Margins

Small margins fascinate me. They’re all around.

It amazes me that we live in an environment that is really made up of only a small marginal sliver of inhabitable environment when compared with all the space around us.  Move a few thousand feet up or down and we would have a much tougher time surviving.

I attended a local fall festival last weekend.  The festival draws a lot festival goers, but small margins matter.  On the main strips throngs of people roll through and purchase hot dogs, funnel cakes, leather goods, you name it.  But the booths just a few feet off the beaten path might as well have not been there.  That small marginal space was enough to keep the throngs away.

The standard of living we enjoy has only been available for a small marginal sliver of time and it’s truly only available in relatively small marginal spaces.  It’s good that we have folks like comedian Louis CK to remind us of this as he did in his appearance on the Conan O’Brien show where he explained that everything is amazing and nobody’s happy.

I found another healthy dose of a reminder in Steven Landsburg’s book, More Sex Is Safer Sex: The Unconventional Wisdom of Economics (p.27):

Modern humans first appeared about one hundred thousand years ago.  For the next 99,800 years or so, pretty much everyone lived just above the subsistence level–on the modern U.S. equivalent of $400 to $600 per year.  In a few fortunate times and places it was a bit more than that, but almost never more than twice as much.  There were usually tiny nobilities who lived far better indeed, but numerically those nobilities were quite insignificant.  If you’d been born any time before the late eighteenth century, it’s astronomically probable that you’d have lived on the equivalent of under $1,000 a year–just like your parents and your grandparents, and just like your children and your grandchildren.

Then in the late eighteenth century–just a couple hundred years ago, maybe ten generations–something happened.  People started getting richer. And richer and richer still.  Per capita income, at least in the West, began to grow at the unprecedented rate of about three quarters of a percent per year.  A couple of decades later the same thing was happening around the world. After thousands of years of stagnation, life started improving from one year to the next, before long people started taking improvements for granted.  Today we expect our cars, our computers, our medicines, our entertainment systems to keep dazzling us with something new. But that’s not how it was before the Industrial Revolution. That three-quarters of a percent annual growth rate, once it got underway, must have seemed miraculous.

Here Landsburg reminds us of one margin we should all know about and informs of us another that few of us likely knew.  We all new that things started getting better only a couple hundred years ago.  Or we should know.  But, it’s easy to get caught up in our daily lives and forget that. If this were more than 200 years ago and I was living, I would not be sipping coffee on Saturday morning, while typing into a computer something I read in a book that can now be viewed by many millions of people all around the world and accessible to me from just about anywhere for the a long time in the future.

I would probably be chopping wood for the winter, taking care of livestock, hunting and gathering, tanning some game’s hide for winter coats and carving it’s bones for tools — or something like that.

The other margin Landsburg gives us is the three-quarters of a percent annual growth rate in income.  Hopefully we all learn the lesson of compound interest at a young age.  Put money into a bank account to earn interest, and over time the interest you earn earns interest compounding to surprisingly large sums if you have enough time.

That three-quarters of a percent annual growth has compounded quite nicely for us.  Take a look around and be happy.

More from Landsburg’s book to come.  I highly recommend it.

3 thoughts on “Margins

  1. i would also highly recommend dr. landsburgs writings to anyone.

    if income continues to grow, will there ever be a time when our children don’t have to work at all? robots will do all the work? or will our children be robots, built to perform only one specific task for humanity-their lives will be their work.

    in douglas adams ‘hitchhikers guide’ there was marvin the depressed robot and the door that sighed. is that our future?

    • dave – Probably not our future. Maybe our grandkids’. We’ll probably all still have jobs showing others how to use all those robots.

  2. Pingback: Tweets that mention Margins « Our Dinner Table -- Topsy.com

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