The one single economic fact we have to explain

There's a new, and free, economic textbook out there, coming from the Core project. David Henderson likes some of it and not other parts. Which is or course just how it's going to go, no one is ever going to get the entire subject between the front and back of just the one book, that's why we've libraries packed with nothing but the subject.

However, it does place useful emphasis on the one single economic fact we've got to explain, in this chart here and used above as our image. If you want the numbers themselves then Angus Maddison is a good source. This thing we've got to explain being the economic hockey stick.

Starting around 1750 something began to happen to living standards in Britain. They started to rise, substantially, for the common man, and sustainably. This is something that had never happened before in human history. The unique occurrence then became less unique, the system which produced it, whatever that system was, spreading and producing the same or similar rises wherever it spread to.

This process is still going on - what we today describe as absolute poverty, that $1.90 a day out there, is roughly and around and about what historical living standards were before this unique occurrence, everywhere.

As the economic historian Brad Delong has been saying these decades, as Dierdre McCloskey has been emphasising, this is the one great fact we have which must be explained.

Of course, we have different names for this, the Enlightenment, the Industrial Revolution,   capitalism perhaps, the destruction of the guild economy and its replacement with free markets possibly. We could also call it the increased immiseration of the proletariat, the greater exploitation of the worker by the employer, as indeed some do. 

But we're still left with this one fact. Human life, in material terms, started to get better for the first time as a result of this occurrence. And no economic explanation, indeed no explanation of any sort, which cannot explain why this did happen is of any value at all.

This is not to say that our explanation has to detail why at this time in this place, not at all. But it does have to explain to us why living standards, for the first time ever, started to rise. We've thus a handy shorthand by which to measure economic, or any other, explanations. If they tell us why we've gone from $2 a day to $100 (yes, obviously, after inflation) then they might have some element of the truth to them, if they do not then they can be rejected immediately.

That this change has only ever happened in places with some modicum of capitalism and markets does indeed make deciding upon the merits of the varying explanations rather easier.