Chapter 10 of Gregory Clark’s A Farewell to Alms contains some interesting observations about economic growth since the Industrial Revolution. Since 1800, wealth per capita has grown enormously in some countries, whereas it has not in others. Thus the gap in income between people who live in wealthy countries and those who live in poor countries has grown enormously. Prior to 1800 wealthy countries had an income per person of around 3 to 4 times that of poor countries. The ratio is now closer to 40:1.
Ordinary people in the West now live like princes did in ancient Egypt or ancient Rome. As people become wealthier their consumption of food does not increase proportionately – there is only so much food one person can eat – but their preferences switch to more expensive calorie sources. The proportion of people engaged in food production declines dramatically as a country becomes richer, and the vast majority of the population relocates to urban centres.
According to Clark’s analysis, there has been only one source of economic growth, and that is efficiency improvement brought about by innovation. Thus the remarkable growth in wealth that some countries have experienced since the Industrial Revolution is attributable to enhanced production of knowledge capital. Something must have happened around the year 1800 that resulted for the first time in a process of continuous expansion of useful knowledge.