Right before the onset of the Great Depression around October 1929,
a great economist named Irving Fisher invested a huge sum of money on the stock market
because he believed that the world might have reached a state of permanent prosperity.
Well, he was wrong. The history of our discipline in economics is full of very well respected economists who
often draw the short stick in history about 130 years earlier than the great phisher.
The classic political economist Thomas Robert Malthus.
Maltose was observing the world just like we do today and came up with his Eureka moment.
At the time, he claimed that the world cannot get much richer than it already was for the following reasons.
Suppose technology improves then, indeed, as Adam Smith has argued some 20 years earlier, people will be better off.
However, there are new found welfare will be only short list.
Why? If.
Because when when people in the 18th century get more income.
They made more kids. Kids were similar to a luxury goods at the time, you know, in a way.
This is reasonable. People lived so poorly that having a poor child may jeopardise the life, the one the good of the entire family.
So they lived poorly and sustained only the number of kids they could with their own income.
If, indeed, technology raised people's productivity for a while, they will find themselves with extra income.
And make some more kids.
However, this new population growth will keep the population rising until people fall back to their subsistence level of income.
That is the income they can barely survive on. So although technology does improve living standards,
it is not enough to keep the production increasing faster than population to keep average incomes rising faster than population.
In short, Maltose argued, because population increases faster than income.
Forget about getting rich. Ever. No.
If you look at a chunk of data around the time Adam Smith and TR Motto's left, you could not really argue much with maltose.
Population was indeed rising faster than real wages. If you also look back in time, you will see that broadly motto's got it right.
For centuries, humanity could not really escape poverty because as it became rich, it immediately increased population growth.
Inturn, population growth reduced average income.
Today, we call this vicious circle of temporary progress leading to population growth and subsequently stagnating real wages.
After the air molecules, we call it the motos in trap.
For centuries, humanity was trapped and could not escape the great tragedy of Maltose, however,
was that just like hearing Fisher, who lived on the cusp of a dramatic change in the way we live.
A change which he could not foresee coming. This changed with the Industrial Revolution.
In the next video, we will examine how the industrial revolution broke the vicious circle of population growth and income stagnation.
So keep watching.
