Economic progress can’t happen without trial and error
It’s called the “toast rack”. Heathrow’s terminal five, which cost £4.3bn and opened in 2008, consists of three, neat rectangular buildings. From the 10-storey control tower, which I visited last week, you can see the logic of it. Passengers are shuttled back and forth between the “racks” via an underground train, so that, around them, planes can come and go with ease. It all seems obvious, and yet it wasn’t always like this.
Walk around the tower and you see the older terminals, a horrible morass of metal and tubes. Each section seems to have been added on haphazardly. The roofs are covered with vents and pipes, the buildings jut out at awkward angles, the corridors to the boarding gates form long peninsulas and bend into kinks to create cul-de-sacs, where planes collect their passengers and then turn around, awkwardly, to go to the runway. “We hate those cul-desacs,” said one airport official, shuddering.
The contrast between the old and new is a lesson in productivity improvements. Most of the time, economic progress isn’t derived from Archimedes moments of inspired genius. It’s a process of trial and error, experimentation and revision. And this is instructive when we wonder why Britain’s productivity performance has been so poor.
Because of our ever-growing stacks of regulations and planning rules, it took Heathrow a decade of public inquiries, lobbying and protests to go from a planning proposal to starting construction on terminal five. It only succeeded thanks to its deep pockets and importance to the national economy.
We should be glad it did. The toast rack matters because Heathrow runs 1,300 flights a day. Getting planes on and off runways efficiently, and being able to re-route them quickly in case of delays, makes a big difference. The cul-de-sacs worked when the airport wasn’t so packed, but now, they’re a hassle. No one could have told you about this problem in advance. The airport had to find out by experiencing it. But the speed at which it could fix it is directly related to the inflexibility of our planning system.
There’s a striking contrast between this and the way development once happened in Britain. Last week, Michael Gove gave a speech on capitalism in which he retold the story of the industrial revolution as “the consequence of a revolution in ideas”.
Capitalism and industrial society emerged, he argued, because “a set of ideas captured society, a mindset developed”. This is the “mad genius” conception of progress, in which sudden, revolutionary insights drive change. But if that were the case, pre-planning everything might work.
In fact, history isn’t driven just by ideas, but by necessity. It’s only when a need arises that we start inventing ways to meet it. This is just as true of Heathrow’s cul-de-sac problem as it is of major developments in the history of capitalism and the industrial revolution. Take, for example, the burning of coal. One of the reasons why Britain’s economy overtook others was that we were the first nation to make widespread use of coal as a fuel.
This didn’t happen because of an inspired idea. It happened due to circumstance, as recounted by Robert Allen, the economic historian, in his analysis of the industrial revolution. He tells how, as London grew in the 17th century, demand for fuel shot up.
Up to then, London’s heating demand had been fulfilled by wood and charcoal. But because of the city’s growth, all of the easily accessible wood was pretty soon used up. The cost of transporting fresh wood to the big smoke rose, so local fuel prices went skyward.
People therefore began to look for alternatives. Coal had been used sporadically for a long time. It wasn’t that nobody had the idea of using it, but up to that point, there had been little need. The rising cost of wood changed the situation.
Before houses could switch to burning coal, however, they needed redesigning. In the traditional wood-fuelled house, the fire was in the middle of the room and smoke rose and escaped through the thatched roof. Coal fumes were far too toxic for that and coal would only burn well when kept bunched together over an air supply. These problems led to the invention of the grate and chimney.
The chimney itself was a great idea, but it required years of trial and error to work well. Fortunately, due to a huge burst of unregulated house building, people could experiment. They tried different chimney breadths, angles, tapers and positions for the hood and shaft, new materials and arrangements for the grate and so on. These “inventions” were all vital in perfecting the new coal-heated house, but they were driven by a collective need and perfected by an entirely decentralised, collective process.
As Allen writes: “Consider what did not happen: had a modern economy faced the challenge of shifting from wood to coal, there would likely have been a large and coordinated research and development programme to solve the design problem. Nothing of the sort happened in the 16th and 17th centuries. Design innovation was left to the decentralised market.”
The problem with replicating this now is obvious. We simply aren’t willing to let the market conduct trial and error experiments in the same way, because we aren’t willing to tolerate error.
In some cases, we won’t tolerate it for good reason, such as pollution or safety failures. It was after the 1666 fire of London, for example, that Britain introduced its first building regulations. The problem is that without error, you cannot have trial.
Heathrow used to have six runways. They crossed in the middle, allowing for planes to adjust their take-off direction for the wind. You can see the ghostly outlines of these old runways from the control tower, radiating out in a star shape. Fortunately, advances in aviation have done away with the need for so many runways. Planes can now take off at angles to the wind.
But when you consider how long it has taken to get close to adding a modern, third runway, the mystery isn’t why Britain’s productivity growth has been so slow. The mystery is that it grows at all.
‘History isn’t driven just by ideas, but by necessity. It’s only when a need arises that we start inventing ways to meet it’
Heathrow’s terminal five, which contrasts with older buildings at the airport and its original layout, comprising of six runways