Rarely do we realize how fortunate we are to have been born now as opposed to just a few hundred years earlier. Ever since income per capita started growing, we simply got accustomed to that fact and took it for granted, as if it were a fact of life. When the Great Depression forced us to experience, just for about a decade, income levels that our parents experienced their entire lives, it felt to us as if the world had ended.
Before 1800, the world was desperately poor; it's obviously hard to compare standards of living across so much time, but the horizontal line y=1 on the graph is an equivalent of about $400 a year today. The world was also stuck in a "Malthusian Trap:" whenever income started rising, population would expand until all the surplus was gone. Technological progress wasn't quick enough to prevent it. In fact, many significant spurs of income growth that occurred in our Malthusian past were due not to innovation but depopulation. For example, the Black Death epidemic of 1348-1350 raised the average standard of living in Europe: as labor became scarce, wages rose to unprecedented levels. But then (by about 1600), population level would return to what it has been before the epidemic, and income started falling again.
Then around 1800 in Europe, something happened. Technological progress started outpacing population growth. No one really knows why it happened then and there. One thing is probably that for income growth to jump-start, a very delicate balance needs to be struck: if population density is too low, technological progress will not accumulate; if it's too high, population growth will eat all the profits from this progress. And then there's the whole issue of political institutions.
It's amazing how little we understand about the most important event in the history of our species.
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