0:33 Intro. [Recording date: November 3, 2017.] Russ Roberts: My guest is journalist and author Tim Harford. He first appeared on EconTalk in 2011, a long time ago, talking about his book, Adapt. And he was a guest a year ago talking about his book, Messy. His latest book, which is the subject of today's conversation, is 50 Inventions That Shaped the Modern Economy. Tim, welcome back to EconTalk. Tim Harford: It's great to be back, Russ. Russ Roberts: I want to start--you did a podcast series on these ideas. Correct? Tim Harford: Yes. It was simultaneously a book and podcast series for the BBC [British Broadcast Company]. And the name of the series is very slightly different from the book. The book, is 50 Inventions that Shaped the Modern Economy. And, the podcast series was "50 Things that made the modern economy". And it ran for a year. One 10-minute episode a week. And they are all still available, if EconTalk listeners might enjoy them. They are all free, of course, as many podcasts are. So, check them out. Russ Roberts: Glorious. Only 10 minutes, though, per episode--that's, you know, short shrift for some of these ideas, of course. /p> Tim Harford: Well, that's true. And that works out to about 1200 words. So, they are short chapters. But actually I found that to be a very good discipline for me, because 10 minutes, 1200 words--it's obviously not enough to say everything. It's not close to being enough to say everything. But it is enough to say something. And the discipline of trying to figure out what it is that you want to say: Do you want to focus on the origin story? Do you want to focus on the unintended consequences? Do you want to--as I often did--do you want to convey an economic lesson, almost a parable about the way the economy works? You just have to make different choices. And that variety was a lot of fun. Russ Roberts: I think that's what makes the book enjoyable, as well as educational. Each chapter is quite short; and you have, as you said, you had to decide what to emphasize. I learned a lot from the book that I didn't expect to learn, and some of those things were just facts about the world that were fascinating, and some of them were implications of these ideas that I had never thought of. So, that was fun. Now, we can't talk about all 50, even if we spent 1 minute apiece on each one, which wouldn't be enough. I wouldn't want to do that. But we're going to talk about a few of them in specific. But, before we do that, I want to ask you how you planned this. How did you choose the 50? You explicitly say in the book they are not the 50 most important inventions. So, how did you decide? Tim Harford: No, I mean there were a lot of obvious ones missing, so that the automobile isn't there, the steam engine isn't there, the computer isn't there, the telephone--there are a lot of things that would be in anybody's top 20. So, I was looking for interesting stories, surprises. Some of them are clearly very important, like the diesel engine or the plow. Some of them are obviously not super-important: the IKEA [Ingvar Kamprad/Elmtaryd/Agunnaryd] Billy Bookcases there. But in each case, the idea was: Can I teach people a lesson about the way the world economy works through the medium of one of these inventions? Is there an interesting story to tell? Is there a surprise? So, that was the basic mission. Actually, Russ, I know you are very interested in communication of economic ideas: that's one of the things that fascinates you-- Russ Roberts: It's all I know how to do, Tim. Tim Harford: Well-- Russ Roberts: I appreciate the implication that it's more than that-- Tim Harford: We both know that's not true. But, I know it's one of the things you are interested in. And obviously I'm interested in it as well. And, something that I came to discover and worked on in the book is, it is amazing to be able to focus on a specific thing, a specific time or place or person that--obviously that comes from telling these stories. And then starting with something interesting and specific and maybe surprising, to then go on and convey a lesson about, you know, winner-takes-all markets, or externalities, or something like that. So, it was a great lesson for me in economic communication. To come back to the question of how I chose the 50: well, apart from just looking for interesting things, I wanted to do a range. I wanted a geographical range; I wanted a historical range. So, some of the inventions are many thousands of years old; some of them are pretty new--like cellar[?cellular?] feedback mechanisms or Google's search algorithm. I wanted a range of industries. So, some are transport; some are used in the home; some are consumer focused; some are very financial. And, that was the basic idea. I talked to a lot of friends and to people--historians and technologists that I respect. And then I just started writing. And by the time I'd got through 35 or 40, you could then go, 'Okay. You've only got a dozen left. What's missing?' And fill in the gaps. At the end of the series, the BBC [British Broadcasting Corporation] suggested that we crowd source one more idea. So, I asked people to send in their suggestions. And there were literally hundreds of suggestions. Many of them were very good. I would say at least 40 or 50 I would be glad to put in a second book. Great ideas. So, I chose 6 for a short list and got people to vote on the final one. So, there's really no short--it could easily have been a hundred things rather than the fifty I mentioned. Russ Roberts: Can you tell me what the 6 were that made that extra list? Tim Harford: I can. It's quite recent. It was all a big secret. But last week we published the winner. So, the short list--I chose the short list, based on what I thought was interesting in people's suggestions. The one thing I didn't put on the short list was pornography. Somebody had suggested--several people suggested--pornography was a major driver of-- Russ Roberts: of modern economy; of human life-- Tim Harford: [?] innovation. Well, but the idea of, well--people say these things--that it drove credit cards on the Internet, video on the Internet; before that, VHS [Video Home System]. I don't know if it's true, but I thought it was interesting; I would have loved to have that in the book. But I couldn't quite face up to putting it on the short list of 6 because it inevitably, it would have won. And then I'd have had to go to my colleagues at BBC and say, 'Sorry, but we asked the public, and they the most important thing in the economy is porn.' So, we didn't do that. The six that I chose were the credit card; the digital spreadsheet; GPS--the Global Positioning System; glass--telescopes, microscopes, spectacles, and glass fiber; the pencil--as a nod to fans of Leonard Read, his great essay I, Pencil; and irrigation. So, those were the 6 that I suggested. And, well, what would you have voted for, Russ? Russ Roberts: Well, they are all fantastic. What were the first two, again? Tim Harford: The credit card, GPS, glass, the pencil, the spreadsheet, and irrigation-- Russ Roberts: When you said the credit card, I thought: Well, the credit card--of course. And the others sort of filtered into my brain, and I'm thinking, 'Well, those are important, too.' It's kind of what you said before: There's so many things you could put on the list. Credit card is an extraordinary, an extraordinary thing. And, what I like about the book is you don't just extol the virtues of these extraordinary, great innovations and the people who invented them. You talk about some of the side-effects, which are often not so good for everybody. And sometimes not so good at all. So, I think I'd go with--on that list, I think I'd go with the credit card or GSP--you know, makes so many things possible.

8:12 Russ Roberts: And I want to come back; we'll talk about GPS. I want to ask you a broader question-- Tim Harford: I should tell you before you ask me the question, I can tell you which one won. Russ Roberts: Oh, yeah. I'm sorry. Tim Harford: You are very much in tune with the BBC audience, Russ, because they chose the credit card. And it's a good suggestion. Because there's a deep point about trust and who is trusted. Credit itself means trust. And this is a technology that broadened out: Who gets trusted and what they get trusted to do. The technology is also interesting: Just instantaneous verification of you are who you say you are-- Russ Roberts: shocking-- Tim Harford: and your bank balance is what you say it is. And of course there's some very interesting Behavioral Economics and Psychology of, this is a very financial-- Russ Roberts: It's free-- Tim Harford: this is a very financial tool and--yeah. It does seem that we can misuse this tool. One little lead that I love is, when you survey Americans with credit cards and you ask them: How strongly do you agree with this statement: 'Credit cards companies give far too much credit to too many people', 90% of them, 95% of them agree. 'Oh, yeah, they are far too liberal.' But, when you ask them: 'Are you happy with the way that credit card companies treat you?' 80% or 85% of people are very happy. They think they've got a great service. They are very satisfied. So, we are--we think it's fine for us but we do worry about what other people might be doing with the technology. Russ Roberts: Yeah.

9:34 Russ Roberts: The thing I thought, that I missed in the book, my sort of favorite pet invention that doesn't get enough credit, is cardboard. And the box. Now, you do have the container. And maybe we'll talk about the container. But cardboard, as well. Tim Harford: And paper as well. Russ Roberts: Yeah; well, you talk about paper. Tim Harford: Yeah. But I don't focus on cardboard. We're in sympathy, I have to say. Paper is perhaps more a favored invention in the book, in terms of being underrated. And there is--I mean, cardboard, corrugated cardboard, very, very important invention. And of course it's a subset of paper. But also, everybody said, as I was working on the book, 'Well, you must do the Wittenberg Press. It's revolutionary; it gave us the Reformation; it gave us textbooks, and newspapers, and mass literacy. And all--of course, all of that is true. But, the interesting thing is, if we had focused on the economics, it is technologically possible to print, using a Gutenberg Press--movable type printing press--on animal skin parchment. But it's very expensive. And, in order to justify mass-producing writing, you need a way to mass produce a writing surface. And that writing surface is paper. So, if this is about the economics of printing, you've got to give some respect to paper as well. Russ Roberts: Well, I just want to say one thing about paper, because--you mention Leonard Read's "I, Pencil." And one of the themes of "I, Pencil," is that no one knows how to make a pencil. That, the amount of knowledge, abiding[?] in this incredibly simple, seemingly untechnological product--which actually has quite a bit of technology underlying it, obviously. But, it requires resources from around the world. Technology and knowledge that is not in any one person's head. And it's an example of the cooperation that occurs in a market system. So, it's a lovely idea. But, if you said to me, 'You have a year to make a pencil,' I could [?couldn't?] make a very good one. And I'd struggle to make any one at all. But, I'd have some vague idea of what needed to be done. The graphite would be challenging, right? Obviously. Graphite is a tricky thing that I wouldn't know where to get. It's in the ground and it has to be refined in certain ways in the process of making the lead for the pencil, but-- Tim Harford: You'd find something-- Russ Roberts: I could do something like it. Exactly. I could probably leave a legal mark, a piece of charcoal. But, paper--you know, I don't have the faintest--if someone--if anyone--take a piece of paper and say, 'Here's one. See if you can double the supply. I'll give you 20 years. With the idea that you would make that from a tree. I'll give you a clue. It's from a tree.' Well, that's a big help. What would I possibly do? How did that come about? Who had the idea of taking a tree and turning it into this paper-thin--pardon the expression--writing surface? It's absurd. Tim Harford: It is an amazing invention. Actually, it wasn't until actually-- Russ Roberts: It's almost as good as bread[?]. I mean bread[?]'s ridiculous, too, because this grain, this wheat that is nothing like bread. It's impossible to imagine turning it into bread. Who would figure that out over time? But, paper--how would you get there? Tim Harford: Yeah, no, paper's amazing. We actually do know who thought of the idea of doing it from trees. It was a, um, a French scientist called DeReo Moore[?], if I remember his surname. And he observed wasps. And he thought, I don't know, wasps are chewing up tree pulp. And, they are producing nests which basically made of paper. So, we must be able to do the same thing. But that was only, maybe about 300 years ago, or maybe even more recently he made that observation. Paper is 2000 years old. It came from China. But they weren't initially using wood; they were using cotton rags. But, yeah, it's miraculous. You basically have to mash up--if people are listening to this over [?] I apologize, because basically it's a mash up this stuff in urine[?]. Because the ammonia breaks down. The fibers, in the cotton, or in the wood. Or in the pulp in a way. It was arguably Europe's first industrial process, making paper. And, the paper mills absolutely stank. The fabriano in Italy is where it first came to Europe, and you've got these fast flowing mountain streams driving these drop-hammers which are just macerating these soiled cotton used garments in a bath of human urine. And then you spread it all out. And it dries. And it forms paper. I'm simplifying a little, because I'm economist, not a paper engineer. But, that's where it came from. And, yeah, it is a miraculous invention. And bizarre. Russ Roberts: And I assume that in modern technology, ammonia is used directly in place of human urine. Putting a lot of people out of work. Which--well, that's the way progress is, sometimes. Tim Harford: Yeah. And there's a lot of recycling, as well. Russ Roberts: Creative destruction. Tim Harford: Yeah. Including of cardboard boxes. So, there's a great description of this in Mark Kurlansky's book. He has a whole book on paper. And he describes the way you can throw a cardboard box in a recycling bin in Seattle and it will cross the Pacific Ocean and be pulped and broken down and turned into another cardboard box in China. And then they'll pack some new Chinese product and then they'll ship it back across the Pacific. And the cycle--it can't repeat indefinitely, because the fiber starts to get brittle. But, um, you can do it about 6 or 7 times. Russ Roberts: Incredible.

15:15 Russ Roberts: Again, before we get--we've already gotten some products, because we just did, but the ones that were in the book, I want to ask you a general question. Let me tell you one thing I learned in the book that I don't think you wrote about. Which is not about the particular products. It's about the process of invention itself. Which is that, it was striking to me, reading about invention after invention, that we don't commonly know the names of the people who invented these transformative products. I want to pick one randomly: the barcode. The barcode is an incredible thing. You write a whole chapter on it. It's an amazing way to keep track of inventory, to deal with pricing at the cash register and on the shelf. It makes it cheaper to re-adjust the price. And, again, it's not something you would just sort of think about, 'Let's have these lines. It's really absurd.' I don't know--I don't remember even, even having read your book, who developed that. These people are not our heroes. Maybe they shouldn't be. I don't know. But, it's interesting how few, after Edison, and say, Steve Jobs in the modern era, it's remarkable how few of the people who have transformed our lives are famous. Did you think about that? And, do you think it's a good thing or a bad thing? Should we try to honor these people more publicly? Tim Harford: Well, perhaps we should. I can tell you who did invent the bar code. It was a gentleman called Joseph Woodland. And he had been set the task of trying to improve the efficiency of scanners. This is in the late 1940s. And he went to visit his grandparents who lived by the seaside. And he was just--he was reflecting on his period in the Boy Scouts and Morse Code. And he, as he sat idly on the beach he dragged his fingers in a circle. And then looked down. And he observed the pattern of grooves that his fingers had drawn. And, thought, 'Hang on a minute. There's an analogy that with Morse Code I can use thick and thin lines to signify information.' So, he was the first person to come up with the idea; but of course, it was developed--it was re-invented several times. It was developed and refined by [?]Joseph Woodland's original barcode. Looked like a bulls eye, and it wasn't particularly practical. You didn't have the computing power. You didn't have the lasers. You needed-- Russ Roberts: So, I always forget about him. He doesn't deserve to be--no, I'm kidding. Tim Harford: Well, I think, so, but he's[?]--Who does?--But the interesting thing about the Bar Code, though, is, yes, we should recognize Joseph Woodland. And he had an obituary in the New York Times, I seem to remember. So, he wasn't celebrated like Steve Jobs. But he was recognized. But, you could also, when you are telling that story. Focus on the fact that all the committee meetings that were required to get the bar code standard approved. And it was a bunch--we all talk about the bureaucracy in the government, but there's a bureaucracy in the private sector as well. And this was, basically, the retailers association; and the grocery goods manufacturers' association, arguing over the format of this barcode. So, on the one there are these Joseph Woodland and his successors, who created this fantastic invention. But then you've got all these bureaucrats haggling over exactly how it's going to look. And they were right to haggle about how it was going to look, because actually different codes suited different people. And while it was actually in everyone's interest to a agree on something, they--everybody wanted the one that suited exactly their requirements.

19:07 Russ Roberts: Is there anything in particular you learned about invention and innovation from the process of thinking about all these--beside the fact that I'm sure made you a more entertaining dinner party discuss. But, is there anything overarching that struck you when you'd gone through all this, these different tales? Tim Harford: Well, a couple of things. One thing I sort of didn't learn, but I thought it was notable that I didn't learn, is that I didn't learn the one secret to where ideas come from. What I learned is it's incredibly varied. There are many inventions that we have no idea who originally came up with them. Or, they've probably been invented many times in many parts of the world. There are these aha moments of inspiration in the shower. Then there are stuff where you can just track a very, very long process of refinement and development and patient engineering. So, I mean, there's no obvious pattern to the process of invention. I think that in itself is interesting. Russ Roberts: Yeah. Tim Harford: But, one thing I learned is, I think that we do have a tendency to focus on the spectacular. So, we want to talk about the Gutenberg Press rather than paper. We want to talk about Artificial Intelligence, robots, flying cars, rather than the shipping container and the cardboard box and the Billy bookcase. But, of course, artificial intelligence is important, and the more sophisticated it becomes, the more important it's going to become. But, let's not take our eye off the humble stuff. So, right now, for instance, just the fact that it's so cheap to make sensors and put sensors everywhere. We're becoming aware of that as an issue, as an opportunity, potentially as a threat. But it's because the sensor has become incredibly cheap--you can just put it in absolutely anything, rather than because it's reached some untold heights of sophistication. So that's--one thing I learned is not to undervalue innovations that are important simply because they have become very, very cheap, so they've become ubiquitous. The other thing I learned was not to forget the way that inventions reshape organizations, reshape the way we live, reshape societies. Often in order to use an invention, take advantage of an invention, you need an awful lot of adjustment. The classic example, which will be well known, I think, to some EconTalk listeners, is Paul David's essay on "The Dynamo of the Computer", reflecting on how long it took electric motors to be adopted in manufacturing in the late 19th-early 20th century, because people had to completely readjust, reconfigure the factories, retrain the workers. I mean, just everything had to change in order to take advantage of this new technology. And initially when it was used, they tried to direct replacement to the steam engine--just rip out a big steam engine, replace it with a big electric motor, and that should be fine. And of course that doesn't realize the gains. Because to really take advantage of these technology, we often have to change, and adjust the way we do things--the way we work, the way we live. Otherwise we don't enjoy the benefits. And sometimes those changes can be--well, they are very hard to predict, but they are occasionally quite hard, quite wrenching. Russ Roberts: Yeah, that's a great example, idea. The part of our adjustment--it's just everywhere. And we don't think about it. It could determine the size of our kitchen. It could change the kind of clothes we wear. It could change where we live. All those things ripple through out culture and emerge, obviously without any top-down direction. Sometimes top down direction like a standard might help it. A decision like that. But, so often--we've talked recently about autonomous vehicles. Tim Harford: Yeah. Benedict Evans--a fantastic interview. Russ Roberts: So interesting. But, one of the things it forced you to start thinking about is, if you can enjoy being in a car, as opposed to minimizing the pain of it. Right? You minimize--right now, someone--I like to think more than one person is listening to this conversation in their car, through their smartphone, and using the technology of the car. And that has made commuting, I hope, a little more pleasant. And if it's not this podcast, somebody else's. But, if you can sit around with your friends and eat and drink and chat, or sleep--it changes so many things other than, 'Oh, I won't have to be driving.' And, your first thought is, 'I won't have to be driving.' Those second, third, fourth, and fifth thoughts are what emerge from the technology that you have and you originally thought about.

24:00 Russ Roberts: Let's move to some of the examples that you give. One of the ones that fascinated me was a TV dinner. I'm old enough to remember what a TV dinner actually looks like. It really--for those of you who are not old enough, for the original ones--they look a lot like really bad airplane food. It's a tray that had this pre-cooked food: you just had to heat it up. It's a hard case to make, that that's an important invention. But, what I found fascinating about the chapter is that you at one point list all the things that are like a TV dinner, that are pre-prepared so that I don't have to do all the work of cooking--which is, we've had Rachel Laudan on the program talking about the challenge of converting food into--I forget the phrase that she uses, but something you can actually eat. A lot of things are edible, but to put them into a form you can eat them, you often have to cook them; you have to chop them; you have to turn them into flour, into dough, and into bread. And, I hadn't thought fully until I saw your chapter on this of how many things that we have in the store, that in our modern world make eating easier. Tim Harford: Yeah. And huge time savings. And, of course, given the history of the way society has worked for--well, for a long time--the people whose time was most saved tends to be women, housewives, who were expected to go through all this preparation, to literally put food on the table for their families. That would involve plucking chickens and, you know, planting vegetables and plucking them from the backyard and cleaning all the earth off, and all of these countless pieces of preparation that needed to be done. What was interesting about the TV dinner was it was originally not going to be about the TV dinner at all. It was going to be about the washing machine--because, again, everybody said, when I told them I was going to do this project and write this book about 50 inventions, people said, 'Oh, you must do the washing machine, because the washing machine was such an amazing force for liberating women from the home. They could get out and they could, instead of being working, unpaid, in the household, they would work for money, in the market. And that was liberating and empowering in all kinds of ways.' And then I looked into it. I really wanted to write this story. I thought, 'Great story.' It turned out it's not true. So, my source was Alison Wolf's book, The XX Factor. Although, there are other scholars who have done the same sort of work. And, Alison looked at the time use diaries, and she said, 'Yeah, actually we know how much time women spent doing laundry in the 1930s and 1960s and today, and it hasn't changed. What's changed is we do a lot more laundry.' And it's still mostly women, although I have to say, I do the laundry in our home. But, we just wash our clothes every day rather than my mother-in-law told me that when she was a schoolgirl in the 1930s, they would change their uniforms once per term. And, they'd have changeable colors--and, I mean, these are primary school kids, so hopefully not quite as smelly as adults. But, they'd change the colors, they'd change the cuffs; and they had pads that they wore in their armpits and they could wash the pads. But the actual clothes would be laundered roughly once every 2 or 3 months. Which makes you think. And now, of course, you just wash them every day and you don't think about it. But it means the washing machine didn't actually save time: it just increased the amount of washing, and we all smelt better. TV dinners, though--and not just TV dinners, but the freezer, the 'fridge [refrigerator], pre-chopped salad, pre-plucked chicken, takeaway pizza, sandwiches, burritos--the whole thing, the whole kind of industrialization and convenience food-- Russ Roberts: pasta sauce, spaghetti sauce-- Tim Harford: All of these things. So many, so many, so many. That really did save time. Because you had to eat. Two or three meals a day. You just had to eat. And, in the time when all of this stuff had to be prepared, that task fell on women. And, even fairly recently. So, in the 1960s, and even quite educated women in prosperous families, we would, perhaps naively think of--they had a lot of choices, they had a lot of freedom--they are spending hours just preparing food. And, the industrialization of food, the outsourcing of food preparation, either to factories or to restaurants, saved a tremendous amount of time. But it's a lot less--the thing about the washing machine is it's this beautiful, sleek cubic robot that sits in your kitchen or in your bathroom and does all this work and it's super-clean. Whereas, when we think about the industrialization of food, we think about: There's too much salt; there's too much sugar; there are additives; snack food makes us fat. And so, we have much more complicated feelings about it, and we don't want to acknowledge that it was this transformative innovation. Russ Roberts: Yeah. I was going to make the observation that processed food has such a bad name. But if making everything from scratch--and my son makes his own mayonnaise, God bless him--and homemade mayonnaise, I want to recommend--it's not easy to do but they're easier and harder ways to do it; and when you've had real mayonnaise it's a shocking experience. It tastes nothing like what is in that jar. So, some of these things--it's like you say: Some of them are not so healthy, the quality is not so good. But there are so many things we enjoy. Like, clean vegetables. It's an interesting example, that we don't typically have to wash our vegetables very much, is really quite extraordinary. Tim Harford: And yeah. Bagged salads. I remember when bagged salads were invented-- Russ Roberts: Yeah. That's--who would buy that?-- Tim Harford: it seemed crazy. Like, who would buy? Yeah. And now, of course, that's all I buy. Russ Roberts: Yeah, me, too. I'm ashamed to say, or not.

30:11 Russ Roberts: Let's talk about the shipping container, because it's another example for me. When I read the book I thought I had a pretty understanding of what was good about the shipping container. We've talked a little bit about this before on the program, that it's very hard to appreciate what square does rather than oddly shaped. And one of the things that the shipping container does is it makes it easier to pack the ship that's coming across the Pacific, or the railcar, or whatever it is, more effectively. But it's not the only thing. So, talk about some of the benefits of the shipping container. It's really quite unbelievable. Tim Harford: And I should say, by the way, people who are really interested in this topic, Marc Levinson wrote a wonderful, an entire book on the shipping container called The Box, which is a great source. But, yeah. One of the things that it did was to save time. Because, this huge amount of effort was spent--every time there was a transition between a mode of transport on the docks, at the trade depot loading onto trucks, loading onto trains--every time there was a change in mode of transport, everything you did had to be unpacked and then re-packed. You needed to keep track of where everything was. Hugely complex. Just a vast amount of labor. Quite dangerous labor. It was a much more dangerous job than construction, for example. So, you saved time. You saved lives, and injuries, because it was much safer. You also had a much more reliable experience--so, you really understood how long something was going to take to get from one part of the world to another part of the world. So, those are these 3 major benefits: the time saving, the predictability, and the safety. The implication of all of this is that of course the costs went way, way down. So, for the price of shipping a ton of goods in, say, the 1950s, just before the shipping containers came in, you could now, inflation adjusted, for the same price you could ship a whole container; and a container might be 40 tons rather than one ton. So, you've got a 40-fold, full at the price, an increase in the speed from something that might take 2 or 3 months all told, to 2 or 3 weeks. You've saved a lot of jobs. You've saved a lot of lives. And the whole thing is much more predictable, which makes Just-In-Time supply chains possible. So--did I miss anything? There's a lot going on there. Russ Roberts: No; I think those are the high points. To me, what's so striking that I hadn't thought about was the speed. I always think about what it saves, space: it makes space more, used more effectively. And the example I like--it's not quite the same example, but it's such an interesting application, a similar principle--is that, it can be environmentally better to ship juice boxes rather than oranges. So, the oranges--you do put them in a box. Which helps. But, one way to think about this is, at one extreme you fill up the truck with oranges. And then, unpacking them, you know, is tricky. How do you grab the oranges? How do you move them into a new container--as you point out, a new mode of transport? So, putting them in a box is a huge improvement. But even in a box, an orange has lots of spaces between them. Whereas, in the juice box, if you pulp and juice the oranges at the orchard, or near the orchard, you can get a, you can carry a lot more oranges effectively in the form of juice boxes. Even though there's "waste involved." There's always waste. There's always got to be waste. So, in one case the waste is this space on the truck. You have to use more trucks. That's not good for the environment, either. So, I've always loved the fact that the geometry of round and square make a difference. But I didn't think about the unpacking. And I sort of think about, when you unpack your suitcase thinking about packing a backpack, and you start throwing things down into the bottom, and you start piling things on top; and then getting them out. That way, versus, say, packing cubes. Which is another innovation you could have written more than one chapter on, they are so marvelous. Tim Harford: But it's another really interesting lesson of the shipping container, which is, I think would appeal to your--the way you tend to look at the world is that government was a big problem and needed to be circumvented in order to introduce this system. So, the thing about the shipping container--it's not like it's an amazing invention. It's 1850s technology. Wasn't introduced till the 1950s. A lot of people had thought maybe we should stick this stuff in a box; maybe that would help--if we don't just move the box. It was just trying to get the whole thing coordinated. It needed to be adopted, by the shipping companies and the trucking companies, and the railroads, and internationally. And, you needed to overcome some objections from the unions, because they rightly feared a lot of jobs would be lost. But, one of the problems was that transport in the United States at the time, the 1950s, was so heavily regulated, in principle to avoid violations that are anti-trust, and we don't want consumers to be exploited. But, in practice what was happening was the regulators seem to have been completely captured by the industry. So, they were specifying, 'Oh, you are not allowed to open up a new route unless you can prove there is a need.' This ties into, you had a recent interview with Mike Munger on permissionless innovation. Nothing could be done and nothing could change in the shipping industry, the trucking industry, and the railroad industry without regulatory permission. And Malcom McLean, who was the shipping entrepreneur who came up with the shipping container system, was a master at getting around these regulations. So, one rule was: You can't own a trucking company and a shipping company. Because that might be anti-competitive. Well, you know, it might be. On the other hand, if you are trying to introduce an integrated system, it's kind of handy to own both. And he just pulled off this audacious piece of legal and financial engineering, where he basically ended up controlling both at the same time despite the fact that it was against the law. And he somehow managed to not violate any rules in doing that. And he was a very savvy operator; and he got the regulators on his side. And, at one point he was supplying logistical services to the U.S. Department of Defense, which was obviously a very useful customer to have. So, he was good at playing that game. And that's why we have shipping containers now. It wasn't just: Oh, someone came up with a good idea. It's: Someone managed to navigate the political and regulatory thicket. And take some big, bold business risks, too. And make it all work.

37:05 Russ Roberts: So, let's play against my worldview, and let's talk about the iPhone, which you have a very interesting chapter where you point out, I think based on Mariana Mazzucato's work, that a huge portion of the key technology inside a smartphone today was started by the government. Tim Harford: Yeah. Russ Roberts: Explain. Tim Harford: It's a really interesting example. So, lots of stories in the book about private sector entrepreneurs doing cool things. And I wanted to make the point that it's not always like that. Or, that's certainly not always the whole story. And, in the case of the iPhone, when Mariana Mazzucato just looked at the key technologies in that phone--so, what is it that makes it an iPhone? Okay. The touch screen. Well, a touch screen has been refined by the private sector, but was originally developed by the Royal Radar Institute in the United Kingdom. GPS [Global Positioning System]--GPS is a U.S. Department of Defense development. It's a military technology. The Fast Fourier Transform Algorithms that basically take sound waves which are analog and convert them into digital signals, or any analog signal to digital signal and back--that mathematical algorithm was developed by mathematicians working for the U.S. Department of Defense. The hard-drive technology: again, subsidized by the U.S. military. Computers themselves originally developed as a code-breaking technology. The Internet, funded, famously funded by ARPA [Advanced Research Projects Agency]--again, Defense. So, invention after invention that is making this iPhone an iPhone rather than a toy--they come from government. The fundamental inventions were funded, subsidized, by government. Often by the U.S. government and often by the U.S. military. Now, of course, at the end of the process, along comes Steve Jobs. Even Siri, by the way, was originally designed for fighter pilots. Um, so, at the end of the process, along comes Steve Jobs, and says, 'We have these amazing technologies. I'm going to put them all together in a brilliantly designed package.' Now, no government took that step. And I think it was a fair case to be made that no government is ever likely to take that step. Steve Jobs took that step. And he deserves the plaudits. But, he wouldn't have had any raw materials to work with without government-backed innovation. Russ Roberts: So, what do you think I'd say to that? How do you think--how do you think my response--I'm going to put you on the spot, here. How do you think some of my worldview--which I think you understand pretty well, actually--what do you think I'll say--what's my response to that? Tim Harford: Well, I was wondering--I thought we'd end up discussing this. So, I was looking forward to your take on it. So, there are a couple-- Russ Roberts: You can duck the question if you want. Tim Harford: No, no. There are a couple of possible--and I'm not sure what you are saying, and I look forward to your response. A couple of possible responses. Some people have complained about this chapter and said, 'Oh, you are diminishing private sector innovation,' and to them, I generally say, 'Well, if you read the rest of the book, there are lots of examples of private sector innovation.' Russ Roberts: Yeah; it's just silly. It's a cheap shot. Tim Harford: But, so one response is: actually Steve Jobs took the critical step and all of these basic innovations were not that significant. I think that's hard to defend. But another response would be: Well, these inventions--the GPS, the fast Fourier transform, the hard drive--they could have been developed by the private sector even without government subsidy. And maybe it would have happened just as quickly, or there would have been a better way to do it. Or you could say the government role in developing something like the hard drive is exaggerated: 'Yeah, they gave it a push at the start but it would have happened anyway.' Or, you might say, 'That's just the way the world works. Things are complicated. Governments do do some good things. And in this particular case, they did some important stuff, and we have the iPhone. And what's the problem?' So, there are various responses. But, I'm intrigued what your thoughts are. Russ Roberts: So, my first response--those are very good, by the way. And I think you passed the ideological Turing test, as a result. Because I know you're not--I suspect--I'm pretty sure you're not as free market as I am, as non-interventionist as I am. But my first response was: Gee, I didn't know that. So, that's interesting. I learned something. I'm assuming it's true. Obviously, there are ways to describe things that over-exaggerate or understate, which came from the private or which came from the public. But I think it's--what I think is true is that a number of really, really important technologies came from the military's research efforts to stay ahead of people seen as enemies. Tim Harford: Yeah. Russ Roberts: That's what fascinates me. I don't think--the reason I'm don't have any visceral negative reaction to the chapter is that, as you say, first of all there's lots of--the book extols human creativity, which is what I really care about. But I think the harder challenge is: It's a little bit alarming, almost, the finding, because it's not--and this is what I meant to say, 'secondly,' but I lost my train of thought--you are not claiming, 'And therefore the government should be--we should quadruple or ten-fold increase the government research budget so that we can get the next generation of human communication technology beyond the iPhone. Because that's not the implication--I don't think. And you certainly don't make that claim. What's alarming about it is the implication that defense spending has these wonderful, positive externalities. And I don't--and people have made the same claims about the space program. We used to talk about this on the program in the past; I don't remember what we talked about exactly, but a long time ago. And so, the question is, the way I took that chapter, as saying, 'You know, it's shocking how many silver linings there are for the billions of dollars we spend on defense that either protected us--which is good--or did nothing: was money that looked--it could have been wasted, but it turned out to have this beneficial side effect of private improvement.' And, I'm not sure what the implications of it are for public policy. But it made me think a lot, because I've heard these claims about defense spending, and 'Is it just maybe a silver lining? Is it--?' I don't think people would argue, 'Oh, therefore we should spend more on defense.' So, anyway, it made me think a lot. Tim Harford: Or you could claim that it's a fluke--it's a one-off; these are all kind of--I know there are lots of different cases--but, they're all basically tangled up with information technology and maybe it's just--the early computers happened to come along in the 1940s. Yeah. So, maybe it's just coincidence. I think it is worth thinking about the policy implications. I'm not sure what they are. One thing that I have seen argued, and I tend to sympathize with, is the idea that we don't seem to do as much fundamental research as we used to. And, in particular, the private sector doesn't seem to do as much fundamental research as it used to. If you look at what seemed to be the glory days of fundamental research in the private sector--so, say, from the 1920s to the 1970s--a lot of Nobel Prizes given to people working in corporate labs: Bell is the most famous case, and Claude Shannon worked there and he didn't even get a Nobel Prize when he was perhaps the most brilliant of the lot. But, William Shockley, Walter Brattain, and John Bardeen, for semi-conductors. There's a gentleman whose name I forget who developed fiber optics; he was in the private sector. There's Eso, I think his name was [Leo (Reona) Esaki?--Econlib Ed.], who was working at Sony and then IBM [International Business Machines], who did, I think, superconductors--oh, no, he did the tunneling electron-microscope. And the guy at Texas Instruments. A lot of Nobel Prizes going for what were basically corporate inventions. There's some evidence, that I find--well, you know, maybe it's not that convincing; I'm convinced by it, but maybe that says more about me--some evidence that corporations don't do as much of that any more. There's some fundamental research. Google's AlphaGo maybe is an example. But not much. And, when you look at Apple, which is the most profitable company in the world, it's hard to justify the claim that they are doing anything really fundamental. They are a great company, and they are producing great products. But, is anyone at Apple going to win a Nobel Prize? It seems unlikely. Russ Roberts: Yeah, the [?] transformer--I think the Bell example is a great example, Bell Labs. Because, Bell Labs--it's a private company, but it's kind of a private company created by a government monopoly that allowed them to be a lot more profitable than they should have been, allowed them to indulge--the very existence of Bell Labs is a crazy thing. And I do think in today's world the only equivalent would probably be what's going on in Google right now, and few other places: highly profitable, enormous margins, at least in the short run--we don't know if they're going to persist; we'll be talking about that soon with guests down the road. But, you know, they can indulge in a section of their corporation that has, you know, what we call 'pie in the sky.' Crazy ideas, many of which will not work, not come to fruition. And hire really creative, really smart people. I think Google does that. Some of them are my friends. And it's wonderful--that's opportunities there. They are doing--what I would call academic research--but with the idea of doing something practical, in some dimension. Funded in a way that's unimaginable at the academic level. Tim Harford: Yeah. I mean, Claude Shannon at Bell Labs--he produced two of the greatest research papers of the 20th century, in Information Theory. One that basically said, 'You know, basically everything can be 0s and 1s.' It was that first amazing breakthrough, the idea that you can create thinking machines with zeroes and ones. Russ Roberts: It's a crazy idea. Tim Harford: And--yeah. Amazing. And then the second paper, breakthrough, that basically connected information theory to the physics of entropy--[?] huge. And then, for the rest of his life, I think that was all done by the time he was about 30. The rest of his life he mostly seemed to spend unicycling while juggling around Bell Labs. I mean, he was just, just had him on the payroll because he's just Claude Shannon, and who wouldn't want Claude Shannon on the payroll? But he didn't do that much afterwards. And, maybe, with that in mind it's not surprising that companies these days would say, 'No, well, we actually want more practical stuff. We want inventions that are going to improve the consumer products we sell next year or the year after. Not stuff that might come to fruition in--' well, in the case of prime number research, that came to fruition about 200 years after the original breakthrough. And you can see why a company wouldn't want to fund that kind of thing. So, it's tricky. There are possible policy solutions. I discuss some of them, actually, way back in Adapt, which is a book we discussed 6 years ago, as you mentioned. But I don't think it's obvious, what conclusion one draws from this. But it's something to pay attention to.

49:02 Russ Roberts: I'm going to make a plug here for the Billy Bookcase chapter. I don't--I have shopped at IKEA, but I haven't in a while. And I did not know about the Billy Bookcase. For those of you who have them, I want to put a plug in for the book that that chapter is very, very interesting--which way exceeded my expectations, Tim. I had low expectations that the Billy Bookcase chapter was going to be a good one. But it is. Tim Harford: The point--just very briefly--the point I want to make is a lot of innovation in the modern world is not iPhones, or AlphaGo. It's just making stuff a little bit cheaper, improving the logistics, cutting down on materials. So, you can have nice, well-designed stuff in your home for less money. And, let's not overlook that. Russ Roberts: Bravo. Yeah. Bravo. But I want to talk about one of my favorite topics. And it was discussed at length in my EconTalk interview with Jason Barr. We were talking about skyscrapers. And that's the elevator. Which you point out is a form of mass transportation. And, once we had the technology of the elevator buttons rather than the elevator operator--I'd never realized it; I'm not sure you mention this--it's autonomous. It's really a driverless car. Now, it's got a narrow track. But it's grossly under-appreciated. Tim Harford: Yeah. I think James Bessen, who wrote an interesting thing on technology thinks that the elevator operator is the only job category ever to have been eliminated by technological progress. So, yeah, elevators are fascinating. One thing I don't think I got to mention in the book is that they now have elevators that you have two elevators running separately in the same elevator shaft. Russ Roberts: You did talk about that in the book. Tim Harford: Just mind-blowing. So, the idea--if you imagine a double-decker elevator. So, this is quite standard in some big buildings now. So, if you are going to an odd-numbered floor, you get in on floor 1, and if you are going to an even-numbered floor, you take an escalator up to the mezzanine and you get it on floor 2. And then the double-decker elevator then drops people off on the odd-numbered, even-numbered floors simultaneously. Russ Roberts: That's so clever. Tim Harford: It is clever. And they even have triple decker elevators in some places. But, the next step is just to say: Well, hang on. You just have two separate elevators. The first one--they are both stored in the basement. One of them comes up, grabs a whole load of people in the morning, and off it goes, stopping on various floors as it goes up the building. While that's going on, the second one comes up to the ground floor, people get on, and it follows up the first elevator, and the computer just makes sure they don't hit each other. And when it reaches the top of the building, the top elevator just disappears into the roof and waits. The elevator beneath it gets to the top of the building, picks some people up, and then starts on the way back down; and then it's followed by the second elevator. You think about that, you go, 'Wow. People are clever.' You would never even know that this never existed. Russ Roberts: The importance of that, what came out in the Barr episode, is that, as buildings get taller, you have to devote more and more space to elevator shafts-- Tim Harford: So we need to get better at this. Yeah-- Russ Roberts: and this is really a hugely important innovation, this idea of double-decking or of multi-car tracking. It's just a fantastically important and again, as an example of something you don't even notice that saves, is going to save money. It's a wonderful thing. Tim Harford: Yeah. And you think about the environmental impact of the whole complex of public transport, or mass transit, the elevator and the technologies that go into the skyscraper, like concrete, steel, and air conditioning. You can't really have skyscrapers without those. There's a point that David Owen makes in a wonderful essay in The New Yorker called "Green Manhattan" where he points out Manhattan has lower energy consumption than all--it's an incredibly green place by the standards of most of America. And, that's partly because of the density. That density is made possible by the elevator. And if you imagine taking a big building like the Sears Tower in Chicago--now called the Willis Tower--take a building like that, which is enormous, and just slice it into one- or two-story chunks, and imagine just placing them in an office park or an industrial park out in sort of Virginia or the outskirts of Washington, D.C., and the amount of car-parking space that would be needed to accommodate all of that. It's just a huge, huge area. And you actually get a better, higher-rent building that is more usable, that more people actually live in or work in, with massively less environment impact by using the elevator as a mass transit system. But nobody thinks of the elevator as a mass transit system. We take it for granted. So, I'm always trying to champion the inventions that don't get enough love, and the elevator is definitely one of them. Russ Roberts: Yeah. I interviewed David Owen, I think on that topic, the green nature of cities and how we don't appreciate urban density. I'm pretty sure that was the focus of that. I think I didn't think about enough until I read your chapter on this was the Otis invention of the safety brake, which made elevators safer. Correct me if I'm wrong--it didn't just make them safer. It made them safe. So, it didn't just reduce the probability--or am I wrong? Was it close to foolproof? Tim Harford: Oh, it's close to foolproof. So, I don't think we have really good statistics on the number of elevator accidents, but they are probably close to zero, except for the people who work on elevator repair. So, a small number of people are killed fixing elevators. Incredibly rare--it does happen, but it's incredibly rare for someone to be killed by an elevator. Russ Roberts: But, we think about the driverless--the autonomous car makes people nervous, right? Because no one's in charge of it. Which, I understand that uneasiness. And that's totally human. And, over time, if it does prove to be as safe as people hope or expect it will be, then people won't be afraid of them any more. They'll just think of it as totally normal. But we think about the elevators where a cable snapped and people died in the early days, or you just even proposed the idea of riding up and down a 20- or 40-story building in a box--people wouldn't want to get in them. The evolution to thinking--I mean, no one gets on an elevator these days with unease. And that's an incredible thing. Tim Harford: Well, a few people are claustrophobic. But I think even they would acknowledge that it's not a rational fear. But yeah; so, Otis understood this. We've had elevators for centuries--industrial elevators in mines, but also occasionally residential elevators. So, one of the French kings, one of the King Louis of France had an elevator for his mistress. It was all concealed behind a chimney [?]. So, he this sort of, the secret love-lift. But nobody in their right mind is going to get in an elevator that goes to 5 stories unless there is some proof[?] against the ropes snapping. And if you are only going to get into an elevator that will go to a height of 6 feet or 8 feet, there's a limited use for the technology. So, Otis realized you need some kind of brake; you need some kind of safety mechanism. And he realized that you needed to demonstrate this very publicly. So, he had this demonstration at the World's Fair--I think it was in Chicago, around about 1850 [probably New York City--Econlib Ed.]. I forget the exact details. But it was one of these kind of great exhibitions of the 19th century. And he had an executioner with an axe standing behind him. There must have been this whole--it must have been reminiscent of a gallows or a guillotine. So, he's on this platform and it's raised up above this crowd. And behind the executioner just swings the axe and cuts the rope. And there's this gasp from the crowd. The elevator just shudders and drops half an inch. And then he yells out, 'All safe, gentlemen. All safe.' And that's his demonstration. He's cracked the problem. And it's that, that's required for the elevator to take off. And it does. Russ Roberts: Imagine how many YouTube views that would have had, if we'd had YouTube back thing back then. I mean, that thing would have gone viral. For sure. Tim Harford: He was a showman. Russ Roberts: He would have dressed up that executioner really well. I'm sure he did. Did it just for the crowd.

58:02 Russ Roberts: Your last, Number 50, is an epilogue. And it's a beautiful chapter, for lots of reasons. It's on light. So, talk about light. Tim Harford: Yeah. So, I start with an experiment the great economist Bill Nordhaus did. He went into the back garden; he chopped wood. He assembled the wood in the fireplace and set fire to the wood; and then sat there with a Minolta light meter, measuring the light being given off by the flicker of the firewood. And how much light there was; how strong it was; and how long it lasted. And then on another day he did something similar, only he had an antique oil lamp--allegedly from Rome itself; I'm not sure it really was. But he had this antique oil lamp; he filled it with olive oil; he lit the lamp, and again, watched it burn: measured how long it burned for and the power of the flame. And it was a much cleaner, brighter, stronger flame, for much longer. Just from a cupful of oil. And he went through all these experiments, because he was trying to understand how much labor was required to produce a given output of light. His interest was in inflation measures. We try and measure how the price of things changes through time. It's always difficult to adjust for quality. And in the case of light, he said, 'Well, there is a measure of light, the amount of light being produced. I can measure how much effort it takes to produce enough firelight to read a book by. Or to produce enough candlelight to read a book by. Or to produce enough light from an oil lamp to read a book by.' And so he went to this exhaustive process. And it produced a wonderful paper tracking the price of light in hours of work required, from pre-historic times through--I think it went through to about 1990. And, the conclusion he reached was that there's no inflation measure that does any justice to how rapidly the price of light has fallen. It just--many, many, many orders of magnitude from light being such an expensive luxury from when the sun went down, that was it--forget it--there was nothing you could do to create light, or nothing practical you could do to create light--through to the situation we have today where we think nothing of it. We flick on a light switch, we have all the light we want. And it's so cheap that for most households, they can think of it as being free. So, I wanted to write about Nordhaus's work, but also to ask us to reflect on the privilege it is to be alive today. There are many problems in the world. But, many good things as well. And we are living off the inventiveness of all of our forebears who produced all of these technological improvements that we get to enjoy. And, of course, so quickly we take for granted. Russ Roberts: You say beautifully in that chapter--you say, "Manmade light was once a thing that was too precious to use." You have some great information about candles which was--really, I didn't know anything about, really interesting. And, of course, once light could be shared in dramatic and effective ways, it made possible public entertainment, mass entertainment, mass audiences for concerts, sports, etc. It just changed the world in so many--I'll let you read it [?] without hurting your eyes; it's glorious. You say, "Manmade light was once a thing that was too precious to use. Now it is too cheap to notice." And, you use it to talk about an example from Tim Taylor, former EconTalk guest--it's a variation of an exercise that I think about and talk about. Which is, you have $70,000 today, or would you rather have $70,000 in 1900? Because, you'd think, well, in 1900 things were so cheap, that inflation has been so large over the last century, $70,000 would go a lot farther. Think how much farther it would go in 1900? But, of course, not the case. Tim Harford: Yeah. I love the Tim Taylor thought experiment. And, the more you think about it, the more you think, 'Yeah, I would rather be middle income in 2017 than fabulously rich in 1917, or 1900.' Because, despite all the status--I would have servants; I would have people fawning over me, people taking me very seriously--in terms of actual physical goods that I could buy--I couldn't have a good car; forget cellphones, computers--obviously none of that. No antibiotics. Very limited air conditioning, hot showers. So much of what we take for granted today, even on a quite modest income, would have been unavailable. I think it is worth reflecting on that. I don't want to suggest everything's great, we have no problems. But--and there are several chapters in the book where I discuss errors and abuses and technologies that have had serious negative consequences and side-effects. There's a lot of that. But, ultimately, we are very lucky to be living in 2017 rather than in 1817 or for that matter in A.D. 17 [?]. So, the overwhelming majority of people--the opportunities and the comforts that are afforded to us in large part by these technological inventions--they are great. And, it's human nature to forget them; and we shouldn't.