Macroeconomics 8: Productivity & Getting Lit

August 31, 2022·30 min·2 clips

Economist Bill Nordhaus found that in ancient Babylon, a day's work earned you just 10 minutes of dim light.

1. Planet Money Summer School's eighth and final macroeconomics episode, hosted by Stacey Vanek Smith, uses the history of artificial light to explain productivity growth. 2. Guest economists are Kristin Brody, whose research focuses on automation's effects by gender and race, and Luigi Zingales, an economist at the University of Chicago, both serving as recurring 'professors' throughout the summer school season. 3. The episode's thesis is that productivity — producing more output with the same inputs — is the central engine of long-run economic growth and human welfare improvement. 4. The core reported piece, originally produced by Jacob Goldstein and David Kestenbaum in 2014, opens with Jacob calling New York City butcher shops to buy beef fat from around a cow's kidney so he can recreate ancient candle-making. 5. Jacob spends 45 minutes dipping wicks in melted fat, producing six 'tiny, crooked, smelly candles' that he brings to light historian Jane Brock, who wrote the book 'Brilliant: The Evolution of Artificial Light.' 6. Jane Brock describes ancient lighting alternatives: Native Americans in the Pacific Northwest made salmon candles, tropical communities used firefly lanterns, and people in northern Scotland threaded wicks down the throats of dried storm petrels and lit them. 7. Yale economist Bill Nordhaus became obsessed with quantifying the cost of light across history, obtained ancient Babylonian price records from a colleague, bought a replica lamp from a catalog, and used a borrowed light meter to measure output. 8. Nordhaus's key metric: if you spend an entire day's wages on light, how many minutes of a dim modern bulb's equivalent do you get? In ancient Babylon, the answer was approximately 10 minutes. 9. The story argues that for roughly 4,000 years — from Babylon to around 1800 — productivity in light (and in the economy generally) improved only modestly. 10. The kerosene breakthrough around 1850, credited to a Canadian inventor, was the first step-change: a day's wages bought five hours of light, compared to roughly one hour from whale oil. 11. Thomas Edison's 1882 power plant in lower Manhattan lit a square mile of the city using electricity, but the story emphasizes that Edison succeeded not just as an inventor but as a businessman who studied gas-lamp pricing and structured his invention around beating that cost. 12. Edison historian Paul Israel, interviewed at the site of the original power plant, notes that Edison's notebooks are full of economic cost comparisons, not just technical schematics. 13. By the 1990s when Nordhaus completed his study, a day's wages purchased the equivalent of 20,000 hours of light — a factor of roughly 120,000 improvement over ancient Babylon. 14. The 2022 studio discussion with Kristin and Luigi addresses whether productivity growth has physical limits: Luigi notes that speed of travel has plateaued, but computing advanced enormously after electricity enabled it, and future breakthroughs will come from dimensions we haven't yet imagined. 15. Kristin raises Keynes's prediction that productivity gains would eventually allow a 15-hour work week, and asks why we're still at 40 hours; the answer offered is that demand continues to expand as technology makes goods cheaper. 16. Luigi distinguishes between production and productivity: it is possible to produce less (fewer goods) while remaining more productive (doing the work faster with fewer hours), a distinction relevant to sustainability debates. 17. Luigi describes his father managing land in Italy from 1950 to 2015: when he inherited it, oxen were still used; when he died, GPS-guided tractors handled the same land with a fraction of the workers and far higher output. 18. The episode's tone is warm and conversational throughout — two economists and a host who clearly enjoy each other's company, with moments of humor (the candle-dipping, the storm petrel lamp) alongside substantive economic analysis. 19. Economics students, lifelong learners interested in the long sweep of economic history, and people curious about why productivity matters will find this episode particularly rewarding. 20. Listeners expecting current events coverage, financial market analysis, or a fast-paced news format will likely find the historical sweep and educational framing too slow-moving.

As heard by us

Productivity becomes a story about light, money, and the infrastructure behind invention.

Planet Money Summer School closes its macroeconomics class by tying productivity to a chain of inventions, money, and infrastructure. It starts with light itself, from kerosene and street lamps to Edison's electric dream, and makes the point that the real breakthrough was not…

Read the full review in PlayNext →

Why you'd press play

Want productivity explained through light bulbs, power plants, and a very expensive idea?

Read the full recommendation in PlayNext →

Listen to the show on

Apple Podcasts Spotify

Play clips from this episode More from Planet Money Summer School