 Although I have written extensively about monetary theory and affairs myself, I want to shift the topic entirely and get away from this evil subject of an object of greed and talk about something entirely different. The title from the Malthusian Trap to the Industrial Revolution, Reflections on Social Evolution. For economic theory, the question of how to increase wealth or how to get rich has some rather straightforward answer. The answer has three components. You get richer through capital accumulation, through participation in the division of labor, and through population control, that is by maintaining the optimal population size. Robinson Crusoe alone on his island has originally only his own labor and land, nature-given resources at his disposal. He is as ritual poor as nature happens to make him. Some of his most urgently felt needs he may be able to satisfy directly, equipped only with his bare hands. At the very least, he can always satisfy his desire of leisure in this way, namely immediately. However, the satisfaction of most of his wants requires more than bare nature and hands, that is, it requires some indirect or roundabout and time-consuming production methods. Most, indeed, almost all goods and associated sorts of satisfaction require the help of some producer goods, indirectly useful producer goods or capital goods. With the help of producer goods, it becomes possible to produce more per unit time of the very goods that can also be produced with bare hands, such as leisure, or to produce goods that cannot be produced at all with just land and labor. In order to catch more fish than with his bare hands, for instance, Crusoe builds a net, or in order to build a shelter that he cannot build with his bare hands at all, he must construct an axe. However, to build a net or an axe requires a sacrifice or saving. To be sure, production with the help of producer goods is expected to be more productive than without it. Crusoe would not spend any time building a net if he did not expect that he could catch more fish per unit time with the net than without it. Nonetheless, the production of a producer good involves a sacrifice, for it takes time to build a producer good and the same time cannot be used for the enjoyment of the consumption of leisure or other immediately available consumer goods. In deciding whether or not to build the productivity enhancing net, Crusoe must compare and rank two expected states of satisfaction, the satisfaction which he can attain now without any further waiting and the satisfaction that he can attain only later after a longer waiting time. In deciding to build the net, Crusoe has determined that he ranks the sacrifice that is the value foregone of greater consumption now in the present below the reward, namely the value of greater consumption later in the future. Otherwise, if he had ranked these magnitudes differently, he would have abstained from building the net. This weighing and possible exchange of present against future goods and associated satisfactions are governed by time preference. Present goods are invariably more valuable than future ones and we exchange the former against the latter only at the premium. The degree, however, to which people prefer present goods over future goods is different from individual to individual. Depending on the height of his personal time preference, Crusoe will save and invest more or less and his standard of living will be higher or lower. The lower his time preference, the easier it is for Crusoe to delay current gratification in exchange for some anticipated greater satisfaction in the future, the more capital goods Crusoe will bring into existence and the higher will be his standard of living. Second, people can increase their wealth through participation in the division of labor. If we assume that Crusoe is joined by Crusina because of their natural physical or mental differences or the differences of the land that they face, almost automatically absolute or comparative advantages in the production of various goods will emerge. Crusoe is better equipped to produce one good and Crusina another one. If they specialize in what each is particularly good at producing, the total output of goods will be larger than if they had not specialized and remained in a position of an isolated and self-sufficient producer. Alternatively, if either Crusoe or Crusina is a superior producer of every good, the all-around superior producer is to specialize in those activities in which his advantage is especially great and the all-around inferior producer must specialize in those activities in which his disadvantage is comparatively smaller. Thereby, too, the overall output of goods produced will be greater than if each had remained in self-sufficient isolation. Third, the wealth in society depends on the population size. That is, on whether or not the population is kept at its optimum size. This follows from the Law of Returns and the Malthusian Law of Population, which Ludwig von Mises has ranked among the truly great achievements of thought and indisputable laws. In its most general and abstract form, the Law of Return states that for any combination of two or more production factors, there exists an optimum combination such that any deviation from this combination involves material waste or efficiency losses. Applied to the two original factors of production, that is land and labor, the Law implies that if one were to continuously increase the quantity of labor, the population size, while the quantity of land and the available technology remain fixed and unchanged, eventually a point will be reached where the physical output per labor input is maximized. This point marks the optimal population size. If the population were to grow beyond this size, income per head would fall. And likewise, income per head would be less if the population were to fall below this point, because the division of labor would shrink with an accompanying efficiency loss. To maintain the optimal level of income per person then, the population must no longer grow but remain stationary. Only one way exists for such a stationary society to further increase real income per head or to grow in size without a loss in per capita income, namely through technological innovation. That is, by the employment of better or more efficient tools made possible through savings brought about by the abstention from leisure or other immediate consumption. If there is no technological innovation or technology is fixed, then the only way for the population to grow in size without a concomitant fall in per capita income is through taking more and possibly better land into use. Now, if there is no additional land available and technology is fixed at a given level, then any population increase beyond the optimal size must lead to a progressive decline in per capita income. Now, later on I will make a few critical remarks concerning pure economic theory, but let me affirm from the outset that these remarks are not at all intended to deny the fundamental truth of economic theory. Economic theory is indispensable for a correct understanding of economic history, but is not sufficient as I will show. So, to emphasize again, it is true that the past toward prosperity involves capital accumulation, that is, capital per capita, the establishment and expansion of the division of labor, and the prevention of excess population through some form of birth control ranging from infanticide to moral restraint. And it is further true, as economic theory also points out, that this process is and can be systematically thrown out of whack by institutional barriers, in particular by some insufficient recognition and protection of private property rights. If Pruso does not recognize Prusina's right to control her own body and to be the rightful owner of all the goods that she, but not he, has first appropriated and produced, or vice versa, then saving and capital accumulation will be impeded and the division of labor distorted, and social wealth will be lower than it otherwise would be. Yet, correct as all of this is, it does not even come close to help us reach a comprehensive understanding of human economic history. I want to illustrate this thesis and indicate what it is that is missing in economic theory by considering what it is, what is without any exaggeration, the most fundamental fact and feature of human economic history. From its very beginnings, first for tens of thousands of years as nomadic hunter-gatherers, and then from about 15,000 years ago, from about 15,000 years ago increasingly as agricultural settlers, until only a couple of hundred years ago, sometimes during the late 18th and early 19th century, mankind was caught in the so-called Malsusian trap. Everywhere, the population size pressed continuously against the means of subsistence. That is, until sometime around 1800, little difference in the economies of humans and non-humans, non-human animals existed. For animals, and also for plants, it is always true that an increase in their number will encroach upon the available means of subsistence and eventually lead to overpopulation. That is, to super-numeric specimens, as Malsus refers to this phenomenon, which must be weeded out due to a lack of sustenance. Today we know and take it for granted that as far as humans are concerned, this must not necessarily be the case, because obviously no super-numeric specimens who are thus weeded out exist in modern western societies, but for most of human history this was indeed the case. To be sure, in contrast to non-human animals, humans were capable of inventing and manufacturing tools. However, every technological advance was quickly eaten up by a growing population living again near subsistence level. Not everyone lived at this level, of course. Naturally, especially with the emergence of sedentary life and private land ownership, distinct differences in wealth and income came into existence. There existed large landowners who lived in enormous wealth, even by today's standards, almost from the beginnings of settled life. Nor does subsistence level necessarily mean on the verge of starvation. Average living standards in 1200 England, for instance, were significantly higher than they are in many third-world countries of today, and thus must be ranked well above Bayer subsistence. Nor were average living standards always and everywhere equally low. There existed pronounced regional differences between, for instance, English, Indian and West African real incomes in 1800, and of course, as far as across time comparisons are concerned, many technologies existed in 1800 England, which were unknown in ancient Rome, Greece, China or Babylonia. Yet in any case, everywhere and at all times, the overwhelming majority of the population, the mass of small landowners and most laborers, lived near subsistence level, held down by the existence of a significant number of supernumerary people, that is, of people for whom no room at all existed within the division of labor and who consequently had to die out silently or become a menace, an economic bed in the form of beggars, vagrants, plunderers, bandits or warriors. As a matter of fact, for as long as one can trace such information back in history, it appears that real income per person in terms of food, housing, clothing, heating and lighting was not higher in 1800 England than it was in ancient Babylonia. There were ups and downs in real incomes due to various external events and pronounced regional income differences existed, but nowhere was there a continuous upward trend in real income per person, which we have come to take for granted by now, discernible until about 1800. The iron law of wages held slay throughout this entire age for many thousands of years. The case can even be made that average living standards in sedentary societies fell as compared to those reached in hunter-gatherer societies, for one, because agriculturalists had to work longer hours than foragers had to do to attain a comparable income and thus suffered a significant loss of leisure. Moreover, vital statistics such as data concerning life expectancy, physical height, the condition of teeth and so forth indicate that average living standards during the post-Neolithic era consistently lagged behind those attained in hunter-gatherer societies and were only reached again and finally surpassed in the course of the second half of the 19th century and even then only in the Western world. Why did it take so long to get out of this Malthusian trap and what happened that we finally succeeded? And why did it take so long even until we gave up hunter-gatherer existence in favor of an existence as settlers? Economic theory, or what I have said about it at least, does not and cannot answer these questions or rather the only answer that economic theory can provide is clearly inadequate. Its answer is there must have been some institutional impediments that prevented a quicker development and these impediments were removed only recently, that is about 1800, but this is clearly an unsatisfactory answer for several reasons. For one, hunters and gatherers, from all we know, had plenty of free time on their hands to invent agriculture and animal husbandry. Again and again and at countless places they suffered from excess population and consequently falling incomes and yet although the opportunity costs of foregone leisure must have been low, no one anywhere for thousands of years saw of agriculture and animal husbandry as an at least temporary escape from Malthusian conditions. Instead, until about 15,000 years ago, hunter-gatherer tribes answered the recurring challenge of overpopulation, always either by migration, that is by taking additional land into use until they finally ran out of land, or by fighting each other to the death until the population size was sufficiently reduced to prevent real incomes from falling. As well, property rights in settled societies were well protected at many places and times. The idea of private property and the successful protection of private property are not inventions and institutions of the recent past, but have been known for a long time and practiced almost from the beginnings of settled life. From all we know, for instance, property rights in 1200 England and in much of feudal Europe were better protected than they are today in contemporary England and in Europe. That is every institutional incentive favorable to capital accumulation and the establishment of a division of labor was in place and yet nowhere until about 1800 did mankind succeed to extricate itself from the Malthusian trap of excess population and stagnating per capita incomes. Thus, the institution of property protection can and should be regarded as unnecessary, but not also as a sufficient condition of economic growth, that is, of rising per capita incomes. There must be something else, some other factor that does not appear in economic theory which will have to explain all this. Now, part of the answer seems to be obvious. Mankind did not get out of the Malthusian trap because men could not keep their pants up. If they had done so, there would have been no excess population. We, or a small group of us, would still live in the same region somewhere in near equatorial East Africa where the first specimens of modern man appeared some 50 or 100,000 years ago. No additional land would have been taken into use and mankind would not have spread out from its point of origin all across the globe. But this can only be part of the answer because population control can prevent that real incomes will fall, but it cannot make incomes rise. The example of Tahiti may illustrate this. When Tahiti was rediscovered by Europeans in 1767, some 1,000 or possibly 2,000 years after it had been first settled by Austronesian farmers, its population was estimated at 50,000. Today it's 180,000. According to all accounts, the Tahitians lived paradisical lives. Real income per capita was high, mostly because of highly favorable climatic conditions in the Polynesian islands. Tahitian men could not exactly keep their pants up either, but in order to maintain their high standard of living, the Tahitians practised a most rigorous and ruthless form of population control involving infanticide and deadly warfare. The place was a paradise, but a paradise only for the living. Yet also while Tahitians were still living in the Stone Age, their toolkit had remained essentially unchanged since their first arrival on the islands. There was no further capital accumulation and real income per capita, even if high due to favorable external circumstances was stagnant. Why, when they could prevent the emergence of any excess population, did the Tahitians not achieve what we have in the meantime come to take for granted, namely, gradually and continuously rising per capita incomes? Put this way, the answer becomes almost obvious. People were simply not yet intelligent enough to do so, and it takes time to breed intelligence. Until some 15,000 years or so ago, mankind was simply not intelligent enough such that even not the brightest members were capable of conceiving the idea of indirect or roundabout consumer goods production that underlies agriculture and animal husbandry. The idea of first planting crops, then tending and protecting and finally harvesting them is not obvious or trivial, nor is the idea of taming, husbanding and breeding animals obvious or trivial. It requires a considerable degree of intelligence to conceive of such notions, and it took tens of thousands of years of natural selection under hunter-gatherer conditions to make such cognitive achievement possible. Similarly, from 15,000 years ago until about 1800, mankind was not sufficiently intelligent such that not even the brightest settlers could conceive of enough new productivity-enhancing capital goods and production technologies to allow for a growing population that is a higher population density without falling incomes or for a steady increase in per capita incomes possibly combined with a larger population size. Today we take it for granted that it is solely the unwillingness to consume less and to save more that imposes limits on economic growth. We have seemingly and seemingly endless supply of natural resources and of recipes how to produce more better and different goods and it is only our limited savings that prevent us from employing these resources and implementing such recipes. Yet this phenomenon is actually quite new. For most of human history, savings were held back by a lack of ideas of how to productively invest them. That is, of how to convert plain savings or storing goods into productive savings that is into producer goods and producer goods production. For Crusoe, for instance, it was not sufficient to have a low time preference. Rather, first Crusoe had to conceive of the idea of a net and even if he had conceived the idea, he must have known how to build it from scratch. Most people are not intelligent enough to invent and implement anything new but merely imitate more or less perfectly what others have invented before them. Likewise, it requires intelligence to recognize the higher physical productivity of the division of labor and it requires intelligence to recognize the laws of human reproduction and thus allow for any form of deliberate population control let alone an efficient or low-cost method. It took several thousand years, more of natural selection under agricultural conditions than to reach a threshold in the development of human intelligence or more precisely of low time preference correlated with high intelligence such that productivity growth could continuously outstrip any population growth. From the beginning of the neolithic revolution until about 1800, enough inventions or technological improvements were obviously made by bright people and imitated by less people of lesser intelligence to account in addition to more agriculturally used land for a significant increase in world population from about 4 million, 12,000 years ago to 900 million around 1800, now the population is 6 billion. But during the entire era, the rate of technological progress was never sufficient to allow for a population growth combined with increasing per capita incomes. The mechanism through which higher human intelligence combined with low time preference was bred over time as a rather straightforward one. Given that man is a physically weak and ill equipped to deal with brute nature, it was advantageous for him to develop his intelligence. Higher intelligence translated into economic success and economic success in turn translated into reproductive success that is producing a larger number of surviving descendants. There can be no doubt that the hunter-gazer existence requires intelligence, the ability to classify various external objects as good or bad, the ability to recognize a multiplicity of causes and effects, to estimate distances, time and speed, to survey and recognize landscapes, to locate various good or bad things and to remember their position in relation to each other, and so forth. Most importantly, the ability to communicate with others by means of language and thus facilitate coordination. Not every member of the band was equally capable of these skills, some were more intelligent than others. And these differences in intellectual talents would lead to some visible status differentiation within the tribe of excellent hunters, gatherers and communicators and lousy ones. And this status differentiation would in turn result in differences in the reproductive success of various tribe members, especially given the loose sexual morals prevailing among hunter-gazers. These by and large excellent tribe members would produce a larger number of surviving offspring and thus transmit their genes more successfully into the next generation than lousy ones. Consequently, if and insofar as human intelligence has some genetic basis, which seems to be absolutely undeniable in light of the evolution of the entire species, hunter-gazer conditions would over time produce a tendency to select for a population of increasing average intelligence and at the same time an increasingly higher level of exceptional intelligence. Moreover, this tendency of selecting for higher intelligence would be particularly pronounced under harsh external conditions. If the human environment is always mild or consumer-friendly and unchangingly constant, as in the seasonless tropics where one day is like any other year in and year out, high or exceptional intelligence offers a lesser advantage than in naturally inhospitable environments which widely fluctuating seasonal variations. The more challenging the environment for human survival, the higher the premium placed on intelligence as a requirement of economic and consequent reproductive success. Hence, it should be expected and it does indeed accord with effects the tools that we have found that intellectual progress was most pronounced in the harshest, northernmost regions of human habitation. The competition was in and between tribes and the selection for and breeding of higher intelligence where differential rates of reproductive success did not come to a halt once the hunter-gazer life had been given up in favor of agriculture and animal husbandry. However, the intellectual requirements of economic success became somewhat different under sedentary conditions. The invention of agriculture and animal husbandry was in and of itself an outstanding cognitive achievement. It required a length and planning horizon, it required longer provisions and deeper and farther reaching insights into the chains of natural causes and effects and it required more work, patience and endurance than under hunter-gazer conditions. In addition, it was instrumental for success as a farmer that one possessed some degree of numeracy so as to count, measure and proportion in particular. It required intelligence to recognize the advantages of inter-household division of labor and to abandon self-sufficiency. It required some literacy to design contracts and establish contractual relations and required some skill of monetary calculation and of accountancy to economically succeed. Not every farmer was equally apt in these skills and had an equally low degree of time preference and on the contrary, under agricultural conditions where each household was responsible for its own production of consumer goods and for its own production of offspring and there was no longer any free riding as under hunter-gazer conditions. The natural inequality of men and the corresponding social differentiation of and between more or less successful members of a tribe became increasingly and strikingly visible through the size of one's land holdings. Consequently, the translation of economic or productive success and status into reproductive success, that is the breeding of a comparatively larger number of surviving offspring by the economically successful, became even more direct and pronounced during conditions of sedentary life. It was not in the northernmost regions of human habitation however as might first be expected where the neolithic revolution began and hence it successively conquered the rest of the world but in regions somewhat further to the south but still far north of the tropics where mankind had originated. It began independently at at least three different locations first in the Middle East, shortly afterwards in central China and was a delay of a few thousand years in Mesoamerica always at locations within roughly speaking similarly temperate Mediterranean type latitudes. The reason for this seeming anomaly is easy to detect however. In order to invent agriculture and animal husbandry, two factors are necessary. Sufficient intelligence and favorable natural conditions to apply this intelligence. It was the second factor that was lacking in extreme northern regions. The extreme freezing conditions and the brevity of the growing seasons made agriculture and animal husbandry practically impossible in those regions even if the idea might have been conceived. What proved necessary to actually implement the idea were natural circumstances favorable to sedentary life and the brevity of a long and warm growing season besides of course suitable crops and domesticable animals. Such climatic conditions it did exist in the mentioned temperate regions. Here the competitive development of human intelligence among hunter-gazers had made sufficient progress even if it lagged behind that found in further northern regions so that combined with favorable natural circumstances the idea of agriculture and animal husbandry could be conceived as well as implemented. Since the end of the last ice age about 10,000 years ago then the zone of temperate climates expanded northward into higher latitudes rendering agriculture and animal husbandry increasingly feasible there as well. And meeting there and even more intelligent people the new revolutionary production techniques were not merely quickly imitated and adopted but most subsequent improvements in these techniques had its origin here in the northern most regions. Gradually in the course of a few thousand years the centers of economic development and of population density shifted then northward and it was here then in the cold and formerly freezing north where mankind first and lastingly managed to extricate itself through the so-called industrial revolution from the Melsusian trap. Now what is missing in economic theory then and what is needed to reach a comprehensive understanding of the course of human history is the recognition of an ongoing sociobiological evolution and of evolutionary change. Economic theory assumes so to speak a constant unchanging man. To be sure it allows for human differences in the form of different labor productivities. However these differences are typically interpreted as a result solely of different external conditions that is of different incentives of a different incentive structure of different natural endowments and of different training. Rarely if ever are internal biologically anchored characteristics admitted as possible sources of human differences and yet every incentive needs a receptor to work and if a receptor is lacking or is insufficiently sensitive a different incentive structure simply makes no difference. Moreover even when economists admit that human differences have internal biological sources as well they still typically ignore that these differences are themselves the outcome of a lengthy process of natural selection in favor of the human characteristics and dispositions physical as well as mental which are determinant of economic success and consequently positively correlated with economic success of reproductive success. That is it is still largely overlooked that we modern men are a very different breed from our predecessors hundreds or even thousands of years ago. We are physically more fragile but we are in doubt with significantly greater mental powers or higher intelligence both on the level of average performance and especially of exceptional performance discipline, endurance and exactitude that is lower time preference. Only once this is understood do the most basic facts of human history make some sense namely why it took so long to develop agriculture and even longer to extricate ourselves from Malthusian conditions how such a feat was possible at all and we did not instead remain under Malthusian conditions forever why is the Industrial Revolution originated and then took hold immediately in some regions but not in others why they are always persistent why there were always persistent regional income differences and why these differences have increased rather than decreased since the time of the Industrial Revolution. Moreover, once we realized that the Industrial Revolution was first and foremost the outcome of the evolutionary growth of human intelligence rather than the mere removal of institutional barriers to growth I am not saying that this is not important the removal of institutional barriers but it is not sufficient once we understand this the role of the state can be recognized as fundamentally different and changed under Malthusian versus post Malthusian conditions under Malthusian conditions the state doesn't matter all that much at least as far as macro effects are concerned a more exploitative state will simply tend to lower population numbers much like a pest does but it does not affect per capita income in fact by increasing land per capita income per capita may even arise as it did in fact after the great pestilence in the mid 14th century and in reverse a good less exploitative state will allow for a growing number of people but per capita incomes will not rise or may even fall because land per capita is reduced all of this changes with and after the Industrial Revolution however for if productivity increases continuously outstrip population increases and allow for a steady increase in per capita incomes then an exploitative institution such as a state can grow without lowering absolutely the per capita income and reducing the population numbers the state then becomes a permanent drag on the economy and per capita incomes and the more so the more it expands its size moreover and I can only indicate this here whereas under Malthusian conditions positive eugenic effects reign that is the economically successful produce more offspring and the population stock is thus gradually improved under post Malthusian conditions the existence and the growth of the state produce a two fold disgenic effect especially under democratic welfare conditions the economically challenged as the main clients and supporters of the state produce more offspring and the economically successful produce less and the growth of the state and the increasing number of state employees and dependents contribute systematically to short sightedness and present orientation that is a rise in the social rate of time preference and the population stock thus becomes increasingly worse rather than better thank you very much