In 2005, Ray Kurzweil published “The Singularity is Near. When Humans Transcend Biology”. I clearly remember the impact it had on me to understand the idea of accelerating returns. It was not just a new technology or an intellectual fad from Silicon Valley. It was something deeper: a different way of looking at human history.
Kurzweil showed that computing power was growing exponentially and that this logic could extend to other areas: robotics, biotechnology, health, artificial intelligence, 3D printing, nanotechnology, and later, energy and space exploration. Moore's Law, which for decades roughly doubled chip capacity every two years, was not just a curiosity of the computer industry. It was the first visible manifestation of a much broader dynamic. In reality, throughout history, major inventions have been accelerating, but at first, extremely slowly, every hundreds of thousands of years, then every 10,000 years, then a few per millennium, but from 1800 to 2000 the exponential curve was already very clear.
For an economist trained in traditional aggregates, this idea was disturbing. Because if technology improves exponentially, then many of our economic measurements begin to lag behind. Not because they are useless, but because they were designed for another era: an economy of physical goods, positive prices, observable industrial production, and slower improvements. But in an economy where more and more goods are dematerializing and becoming digital, where the marginal cost tends to zero and where quality improves much faster than price, Gross Domestic Product starts to capture only an increasingly smaller part of the phenomenon.
William Nordhaus saw this with enormous clarity in a pioneering paper from 1996, Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not. His example was simple and devastating: for centuries, humans did not buy candles for the love of candles; they bought light. If we measure the price of candles, we miss the true phenomenon: the extraordinary drop in the cost of an hour of illumination. Nordhaus showed that the efficiency of lighting increased on a gigantic scale and that traditional measurements underestimated the true increase in well-being.
This intuition was central to my work “The Terms of Trade and Technological Change”, published in May 2008 in the Journal of Institutions, Ideas and Markets. There, I discussed the Prebisch-Singer thesis from another angle. The problem was not just whether the relative prices of primary and manufactured goods moved in one direction or another. The problem was deeper: many economists looked at the prices of manufactures without understanding the technological revolution embedded in those goods. They measured the cost of the candle, not the amount of light; the price of the car, not the safety, speed, reliability, heating, air conditioning, electronics, ABS brakes, or satellite navigation that were being incorporated.
In that same vein, Erik Brynjolfsson proposed moving towards an expanded GDP — the so-called GDP-B — to capture the value of free or nearly free digital goods that traditional GDP does not register well: search engines, maps, networks, videos, artificial intelligence, information, communication, and other services whose monetary price is zero, but whose value to the consumer can be enormous. The truth is that they also fail to capture the true impact.
Similarly, the old discussion about inequality is outdated, poorly framed. For millennia, the truly decisive inequality was not a difference in brands, square meters, or luxury consumption. It was a brutal difference in the basic conditions of human life. The poor lived in darkness; the rich had light. The poor ate little and of poor quality; the rich had access to a varied diet with many more calories. A belly was a symbol of wealth. The poor worked fourteen hours in physically grueling tasks; the rich could afford time, leisure, and education. The poor had no heating, running water, bathroom, dentist, doctor, anesthesia, antibiotics, comfortable transportation, or extended education. They dressed differently, smelled differently, got sick differently, aged faster, and died much sooner; and rarely ventured beyond a neighboring town.
This was a desperate inequality because it permeated everything: the body, health, nutrition, hygiene, life expectancy, access to knowledge, and everyday dignity.
In capitalist countries, that inequality has been extraordinarily reduced. Today, from the moment they wake up until they go to bed, the material life of an average citizen resembles much more that of a rich person than at any other time in history. Both have electric light, hot water, heating, refrigerators, washing machines, antibiotics, anesthesia, dentistry, vaccines, internet, GPS, music, movies, video calls, supermarkets, comfortable clothing, motorized transportation, and immediate access to global information with a smartphone.
The CEO of Google may have a bigger house, travel first class, or eat in more expensive restaurants. But that does not necessarily mean that his life is better than that of an employee who earns a tenth, but owns his free time, enjoys his children, converses with his friends, exercises, reads, listens to music, and lives with purpose. The good life is not measured only by consumption, wealth, or status.
