Planet Money - SUMMER SCHOOL 8: Productivity & Getting Lit

Episode Date: August 31, 2022

Productivity is our economic measure for how far our work goes, as individuals and as a society over all. It plays an important role in determining our quality of life, the prices of our goods and services, and, to some extent, the amount of free time we have. Today, we explore how thousands of years of productivity advancements transformed something now so standard that we take it for granted: light. | At this Summer School, phones ARE allowed during class... Check out this week's PM TikTok! | Listen to past seasons of Summer School here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. Hello and welcome to Planet Money Summer School. I'm Stacey Vanek-Smith. And this class, this is a special one. It is really hard to believe, but the summer is very nearly over and this is our very last summer school class. It's making me a little sad, but we've got a great show ahead of us full of amazing economics, fire, actual fire,

and the long-awaited diploma. We'll talk about that a bit later, but for now, I am so thrilled to introduce, for the very last time, our summer school professors, our guides extraordinaire through the hallowed halls of macroeconomics, economists Kristen Brody and Luigi Zingales. Hey, guys. Hello. Hello. What about you? This feels like a fitting last episode because this piece that we're about to hear, it deals with something that I feel like is sort of like the holy grail of macroeconomics. Please correct me if I'm wrong, but it is productivity. I feel like this is one of the sort of the central tenets of macroeconomics. them and how technology can speed that process up, right, that with computers and automation, things can be done much, much faster.

Yeah, and productivity growth basically looks at how good we are at making stuff. When we can find ways to make things faster and cheaper, that is basically a recipe for economic growth. Yeah, I think economics is about how to get the most with the resources you have. But if you can relax this constraint and produce more with the resources you have, then you're going to be happier and wealthier. And so productivity is what makes you happier and wealthier. And productivity often doesn't happen in a gradual way. There can be these sudden, really seismic events in productivity that catapult us forward in terms of living standards and wealth as a whole country. One of these moments comes back to something that you mentioned, Kristen, technology.

technology. In this case, the technology of light and the immeasurable impact it has had on how we live, which they measure right after the break. For this next story, we are going to go back to the beginning. Let there be light. We are about to hear about the history of light, how the technology of light evolved over the centuries, and the huge impact that had on productivity and how we live. This is a story that David Kestenbaum and Jacob Goldstein reported back in 2014. Here's Jacob. Long before there were light bulbs, there was fat. For thousands of years, if you wanted to light up your cave, your mud hut, or if you were really lucky, your castle, you had to find some fat, something to use for a wick, maybe some moss, maybe a piece of fabric,

and you had to light it on fire. This was not easy. Even today, it's a hard way to get light. Adam and I. Yeah, hi. Do you sell fat, maybe beef fat? No.

I don't carry that, no. Okay, thanks very much. Thank you. Hi, do you sell fat, like beef fat? No, we don't sell any of that. Suet? No.

Okay. Okay. Thanks very much. Yeah, hi. Do you sell beef fat? Yeah, yeah, that we have all the time. How much is that? $2.98. Okay. Thanks very much. That's the lidows. Yeah, hi. Do you sell beef fat? Yeah, that we have all the time. How much is that? $2.98 a pound.

Okay, great. Thanks very much. You're welcome. Bye. I got two pounds. A big, nasty lump of fat came from around the cow's kidney. I got some twine from the hardware store, and I went home to my apartment to try and make candles.

God. It's a little harder to chop than you might think. It kind of sticks to itself. I put the fat on the stove. It's pretty melted. It smells really nasty. It's like melted. It smells really nasty. It's like animal nasty. I strained it, then I started dipping the wicks into it.

Dipping, dipping. You have to let the fat dry, then you have to dip the wicks some more. More dipping. It was maybe, I don't know, 45 minutes or so of dipping. Yep. Dip. I got kind of, 45 minutes or so of dipping. Dip. I got kind of dip crazy in there. Dip.

Dip. After hours of work, not counting raising the cow or killing the cow or making the twine, I had six tiny, crooked, smelly candles. So you brought these candles into the office here, and we wanted to show them to an expert. And we sat down with this woman, Jane Brocks. Jane wrote a book called Brilliant! The Evolution of Artificial Light. So I made a few different candles.

I tried... Oh, look! They're beautiful! If I think they're beautiful, you mean a total disaster. In the olden days. I was afraid when we lit these things that we might set off the fire alarm or the sprinkler system in the office. I mean, that is how weird it is to have light from fire these days. I was afraid we weren't going to be able to light them at all. I mean, it's just beef fat and twine. But we pulled out a lighter.

Oh, we have light. That's not too bad. Should we see how long it lasts? It's not pretty, but I'm very impressed. It's a beautiful color. Look at the nice yellow flame, wouldn't you say? Dude, you made a candle. Jane says that the quest for this, for something that gives you light after the sun goes down, drove people to do all kinds of things. In the United States, in the Pacific Northwest, Native Americans used dried salmon. They basically made a salmon candle. In the tropics, people would catch fireflies and try to make a kind of firefly lantern. And then there's this bird called the petrel.

And then there's this bird called the petrel. The storm petrel in the north of Scotland, which is a very oily seabird, which they'd catch and dry and thread a wick down its throat and then light it. And that was a lamp. Just carry around a dead bird? Well, it would be on a table. And I would imagine they'd have a little storage area with a lot of dead storm petrels. Martha, we need another petrol.

The petrol supply is getting low. These ways of making light were all a huge hassle. They took a lot of work. It was not just that I didn't know what I was doing when I made those candles. The writer Harriet Beecher Stowe said making candles from animal fat was seven times as bad as washing clothes. From an economic perspective, if you want to try to quantify how much of a pain in the butt it is to make something, or at least how hard it is to get that thing, you can ask a simple question. How much does it cost? Bill Nordhaus, an economist at Yale a while back, got obsessed with this question. How much does it cost? Bill Nordhaus, an economist at Yale a while back, got obsessed with this question. He decided he wanted to calculate exactly how expensive light was thousands of years ago and how that cost changed over time. Because light, you know,

light is this thing society has needed and sought forever. It was a way to track progress, not just in light, but in all kinds of things. Unfortunately, in order to do this, he needed to know how much things cost thousands of years ago, like in ancient Babylon. He wasn't even sure those numbers existed, but they did. I ran into a woman at Yale, and she, believe it or not, it's just unbelievable, actually. She actually had wage data and price data from the Babylonian era, so 4,000 years ago. So now he has these numbers, but he needs to know one other thing. How much light are people getting for their money? In ancient Babylon, people used lamps for light, so Nordhaus decided to make one. I did this in my dining room. Where else?

He buys an ancient-style lamp from a catalog. He gets it burning. To measure how bright it is, he borrows a light meter from a facilities guy at Yale. And he does some science. And I would just measure it and write it down, just the way you see in the old movies, some guy in his lab coat writing down the measurements. So he does this, the light meter in the ancient lamp, and he has his numbers.

But now he has to figure out a way to compare the price of light over thousands of years. So here's one measure he uses. If you take a day's wages, you work all day, you take all the money you earn in that day, and you spend it on light. How many minutes could you light up a small room at night with as much light as you get from today's modern light bulb? Here's the answer for ancient Babylon. Maybe 10 minutes. It was really expensive. An entire day's wages got you the equivalent of 10 minutes of light from a kind of dim light bulb.

Economists talk a lot about productivity, how much one person can produce with a day's labor. And back then, the answer was not much. I mean, everything was hard. Growing food was hard. Making candles, for instance, took hours. And it used up fat. Fat, which, by the way, was expensive because raising animals was hard. This was a world where when the sun went down, almost everyone lived in the dark. And this may sound sort of romantic, but basically it was awful. The dark was not some beautiful thing you went out and explored. It was dangerous.

It was something that trapped you. In Paris, at one point, there was actually a law that said every night everybody has to give their keys to a magistrate, go home, and lock themselves in the house. And for basically 4,000 years, very little happens with light or with the economy in general. Most people work all day, and that gets them enough to eat. The way things get better, the way an economy grows, the way people get richer, is that someone comes up with a better way to do something, a way that takes a little less work. Over time, there are small improvements in life and in light. The Romans figure out how to make a lamp that's a little more efficient. People start to use whale oil. This, of course, is very, very bad for whales, but whales have a lot of fat. They

were like these big swimming sources of fuel. Year after year, there are tiny gains in productivity, little bits of economic growth, but not a lot. And light, light still comes from finding stuff that's lying around and just lighting it on fire. Again, economist Bill Nordhaus. As you look at the picture of what happened here, it's economic history in a nutshell. From Babylonian times to around 1800, there were, even though there were improvements, as best we can tell, they were very modest. And then around 1800, in the lighting, you can see it so clearly in lighting, it's just an enormous change in the pace of improvement.

What happens in the 1800s is a few things. We start to really actively experiment. We try to discover stuff. And around 1850, a guy in Canada comes up with something that's not just a slightly better wick or a slightly more efficient lamp. It is this magical liquid. With the right techniques, you can get it from coal or oil. This big breakthrough, kerosene. Not cutting edge now, but back then, Jane Brock says, kerosene was a huge deal. When the first kerosene lamps came out, it was, as one historian said, it was the kind of oil people had dreamed about for centuries.

It was brighter, it was cleaner, and, importantly, it was much cheaper. You work a day, you get about an hour of whale oil. Kerosene, you get about five hours. Wow. So it's about five times more efficient kerosene lit the world and saved the whales. Now all these scientists are working on better ways to make light. And light is getting cheaper. More people are using it.

No more locking yourself in and huddling in the dark all night. Around this time, streetlights start popping up and people start going out at night. So we have kerosene. What's the next big advance after that? Okay, next big advance after that is the electric lamp. The big one. Well, you might think so. You know, Jacob, I thought I knew the story of the light bulb. You know, Thomas Edison, the great inventor, story about science and innovation. You know, Edison trying all these different filaments, these different designs, and finally getting one that will glow for hours. But this Eureka light bulb moment, it is not enough to get you to the world of really cheap light. Because Edison needed this other thing. He needed money. He needed lots and

lots of money. Why? Because he can't light a light bulb without electricity. He needed to build a power plant. So right now we're at the location of the original power plant in Lower Manhattan. This is Paul Israel. He's an Edison scholar. We met him here in New York City. We're standing in front of this plaque. It says Thomas Alva Edison in big letters. And there's this picture, an etching. And the image that they show is the generator room of the power plant.

With a bunch of guys in really long mustaches and hats. Right. This is 1882, so lots of mustaches at that point. To be clear, they built this great, big, expensive, complicated power station, the first central power station in the world, right? Basically inventing electric light. And when they turn it on, Edison is not there. Right. Right. He was where he needed to be with the people who had funded the whole thing, right? So at 3 p.m. on September 4th, Edison flicked on the switch here at J.P. Morgan's office. And what happened? It went on.

And as did lights all over the district. About a square mile of lower Manhattan suddenly was lit by electricity. You think of Edison the inventor, but even more important is Edison the businessman. At the time, buildings in lower Manhattan were running off gas lights, and Edison knew that was who he had to beat. So he spent a lot of time thinking about economics. Yeah, well, he did. Yeah. In fact, if you look at his notebooks, constantly he's going through and comparing the cost of what he's doing to what the cost

of a gas system is. You never think about that. Well, and that's what made him such a good innovator, right? Because he recognized that these economic questions were just as important in designing what he did in the laboratory. When you think of economic growth, how much do you think of it as coming from individual eureka moments and inventions and stuff like that? And how much is it the stuff around it, like the ability to finance these things, the economic structure around it? So most of it is actually the structure around it. To light a square mile of lower Manhattan, Edison needed a whole financial system. He needed patents, a way to protect his ideas so no one would steal them.

He needed a company, a way a bunch of different investors could come together and risk money, a lot of money, to build a power plant and lay wires so you could try this crazy thing. Light without fire. Edison comes along at a time when all this machinery, patents, corporations, banks is in place. Around this time, everything is getting faster and cheaper. Scientists keep making new discoveries. You get the internal combustion engine, the tractor. For the first time in human history, most people don't have to work as farmers. This went on decade after decade all through the 20th century. All kinds of things got much cheaper, like light.

And if you look at the really long arc here, it's amazing. I mean, go all the way back to the Babylonians, okay? Babylonians, you worked all day. You got the equivalent of 10 minutes, 10 minutes of light. 4,000 years later, in the 19th century with kerosene lamps, things are better. A day's labor gets you five hours of light. And by the time Nordhaus does his light study in the 1990s, if you work a day, how much light do you get? Maybe 20,000.

20,000 hours? 20,000 hours. I mean, you basically, you have your house lit up. You have your streets lit up. You have all your equipment on. You have your air conditioner on. You have all the stuff you're doing. You're saturated with light.

The main thing is you're saturated with light. Economic growth isn't all good. There's pollution. There are environmental consequences. True to the light. Economic growth isn't all good. There's pollution. There are environmental consequences.

But fundamentally, growth is about things getting faster, getting cheaper, getting more efficient. It's about doing the same amount of work and being able to buy 20,000 hours of light instead of 10 minutes. And as a result, it's about being able to work less or to buy other stuff that used to be just for the wealthy. We can buy books. We can take vacations. Even today, there are still people who go to work every day and try to figure out how to make a better light bulb. This morning, I went to the bulb factory for about an hour. This is John Edmund. He's one of the founders of a company called Cree.

They make this new light bulb called an LED light. It's much more efficient than traditional bulbs. You'll try and experiment and you'll say, holy crap, we just got more light out of this thing by using this contact material or flipping the chip over. a couple percent. That happens because every day out there, someone somewhere in some corner of the economy has figured out how to do something a little bit better or a little bit faster or a little less expensively. And this process has gone on year after year for hundreds of years now. And one question I always have when I think about this is like, and not just with light, but this whole story of constant economic growth, constant productivity improvement. My question is, is it going to go on forever? Or at some point, we're going to run out of ways to

make things better? We might double from where we are now, but we're not going to be triple and quadrupling it because there are physical limits. I mean, will a car go a million miles an hour? No. It just won't. It's not going to happen. For the light bulb, at least, John says, we may actually be near the end. OK, class. So we just heard a great story by Jacob Goldstein and David Kestemann from 2014, back when LED lights were on the very cutting edge of technology. But I am back in 2022 with our economists, Luigi and Kristen. Guys, what does this story illuminate about productivity and economics in general?

I love the whole candle making thing and how candles were made with fat and just imagining the smell of that is something that I don't really want to consider. But thinking about going from 10 minutes of light to being able to earn enough for 20,000 hours of light is what technology does. does. And I guess I think about Keynes and how John Maynard Keynes predicted that because of technological change and productivity improvement, that we would eventually get to a 15-hour work week, but we're still at 40, right? And why is that? Because you don't just stop at whatever level of productivity you think you want. Demand continues to increase. And as technology improves, then we can continue to make more things, make them better and faster. At the end of this piece, they talk about, like, are we reaching the end of how much more productive we can get? Which I think is an interesting question and also maybe ties into one of the critiques

that I sometimes hear of capitalism and a market economy, that it creates more stuff and then we buy more stuff and maybe we should make less stuff and be less focused on productivity and growth and more focused on sustainability, maybe a 15-hour workweek. I feel like that's like economic sacrilege, but I would love you guys' reaction to that. First of all, I will distinguish between production and productivity. I think that we can produce less, but be more productive.

We just work much fewer hours. I think that's exactly the point. So the choice maybe to pollute less, et cetera, is maybe to produce less, but not necessarily to be less productive because given the time I dedicate to do something, I prefer to be faster at doing rather than slower. In the episodes, I think that they correctly point out that there are physical limits in which we can progress in some dimension. And it's true that if you look at the speed of travel, for example, in the early part of the 20th century, it was very rapid and then it's tall.

And we've not made enormous progress on that. However, we made enormous progress on other dimensions. Nobody thought about electric computers until electricity was around. about electric computers until electricity was around. And then we stopped increasing in the ability to improve the light production. But we made gigantic leap forwards in computing. And the next generation will use computing to make gigantic leap forward in something we don't know yet, but it will exist for sure. And I'm very hopeful about that.

Well, the theme of macroeconomics that we kind of started with was this idea of something taking us out of the darkness, the darkness of the Great Depression, which is when Keynes really sort of started thinking about what a government's role should be. And we started our summer school season,

but how to bring us into the light. And so I was wondering if there are any economic concepts or macroeconomic concepts that give you guys hope or that you think about in dark times. I think for me, it would be automation. It's what my research has focused on for the last few years. And just looking at how automation has affected people in different jobs by gender and race, right? So who is affected? What jobs are changed by automation? Who's doing new jobs? And what are those new jobs? Or how did the pandemic change automation or change how people do their jobs through telework or through increases in platforms like Teams or Zoom or just how people work, not just what they do.

Yeah, I feel like people tend to think of automation in sort of a menacing way. Do you know what I mean? Like Rise of the Robots or robots taking our jobs, that kind of thing. But you're looking at it in a totally different way. I am. So it allows people to work faster. And with the right training and investment, they can learn to do new jobs that may pay more, that would allow us to be even more productive. What about you, Luigi? Is there an economic concept that tends to give you kind of a silver lining view of things? I think that looking at the past increase in productivity is amazing. Sometimes we forget

how far we have come in such a short period of time. And my father managed some land for all his life, and he picked it up when his father died in 1950. He died in 2015. When he picked it up in Italy, there are still oxen still in the field. When he left, there were tractors with a GPS. The amount of people that used to be working for that land has shrunk tremendously over time, and the production increased tremendously over time. I think that this is really the unbelievable gift that actually one economist called the Athena's gift, because it's the gift of knowledge that has given us so much richness. Okay, everyone.

Last time, try not to get choked up, we're going to go over vocabulary and concepts. First up, productivity. That is the big one. It is basically how good an economy is

at making stuff. The faster, the more cheaply we can make something, the more productive we are. A country's productivity just has a massive impact on all of these fundamental parts of the economy, on how much things cost, like we

saw with light, but also, you know, workers' wages and our own quality of life. It is one of the most important factors, maybe the most important factor in how much our economy grows. Technology plays a huge role in productivity, as we just heard. It can make us faster producing things and make those things cheaper for everyone. Other things that can make us more productive, efficient supply chains or really skilled workers,

things like that. And by the way, all of these questions, all of this homework, it is not for naught. Our final exam is ready for you. Easiest way to find it is just to Google Planet Money Summer School, and that will take you to our summer school main page with all of the lessons, the beautiful graphics we have this year, and the final exam. And if and when you pass, you will get a genuine certificate of course completion, a little diploma, that seems like an amazing output for some pretty

reasonable input. So I think it's a productive choice for everybody. And, you know, having that diploma, you can just carry that around with you. It's a really great conversation starter and just a really good way to impress strangers, I think. Okay, Luigi and Kristen, we are to the end of the end. I don't know, do you guys have any final words for our graduates, people who've like stuck with us and learned all these lessons? Any sort of, yeah, words to our graduates as they go out into the world, to our sea of shining faces or ears, sea of shining earbuds? I would first say congratulations, earbuds? I would first say congratulations, graduates, first and foremost. And I would say considering our discussion about automation and technology, prepare to continue to learn. Lifelong learning will be important as technology changes. So whether you're just completing Planet Money Summer School, Elementary School,

High School, College, an MBA, or a PhD, know that things will continue to change because of technology. And just be prepared to continue to learn. I think that the economic field has still a lot of things that need to be understood. So there is ample room for new students to do better and improve our knowledge with enormous potential benefits for humankind. So everybody thinks that the only way to improve humankind is to be a doctor or a scientist. And of course, it is very important. But I think that curing from bad economic ideas is a very important task. Oh, I love that. I was trying economic ideas is a very important task. Oh, I love that.

I was trying to think of something to end with, and I was looking at Keynes' quotes, and I think one of my favorite ones was apparently somebody asked him near the end of his life what he wished he had done differently. Drink more champagne. Yes, exactly. That was it. Drink more champagne. Truly, words to live by. how to deal with economic crises and crashes in a way that could help avoid disaster or at least soften it,

make our economies more resilient, our lives better. With that in mind, I want to play one final song from our Planet Money Spotify summer school playlist. It is the old lamplighter by the Browns. The song was published in 1946, the year that Keynes died, and the world got a little bit dimmer. He made the night a little brighter, wherever he would go. The old lamplighter I can't thank you guys enough. This has been really fun. I feel so lucky that you guys were both available. And thank you guys just so much. No, thank you.

Thank you. This has been amazing. And thank you to you, our students, for listening and learning along with us all season. You guys have been an amazing class. Thank you for all your emails and comments. We have loved them. Planet Money Summer School is produced by the great Audrey Dilling. We got a lot of help from the wonderful Greg Morton.

We are edited by Alex Goldmark and Molly Messick. Devin Meller is our project manager. Engineering on this episode by Gilly Moon. Artwork for this series, it's really beautiful, you should check it out, by James Yang. Special thanks to Willa Rubin,

Sam Kessler, Emma Peasley, James Sneed, Dave Blanchard, Alison Hurt, Katie Dull, and Jackie Lay, and many, many more.

I'm Stacey Vanek-Smith, and this is NPR. Thanks for listening. We'll see you next year. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.