How Did the World Get Rich?

Start Here: The Hockey Stick

For almost all of human history, most people lived close to bare survival. Kings and merchants rose and fell, and good harvests came and went, but the typical person’s standard of living barely changed from one century to the next. Then, beginning in northwestern Europe around 1800, something new happened: incomes began rising and kept rising. Plotted over time, average income looks like a hockey stick, flat for millennia and then shooting upward.

WATCH Puzzle of Growth: Rich Countries and Poor Countries (Marginal Revolution University)

Life Before the Upswing

Many people picture life before factories as simpler and gentler: quiet villages, food straight from the farm, clean air, and no smokestacks. The records that historians and demographers have pieced together tell a different story. On the flat part of the hockey stick, ordinary life was short, hungry, and hard.

The table compares the world around 1800 with the world today.

Figures are from Our World in Data, which compiles estimates from historians and demographers with recent data from the United Nations and the World Bank.

What the averages hide. Averages can mislead. Life expectancy was low largely because so many children died, not because adults typically died at 30 or 40. In France in 1816, a 15-year-old could expect to live to about 58; today, a French 15-year-old can expect to reach 83. Death rates have fallen at every age, not only in childhood.

Daily life. Numbers can make the past feel abstract. Chelsea Follett, a research fellow at the Cato Institute, tries to make it concrete in her 2026 book The Grim Old Days: An Introduction to the Preindustrial Past, built on firsthand accounts. She describes most people living on thin gruel and coarse bread, often stale or contaminated, with food shortages regularly setting off riots. Work ran from sunup to sundown, and homes filled with smoke from the hearth. Medicine often did more harm than good: surgery came with no anesthesia beyond alcohol, and bloodletting was the standard treatment for almost any illness. “Even lighting,” she writes, “was once a luxury that most ordinary households went without after nightfall.”

Why it stayed flat. Why did the stick stay flat for so long? Thomas Malthus offered an answer in 1798. When harvests improved or a new tool raised output, more children survived and families grew. Because land was fixed, each extra worker added less, and income per person slid back toward subsistence. Economists call this the Malthusian trap: growth in total output was matched by growth in population, so the typical person was no better off. The rest of this reading asks what finally broke the trap.

A long debate. Historians have argued for nearly two centuries about whether the first decades of industry made ordinary workers better off. Friedrich Engels’s 1845 account of Manchester and other English factory towns described crowded, filthy slums. Economic historian Charles Feinstein estimated that the living standard of the average British working-class family rose by less than 15 percent between the 1780s and the 1850s. Robert Allen calls this stretch, when output per worker grew but real wages stalled, “Engels’ pause.” After about 1850, wages began rising along with productivity. Both things can be true: preindustrial life was grim, and the early industrial era brought crowded cities and gains that took two generations to reach most workers.

And about the future. A related debate looks forward. Degrowth writers, such as economic anthropologist Jason Hickel in Less Is More (2020), argue that rich countries no longer need economic growth and should cut their use of energy and materials while sharing more fairly what they already have. Follett wrote her book partly as an answer to that view, arguing that a romantic picture of the past leads people to undervalue growth. The Normative Question at the end of this reading asks you to weigh these.

What Growth Buys shows that many of the same gaps still exist today, between rich countries and poor ones.

READ The Preindustrial Past Was a Horror Story (Chelsea Follett, HumanProgress, Cato Institute, October 2026)

What Growth Buys

Our World in Data, a research project based at the University of Oxford, publishes hundreds of charts that set average income beside other things people care about. The pattern is hard to miss: on almost every measure of health, comfort, and opportunity, people in richer countries do better. The World Bank’s figures for its four income groups show the same thing.

Income is measured at purchasing power parity in 2021 dollars, which adjusts for differences in living costs. Other figures are for 2024.

WATCH 200 Countries, 200 Years, 4 Minutes (Hans Rosling, BBC)

Soil, Climate, and Seeds

One useful way to sort the answers is to think of a garden. Nothing grows without good soil, but soil alone doesn’t make a garden.

• The soil: institutions. The rules of the game, such as property rights, contracts, courts, and limits on rulers. Douglass North.
• The climate: ideas about people. Whether a society honors or scorns ordinary people who try new things. Deirdre McCloskey.
• The seeds: useful knowledge. Knowing how things work and putting that knowledge to use. Joel Mokyr.

The three overlap, and the thinkers themselves disagree about which matters most.

Three Thinkers, Three Layers

1 Douglass North: The rules of the game

Nobel economist Douglass North defined institutions as “the humanly devised constraints that structure political, economic and social interaction.” They include formal rules, such as constitutions, laws, and property rights, and informal ones, such as customs and codes of conduct. Good rules lower the cost and risk of trading with strangers, so people will specialize, invest, and make deals they could not make otherwise. North found that secure property rights were a prerequisite for growth in Western Europe. England and the Netherlands, where property was secure and restrictive guilds were weak, pulled ahead. Spain, which lacked such changes, stagnated for a century.

The challenge. Rules are slow to change, so why did growth explode when it did? England had courts and fairly secure property for centuries before 1800. McCloskey argues that the timing doesn’t fit and that institutions only work when people believe in them. North’s own definition, which includes customs and codes of conduct, partly answers this.

2 Deirdre McCloskey: Dignity and liberty

McCloskey argues that the Great Enrichment came from a change in ideas. “Our riches,” she writes, “were made not by piling brick on brick, bank balance on bank balance, but by piling idea on idea.” Starting in Holland and Britain, ordinary people such as barbers, clockmakers, and shopkeepers gained the liberty to try new things and, just as important, the dignity of being admired for it. She calls the result the Bourgeois Deal. Act 1: let me try out my idea and keep the profits if it works. Act 2: don’t envy those profits, because you chose to buy what I made. Act 3: by the end, you will all be better off too. Saving and investment were needed, she says, but they had always existed. What was new was the honor given to innovation.

The challenge. Ideas and attitudes are hard to measure, so critics ask how the theory could be tested. Did respect for commerce come first, or did it follow wealth? Others note that the same centuries that celebrated free commerce also saw slavery and colonial rule, so liberty and dignity were far from extended to everyone.

3 Joel Mokyr: Useful knowledge and a culture of growth

Economic historian Joel Mokyr shared the 2025 Nobel Prize for identifying the prerequisites for sustained growth through technological progress. Earlier societies produced brilliant inventions, but the gains fizzled out. Mokyr argues that people often knew that something worked but not why. Once the Scientific Revolution and the Enlightenment connected the two kinds of knowledge, each fed the other: science improved tools, and better tools improved science. Europe’s many competing states created a “market for ideas.” A thinker banned in one country could publish in another, and a cross-border “Republic of Letters” shared findings. Britain also had skilled craftsmen who could turn designs into working machines. Finally, growth needs a society open to change, because new technology always creates losers who want to block it.

The challenge. If the knowledge spread across Europe, why did the breakthrough come first in Britain rather than in France or the Netherlands? Some historians reply that ideas were everywhere but it paid to use them only in certain places.

WATCH What Caused the Industrial Revolution? and The Economics of Ideas (Marginal Revolution University)

A Clue from the Job Records

Many people picture the Industrial Revolution as the moment workers left farms for factories. A long-running Cambridge University project on British jobs tells a different story. Its historians pieced together the occupations listed in wills, estate records, and baptism registers, more than two million documents in all. They found that the share of men in England and Wales who made things, in crafts, manufacturing, and construction, rose from about 30 percent in 1601 to about 43 percent in 1701. Then it barely moved for 150 years: it was about 46 percent in 1851. When workers did leave farming after about 1820, most went into services such as transport, shops, and offices, not into factories.

So what changed during the Industrial Revolution was mainly how much each worker produced, not where people worked. That doesn’t settle which explanation above is right, because new ideas, cheap coal, and better rules could each raise output per worker. It does sharpen the question: what made workers so much more productive after about 1800? A caution: before 1817 the estimates cover men only, and they are rebuilt from incomplete records, so the exact numbers may change as the research continues.

One Question, Several Answers

Why did sustained growth begin in Britain around 1800?

What Economics Adds

LISTEN The Hidden Cause of the Industrial Revolution (with Ben Southwood) and Can a Nation Plunder Its Way to Wealth (with Noah Smith) on EconTalk, hosted by Russ Roberts, with transcripts

Key Terms in Plain Words

Great Enrichment

McCloskey’s name for the sustained rise in living standards since about 1800.

Institutions

The formal and informal rules of the game that shape how people interact.

Property rights

Secure, enforceable claims to own, use, and trade what you have.

Rule of law

Rules that apply to everyone, including rulers, and are enforced fairly.

Bourgeois Deal

McCloskey’s bargain: let me innovate and profit, and everyone ends up richer.

Useful knowledge

Mokyr’s term for knowing both how things work and how to make them.

Market for ideas

Competition among thinkers that tests ideas and spreads the best ones.

Creative destruction

Growth through new products and firms replacing older ones.

Inclusive institutions

Rules that let most people take part and share in the gains.

Extractive institutions

Rules that let a small elite take wealth from everyone else.

Preston curve

The link between national income and life expectancy, which has shifted up over time.

Easterlin paradox

The finding that average happiness may not rise over time as countries grow richer.

Malthusian trap

A pattern in which gains in output are absorbed by population growth, keeping incomes near subsistence.

Standard-of-living debate

Historians’ long argument over whether early industry made ordinary workers better off.