Knowledge, Power, Economy--and Civilization

I listened to another Uncommon Knowledge episode the other night; yet again it becomes clear how interrelated the economic, political, and civilization spheres are.

The interview was with George Gilder, most recently the author of Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World. He makes the assertion that wealth is essentially knowledge. Every trade is an exchange of knowledge.

George Gilder (right) being interviewed on Uncommon Knowledge

Gilder studies information theory. There are a lot of specific definitions, all worth hearing. One is that entrepreneurship and information are essentially surprise—in other words, contrary to expectation. In a radio transmission, for example, you have static, or white noise, which is the expected chaos, or what he refers to as entropy. Then there’s the message—something clear that comes through, unexpected among the white noise. That’s what we pay attention to; that is what surprises us by being different from the background noise. In a carrier, such as a radio transmission, there may be a certain amount of noise. Fiber optics might have less noise, or lower entropy. The lower entropy, the more clarity.

And he applies this noise vs. clarity idea to economics. Quite literally, socialist economic systems introduce noise into the market—and interference in the market muddies up the clarity. Here’s a portion of the conversation, starting at about 15 minutes in:

Peter Robinson: So in an economy you want a set of circumstances, government circumstances, tax policy, regulation, legal regime, property rights, which somehow or other permits the greatest possible pure information?

George Gilder: That’s right.

PR: So why does socialism impinge on pure information?

GG: What you want is a predictable carrier. Remember, the electromagnetic spectrum, all guaranteed by the speed of light. What you want in economy is predictable laws, predictable political leadership, a spirit of trust, which means contracts can be predictable. Property rights—which means that property rights don’t change from time to time. That entrepreneurs can launch their creations through a world that’s governed by predictable rules of law—the rules of the road, as Hayek said.

And where I diverge to some extent from pure libertarian views is that I don’t believe that these rules of the road, the Constitution, the, uh, trustworthy political leadership, contracts, courts that are reliable—that all these low-entropy carriers can emerge spontaneously. I think it takes heroic—it took George Washington and Jefferson and Madison and all these great men to achieve the low-entropy carriers that allowed the efflorescence of the American economy.

And it still requires both restrained and inspired political leadership, and sacrificial national defense, and reliable police, and the whole structure of the constitutional order is necessary in order to bear the unexpected, surprising creations of entrepreneurs—new goods and services, bearing new knowledge through the economy.

Right after this exchange, Peter Robinson puts up a quote from the book, which crystalizes the point:

In capitalism, the low-entropy carriers are the rule of law, the maintenance of order, the defense of property rights, the stability of money, the discipline of futurity of family life, and a modest and predictable role of government. These low-entropy carriers do not emerge spontaneously. They originated historically in a religious faith in the transcendent order of the universe.

Then, going on:

PR: George, there are moments when there’s a kind of cultural whiplash form reading this book, because here and here and here you’re talking about cutting-edge information theory. You even go into the mathematics of it. You talk about how the physics that I struggled with in high school transcend… You sound cool, and so cutting edge, and so high tech! And then you talk about sacrifice and thrift, and a “religious belief in the transcendent order of the universe.” And suddenly we’re not in Silicon Valley; we’re in small town Kansas or Iowa. How do these go together?

This is where I get really interested. It’s culture—the rules of civilization—that makes all the difference in economics, in entrepreneurial success, in real progress.

The culture discussion continues. This section is about 26 minutes in:

PR: [You talk about the ] “futurity and stability of the family,” which sounds pretty retrograde, if I may so in this year of our Lord 2013—but of course it’s not “our Lord”; that’s also retrograde. But, George, it even gets worse. I went back to the opening page of [Gilder’s book] Men and Marriage. Get ready; I’m going to quote this, and what I’m about to quote is so politically incorrect there will be a paddy wagon ready to take you away after this shoot. “The prime fact of life is the sexual superiority of women. Women transform male lust into love; channel male wanderlust into jobs, homes, and families; change hunters into fathers; divert male will to power into a drive to create.” Oh, George, you go from being cool to being unspeakable.

GG: Well, crucial to economic growth is a sense of the future. You have to be engaged in long-term activities, because knowledge is hard to achieve, and it takes determination and resolution, and sacrifice and persistence, and perseverance and imagination to pursue. And when families break—the way most of this society gains a stake in the long-term future is through children, who biologically extend our lives into the future, and give us a sense of a stake in the future. And when the family breaks down, just as when a stable money fails and the courts become capricious and unpredictable, when politicians gouge for power and money of their own—what happens is the horizons of the economy close in, and the whole society becomes increasingly engaged in short-term transactions. … Everything resolves to small little—seconds minutes and hours, rather than the long-term commitments that yield a great and growing economy.

How do we get a better, more prosperous economy? Live better, more civilized lives. Simple, but not easy.

I always like something hopeful, and Gilder had some positive, hopeful things to say about getting things turned around. Robinson quotes him again from the book: “An economy is not a process that is changeable only over generations. It can revive as quickly as minds and policies can change.”

The economy, Gilder believes, can turn practically on a dime—as soon as the policies change. I think he’s right. We saw that turnaround (over about two years, to get new budgets in place) when Reagan put in free-market policies following the malaise Jimmy Carter tried to convince us was a permanent new normal. So, as soon as we get rid of Obamacare, confiscatory taxes, income distribution from producers to able-bodied non-producers, and skyrocketing public debt—as soon as the policies change, recovery begins. Creative, hard workers are bound to succeed when roadblocks are moved out of the way.

However, the way to get the policy change is to get the people to believe and act differently than they have been doing. Gilder said,

In Men and Marriage I predicted that if the family collapsed the way it seemed to be doing, in the case of the inner city, that it would take a welfare state to care for the women and children and a police state to take care of the boys…. This society depends on a man and a woman taking care of children. And now we have a third of black young men either in jail or on probation or on the lam. This is the harvest of liberalism.

The culture problems are serious, and slower to respond to change, because, unlike economics, generations are set on a path that’s hard to correct. But policies are to blame, so change to appropriate policies can lead to positive changes in society.

I think, because the political, economic, and civilization worlds interrelate, you can’t really get anywhere without the right kind of living. But Gilder is hopeful that, because economics is easier to affect, mainly by changing political policy, that is a starting point. Make those changes. They require honesty, thrift, rule of law, consistency, family strength, and other things required of us in the Ten Commandments. So put those policies in place, and we're on the path to a recovery of civilization as well.

I say we give it a try.