Today, of Americans officially designated as ‘poor’, 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 per cent air conditioning. Cornelius Vanderbilt had none of these. Even in 1970 only 36 per cent of all Americans had air conditioning: in 2005 79 per cent of poor households did.

Meanwhile, average life expectancy in the longest-lived country (Sweden in 1850, New Zealand in 1920, Japan today) continues to march upwards at a steady rate of a quarter of a year per year, a rate of change that has altered little in 200 years.

In another respect, too, inequality has been retreating. The spread of IQ scores has been shrinking steadily – because the low scores have been catching up with the high ones. This explains the steady, progressive and ubiquitous improvement in the average IQ scores people achieve at a given age – at a rate of 3 per cent per decade. In two Spanish studies, IQ proved to be 9.7 points higher after thirty years, most of it among the least intelligent half of the group. Known as the Flynn effect, after James Flynn who first drew attention to it, this phenomenon was at first dismissed as an artefact of changes in tests, or a simple reflection of longer or better schooling. But the facts do not fit such explanations because the effect is consistently weakest in the cleverest children and in the tests that relate most to educational content. It is a levelling-up caused by an equalisation of nutrition, stimulation or diversity of childhood experience. You can, of course, argue that IQ may not be truly representative of intelligence, but you cannot argue that something is getting better – and more equal at the same time.

Put it another way, an hour of work today earns you 300 days’ worth of reading light; an hour of work in 1800 earned you ten minutes of reading light. Or turn it round and ask how long you would have to work to earn an hour of reading light – say, the light of an 18-watt compact-fluorescent light bulb burning for an hour. Today it will have cost you less than half a second of your working time if you are on the average wage: half a second of work for an hour of light.

This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work. As late as the mid-1800s, a stagecoach journey from Paris to Bordeaux cost the equivalent of a clerk’s monthly wages; today the journey costs a day or so and is fifty times as fast. A half-gallon of milk cost the average American ten minutes of work in 1970, but only seven minutes in 1997.

The price of computing power fell so fast in the last quarter of the twentieth century that the capacity of a tiny pocket calculator in 2000 would have cost you a lifetime’s wages in 1975.

And, once again, notice that the true metric of prosperity is time. If Cornelius Vanderbilt or Henry Ford not only moves you faster to where you want to go, but requires you to work fewer hours to earn the ticket price, then he has enriched you by granting you a dollop of free time.

Since then the ‘Easterlin paradox’ has become the central dogma of the debate. Trouble is, it is wrong. Two papers were published in 2008 analysing all the data, and the unambiguous conclusion of both is that the Easterlin paradox does not exist. Rich people are happier than poor people; rich countries have happier people than poor countries; and people get happier as they get richer. The earlier study simply had samples too small to find significant differences. In all three categories of comparison – within countries, between countries and between times – extra income does indeed buy general well-being.

There are some exceptions. Americans currently show no trend towards increasing happiness. Is this because the rich had got richer but ordinary Americans had not prospered much in recent years? Or because America continually draws in poor (unhappy) immigrants, which keeps the happiness quotient low? Who knows? It was not because the Americans are too rich to get any happier: Japanese and Europeans grew steadily happier as they grew richer despite being often just as rich as Americans.

Getting richer is not the only or even the best way of getting happier. Social and political liberation is far more effective, says the political scientist Ronald Ingleheart: the big gains in happiness come from living in a society that frees you to make choices about your lifestyle – about where to live, who to marry, how to express your sexuality and so on. It is the increase in free choice since 1981 that has been responsible for the increase in happiness recorded since then in forty-five out of fifty-two countries.

Even those who have several paying jobs – say, freelance short-story writer/neuroscientist, or computer executive/photographer – have only two or three different occupations at most. But they each consume hundreds, thousands, of things. This is the diagnostic feature of modern life, the very definition of a high standard of living: diverse consumption, simplified production.

I am not trying to make you feel guilty: I am trying to tease out what it is that makes you well off. It is having the hard work of living made easy by markets and machines and other people. There is probably nothing to stop you fetching free water from the nearest river in your home town, but you would rather pay something from your earnings to get it delivered clean and convenient from your tap. So this is what poverty means. You are poor to the extent that you cannot afford to sell your time for sufficient price to buy the services you need, and rich to the extent that you can afford to buy not just the services you need but also those you crave.

Here is the data. From the !Kung in the Kalahari to the Inuit in the Arctic, two-thirds of modern hunter-gatherers have proved to be in a state of almost constant tribal warfare, and 87 per cent to experience annual war. War is a big word for dawn raids, skirmishes and lots of posturing, but because these happen so often, death rates are high – usually around 30 per cent of adult males dying from homicide. The warfare death rate of 0.5 per cent of the population per year that was typical of many hunter-gatherer societies would equate to two billion people dying during the twentieth century (instead of 100 million).

The cumulative accretion of knowledge by specialists that allows us each to consume more and more different things by each producing fewer and fewer is, I submit, the central story of humanity. Innovation changes the world but only because it aids the elaboration of the division of labour and encourages the division of time.

So cooking adds value: the great advantage of cooked food is that though it takes longer to prepare than raw food, it takes just minutes to eat, and this means that somebody else can eat as well as the person who prepares it.

The argument is not that exchange teaches people to be kind; it is that exchange teaches people to recognise their enlightened self-interest lies in seeking cooperation.

As a broad generalisation, the more people trust each other in a society, the more prosperous that society is, and trust growth seems to precede income growth.

By these measures, Norway is heaving with trust (65 per cent trust each other) and wealthy, while Peru is wallowing in mistrust (5 per cent trust each other) and poor.

When Pierre Omidyar founded eBay, few believed as he did that trust between anonymous strangers would prove easy to create in the new medium. But by 2001, fewer than 0.01 per cent of all transactions on the site were fraud attempts.

The history of human prosperity, as Robert Wright has argued, lies in the repeated discovery of non-zero-sum bargains that benefit both sides. Like Portia’s mercy in The Merchant of Venice, exchange is ‘twice blest: it blesseth him that gives and him that takes.’ That’s the Indian rope trick by which the world gets rich.

Peter Saunders argues, ‘Nobody planned the global capitalist system, nobody runs it, and nobody really comprehends it. This particularly offends intellectuals, for capitalism renders them redundant. It gets on perfectly well without them.’ There is nothing new about this.

In market societies, if you get a reputation for unfairness, people will not deal with you. In places where traditional, honour-based feudal societies gave way to commercial, prudence-based economies – say, Italy in 1400, Scotland in 1700, Japan in 1945 – the effect is civilising, not coarsening.

Half of the biggest American companies of 1980 have now disappeared by take-over or bankruptcy; half of today’s biggest companies did not even exist in 1980. The same is not true of government monopolies: the Internal Revenue Service and the National Health Service will not die, however much incompetence they might display. Yet most anti-corporate activists have faith in the good will of the leviathans that can force you to do business with them, but are suspicious of the behemoths that have to beg for your business. I find that odd.

But note here that a country’s economic freedom predicts its prosperity better than its mineral wealth, education system or infrastructure do. In a sample of 127 countries, the sixty-three with the higher economic freedom had more than four times the income per capita and nearly twice the growth rate of the countries that did not.

Human history is driven by a co-evolution of rules and tools. The increasing specialisation of the human species, and the enlarging habit of exchange, are the root cause of innovation in both.

That is the point of agriculture: it diverts the labour of other species to providing services for human beings.

The most fundamental feature of the modern world since 1800 – more profound than flight, radio, nuclear weapons or websites, more momentous than science, health, or material well-being – has been the continuing discovery of ‘increasing returns’ so rapid that they outpaced even the population explosion.

In an exactly analogous way, the science of ecology has an enduring fallacy that in the natural world there is some perfect state of balance to which an ecosystem will return after disturbance.

But Orwell’s scepticism misses the point. It is not the speed but the cost – in terms of hours of work – that counts. The death of distance may not be new, but it has been made affordable to all. Speed was once a luxury. In Orwell’s day only the richest or most politically powerful could afford to travel by air or to import exotic goods or make an international telephone call. Now almost everybody can afford the cheap goods carried by container ships; almost everybody can afford the internet; almost everybody can afford to travel by jet.

It goes with the fact that they are risk-averse: a large literature confirms that people much more viscerally dislike losing a sum of money than they like winning the same sum. And it seems that pessimism genes might quite literally be commoner than optimism genes: only about 20 per cent of people are homozygous for the long version of the serotonin transporter gene, which possibly endows them with a genetic tendency to look on the bright side.

Apocaholics (the word is Gary Alexander’s – he calls himself a recovering apocaholic) exploit and profit from the natural pessimism of human nature, the innate reactionary in every person.

As Bruce Ames famously demonstrated in the late 1990s, cabbage has forty-nine natural pesticides in it, more than half of which are carcinogens. In drinking a single cup of coffee you encounter far more carcinogenic chemicals than in a year’s exposure to pesticide residues in food. This does not mean that coffee is dangerous, or contaminated: the carcinogens are nearly all natural chemicals found in the coffee plant and the dose is too low to cause disease, as it is in the pesticide residue.

DDT’s miraculous ability to halt epidemics of malaria and typhus, saving perhaps 500 million lives in the 1950s and 1960s (according to the US National Academy of Sciences), far outweighed any negative effect it had on human health. Ceasing to use DDT caused a resurgence of malaria in Sri Lanka, Madagascar and many other countries.

It would be wrong to conclude that the anti-acid rain legislation did no good at all. The acidification of mountain lakes by distant power-station emissions was a real (though relatively rare) phenomenon, and this was indeed reversed by the legislation. But even this harm was vastly exaggerated during the debate: far from 50 per cent of lakes being affected, it was 4 per cent, said the official study.

The fact is, if you read the history of the episode carefully, acid rain was a minor and local nuisance that could be relatively cheaply dealt with, not a huge threat to large stretches of the planet. The ultra-pessimists were simply wrong.

Here’s the rub: this future sounds awfully like the feudal past. The Ming and Maoist emperors had rules restricting the growth of businesses; forbidding unauthorised travel; punishing innovation; limiting family size. They do not say so, but that is the inevitable world the pessimists want to return to when they speak of retreat.