Alex Tabbarok is a radical optimist.

This post is part of a series from the TED 2009 conference held in Long Beach, California from February 4-8th. You can read other posts in the series here, and the TED site will release video from the talk in the coming weeks or months. Because I’m putting these posts together very quickly, I will get things wrong, will misspell names and bungle details. Please feel free to use the comments thread on this post to offer corrections. You may also want to follow the conference via Twitter or through other blogs tagged as TED2009 on Technorati.

Alex Tabarrok, a political economist from George Mason University, offers some good reasons to be hopeful about the world economy. He begins by explaining that the beginning of the last century was a difficult time – we experienced two world wars, a great depression and the rise of communist states. These phenomena led to the building of walls – iron curtains – that separated a global economy into national and regional economies.

In the second half of the last century, these walls came tumbling down. Tarrifs dropped from 40% to 5% over the course of decades. Container shipping brought down costs of transportation. The internet has shattered walls of communications. And we’re seeing incredible economic growth. China has grown at 10% a year, leading to an unprecendented rise of people out of poverty. Even in Africa, which experienced negative income growth for most of the late 20th century, has seen sharp growth the past eight years.

Tabarrok sees growth coming from new ideas. He believes that future growth comes from ideas that have high R&D costs, but low production costs. He quotes Jefferson, with the wonderful maxim about knowledge, that he who lights his candle at mine receives light without darkening me. As he phrases it, “One apple feeds one man, one idea can feed the world.”

If you had to choose between having two deadly diseases, one common and one rare, you’d want to have the common disease. There are more incentives to produce solutions to common diseases – “Larger markets save lives.
Misery truly does love company.”

“If China and India were as rich as the US was today, the market for cancer drugs would be eight times what it is now.” We’d have far more scientists and engineers able to work on these problems and increased incentives to condust research. It’s similar to the ways in which action films have larger budgets than comedies – action films do better in overseas markets and therefore impact more sales, and can cost more.

“One Idea, One World, One Market” is the solution for the future, Tabarrok tells us. We need more idea creators. Less than 0.1% of the world’s population are scientists and engineers. A large percentage of those people are in the US. The US is now losing idea leadership… and that’s a good thing, he tells us. Around the world, there may be geniuses, like the Indian mathematician Ramanujan, toiling in poverty and obscurity.

“It’s as if we had a supercomputer and billions of our processors had been offline.” India, China, and Africa are coming online, and we will see an Einstein in Africa this century. We need to build investments in education that increase the supply of new ideas.

Should we be worried? No, he tells us – we may face a depression, but growth will more than equal it out. By 2100 he tells us we’ll have GDP per capita of $200,000 everywhere in the world.

Don’t worry about the price of oil, about the idea that “China is drinking our milkshake.” That price pressure is good for us – it will give us incentives to invest in green energy.

We need to keep globalizing and extending markets, and to keep investing in education. The challenge is to keep our education system globalized. We are, he tels us, the fire that others light their tapers from.