every age everybody knows that up to his own time progressive improvement has been taking place, nobody seems to reckon on any improvement during the next generation. We cannot absolutely prove that those are in error who tell us that society has reached a turning point, that we have seen our best days. But so said all who came before us, and with just as much apparent reason. ... On what principle is it that, when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
I've raised this theme often enough in discussions. Yes, maybe economic progress is about to stop and reverse itself. Maybe we will be immiserated by new technology. Maybe the future is one of mass starvation from overpopulation. But looking back at the historical experience of the last several hundred years, what can be the basis for having any confidence in such pessimistic claims?
Here's a fuller rendering of the passage which contains the second Macaulay quotation (I've added some paragraph breaks for readability).
The present moment is one of great distress. ... Yet is the country poorer than in 1790? We firmly believe that, in spite of all the misgovernment of her rulers, she has been almost constantly becoming richer and richer. Now and then there has been a stoppage, now and then a short retrogression; but as to the general tendency there can be no doubt. A single breaker may recede; but the tide is evidently coming in.
If we were to prophesy that in the year 1930 a population of fifty millions, better fed, clad, and lodged than the English of our time, will cover these islands, that Sussex and Huntingdonshire will be wealthier than the wealthiest parts of the West Riding of Yorkshire now are, that cultivation, rich as that of a flower-garden, will be carried up to the very tops of Ben Nevis and Helvellyn, that machines constructed on principles yet undiscovered, will be in every house, that there will be no highways but railroads, no travelling but by steam, that our debt, vast as it seems to us, will appear to our great-grandchildren a trifling incumbrance, which might easily be paid off in a year or two, many people would think us insane.
We prophesy nothing; but this we say: If any person had told the Parliament which met in perplexity and terror after the crash in 1720 that in 1830 the wealth of England would surpass all their wildest dreams, that the annual revenue would equal the principal of that debt which they considered as an intolerable burden, that for one man of ten thousand pounds then living there would be five men of fifty thousand pounds, that London would be twice as large and twice as populous, and that nevertheless the rate of mortality would have diminished to one half of what it then was, that the post-office would bring more into the exchequer than the excise and customs had brought in together under Charles the Second, that stage-coaches would run from London to York in twenty-four hours, that men would be in the habit of sailing without wind, and would be beginning to ride without horses, our ancestors would have given as much credit to the prediction as they gave to Gulliver’s Travels. Yet the prediction would have been true ...
To almost all men the state of things under which they have been used to live seems to be the necessary state of things. We have heard it said that five per cent. is the natural interest of money, that twelve is the natural number of a jury, that forty shillings is the natural qualification of a county voter. Hence it is that, though in every age everybody knows that up to his own time progressive improvement has been taking place, nobody seems to reckon on any improvement during the next generation. We cannot absolutely prove that those are in error who tell us that society has reached a turning point, that we have seen our best days.
But so said all who came before us, and with just as much apparent reason. ‘A million a year will beggar us,’ said the patriots of 1640. ‘Two millions a year will grind the country to powder,’ was the cry in 1660. ‘Six millions a year, and a debt of fifty millions!’ exclaimed Swift; ‘the high allies have been the ruin of us.’ ‘A hundred and forty millions of debt!’ said Junius; ‘well may we say that we owe Lord Chatham more than we shall ever pay, if we owe him such a load as this.’ ‘Two hundred and forty millions of debt!’ cried all the statesmen of 1783 in chorus; ‘what abilities, or what economy on the part of a minister, can save a country so burdened?’ We know that if, since 1783, no fresh debt had been incurred, the increased resources of the country would have enabled us to defray that debt at which Pitt, Fox, and Burke stood aghast, nay, to defray it over and over again, and that with much lighter taxation than what we have actually borne. On what principle is it that, when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?
For fans of intellectual combat, Macaulay's review is worth reading as an example of a bitingly negative review, couched in a pleasant and even languorous tone. Here are the opening paragraphs:
It would be scarcely possible for a man of Mr. Southey’s talents and acquirements to write two volumes so large as those before us, which should be wholly destitute of information and amusement. Yet we do not remember to have read with so little satisfaction any equal quantity of matter, written by any man of real abilities. We have, for some time past, observed with great regret the strange infatuation which leads the Poet Laureate to abandon those departments of literature in which he might excel, and to lecture the public on sciences which he has still the very alphabet to learn. He has now, we think, done his worst. The subject which he has at last undertaken to treat is one which demands all the highest intellectual and moral qualities of a philosophical statesman, an understanding at once comprehensive and acute, a heart at once upright and charitable. Mr. Southey brings to the task two faculties which were never, we believe, vouchsafed in measure so copious to any human being, the faculty of believing without a reason, and the faculty of hating without a provocation.
It is, indeed, most extraordinary, that a mind like Mr. Southey’s, a mind richly endowed in many respects by nature, and highly cultivated by study, a mind which has exercised considerable influence on the most enlightened generation of the most enlightened people that ever existed, should be utterly destitute of the power of discerning truth from falsehood. Yet such is the fact. Government is to Mr. Southey one of the fine arts. He judges of a theory, of a public measure, of a religious or a political party, of a peace or a war, as men judge of a picture or a statue, by the effect produced on his imagination. A chain of associations is to him what a chain of reasoning is to other men; and what he calls his opinions are in fact merely his tastes.
Given that Keynes was remarkably well-read, I do wonder if he had Macaulay in mind when he sat down to write his 1930 essay.
I can't claim any deep familiarity with the disputes between Southey and Macaulay. But for an overview, interested readers with access to JSTOR might start with the article by W.A. Speck, "Robert Southey, Lord Macaulay and the Standard of Living Controversy," which appeared in History (October 2001, 86:284, pp. 467-477).
Postscript: For a fairly short and very readable overview of the Macauley-Southey contretemps, see "Macaulay: Defender of Capitalism An answer, in 1830, to Robert Southey's charges against the factory system," by Bruce Bartlett, appearing in The Freeman, May 1975, pp. 272-276.
A version of this article first appeared on Conversable Economist.
Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.