Los Gatos, CA, United States | Member Since 2000
It's a novel and important view of economics.
The revelation that all prior economic theory is too mechanistic.
Please...this is non-fiction.
Poetry. That’s how a friend once described George Gilder’s Wealth and Poverty; he was right. Well, so too is Knowledge and Power. I have just finished the hardback and have ordered an audio version as well because reading wasn’t enough. Knowledge and Power is a fresh and insightful view of economics. In the last decade, I read perhaps a dozen books on economics, but still remained uncomfortable with the topic. Relationships among spending, saving, inflation, currency values, regulation, productivity, trade, tariffs, subsidies, taxes, and more were confusing in the extreme. Knowledge and Power is a giant step in the clarification of what until now seemed an intractable topic.
Classical economics, whether in the Keynesian variety or the supply-side variety, builds models of economic systems from a mechanistic point of view. That is, it tries to build systems that interact with humans, but for which the human is not an integral part of the system. Economics before Knowledge and Power had the equivalent of a Newtonian perspective: it was believed possible to construct a closed-system model that could predict behavior of humans interacting with the system and responding to incentives. Past economic models have treated capitalism as an incentive system, but in reality capitalism is an information system. An economy is a vast information system in which knowledge is distributed among its human actors. In capitalist systems, knowledge and power are together in the individual; in socialist systems knowledge still resides in individuals, but power is vested a hierarchy with no access to the knowledge. Knowledge and Power shows that information and the human, and specifically the entrepreneur, are central to any economic model.
Further, in Knowledge and Power George Gilder applies a deep understanding of communication theory to economics. Economic systems, in an analogy to communication systems, can be divided into content and conduit; that is, divided into the information or knowledge (content) and the means for delivery (carrier or conduit). The conduit is the transport mechanism; it has to be predictable and reliable for the most efficient transfer of content. If the conduit is noisy, unreliable, or if its function varies with time, then its ability to transport content degrades. For economic systems, conduit includes such things as stable currency, property rights, modest taxes, and rule of law. The content is the exchange of information and goods. If the conduit elements of the system aren’t reliable, predictable, and stable, then the flow information and goods is degraded or even perverted. Valuable human intelligence (the ultimate resource) is diverted to compensate for or even to exploit noise in the conduit. People choose careers in currency trading, regulatory agencies, tax consulting, government, and law instead of science, engineering, and business and we are all poorer as a result.
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