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Knowledge and Power: The Information Theory of Capitalism and How it is Revolutionizing our World
Ronald Reagan’s most-quoted living author—George Gilder—is back with an all-new paradigm-shifting theory of capitalism that will upturn conventional wisdom, just when our economy desperately needs a new direction.
America’s struggling economy needs a better philosophy than the college student's "I can't be out of money, I still have checks in my checkbook!" We’ve tried a government spending spree, and we’ve learned it doesn’t work. Now is the time to rededicate our country to the pursuit of free market capitalism, before we’re buried under a mound of debt and unfunded entitlements. But how do we navigate between government spending that's too big to sustain and financial institutions that are "too big to fail?" In Knowledge and Power , George Gilder proposes a bold new theory on how capitalism produces wealth and how our economy can regain its vitality and its growth.
Gilder breaks away from the supply-side model of economics to present a new economic the epic conflict between the knowledge of entrepreneurs on one side, and the blunt power of government on the other. The knowledge of entrepreneurs, and their freedom to share and use that knowledge, are the sparks that light up the economy and set its gears in motion. The power of government to regulate, stifle, manipulate, subsidize or suppress knowledge and ideas is the inertia that slows those gears down, or keeps them from turning at all.
One of the twentieth century’s defining economic minds has returned with a new philosophy to carry us into the twenty-first. Knowledge and Power is a must-read for fiscal conservatives, business owners, CEOs, investors, and anyone interested in propelling America’s economy to future success.
America’s struggling economy needs a better philosophy than the college student's "I can't be out of money, I still have checks in my checkbook!" We’ve tried a government spending spree, and we’ve learned it doesn’t work. Now is the time to rededicate our country to the pursuit of free market capitalism, before we’re buried under a mound of debt and unfunded entitlements. But how do we navigate between government spending that's too big to sustain and financial institutions that are "too big to fail?" In Knowledge and Power , George Gilder proposes a bold new theory on how capitalism produces wealth and how our economy can regain its vitality and its growth.
Gilder breaks away from the supply-side model of economics to present a new economic the epic conflict between the knowledge of entrepreneurs on one side, and the blunt power of government on the other. The knowledge of entrepreneurs, and their freedom to share and use that knowledge, are the sparks that light up the economy and set its gears in motion. The power of government to regulate, stifle, manipulate, subsidize or suppress knowledge and ideas is the inertia that slows those gears down, or keeps them from turning at all.
One of the twentieth century’s defining economic minds has returned with a new philosophy to carry us into the twenty-first. Knowledge and Power is a must-read for fiscal conservatives, business owners, CEOs, investors, and anyone interested in propelling America’s economy to future success.
400 pages, Hardcover
First published January 1, 2013
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Displaying 1 - 30 of 73 reviews
August 3, 2013
This is a hard book to review because it seems to be two books at once.
The first book wishes to define, explain, and demonstrate how Information Theory works and may be applied to economics moving forward. The author appears to recognize Market Fundamentalism/The Austrian School is a broken tool and that something new is needed.
Mr. Gilder has limited success here. His explanation of Information Theory is a little on the nebulous side and its application to economics appears almost metaphysical at times -- functioning almost as a quasi-mystical activity.
The present reader was left bemused by this, more than irritated.
The second book Mr. Gilder wrote seems almost indefensible. This book is concerned with the spewing of as much bile as is possible at those whose ideolog[y/ies] do not fall in sync with this own. At times he reads more a Fox News guest talking head. This book begins 13% [Kindle Edition] in to the book with: "Obama's hope-and-change Marxism. Not long after this the Environmentalists come in for an attack, and the author repeatedly returns to them: "The factitious and febrile campaign against global warming is only the latest binge of self-abuse among the children of prosperity." Here's a favorite: "Socialism in all its forms...is in practice a conspiracy of the greedy to exploit the productive."
And the hits just keep on coming.
Some of his statements this reviewer agrees with; some he does not; some he does -- partially.
The point is not whether one agrees or disagrees with the observations/reasoning but that the manner in which these are made are combative or, at worst, incendiary.
This could have been a great analysis and theoretically forward looking book...instead it has fallen into mysticism and polemic.
Neutral Recommendation
The first book wishes to define, explain, and demonstrate how Information Theory works and may be applied to economics moving forward. The author appears to recognize Market Fundamentalism/The Austrian School is a broken tool and that something new is needed.
Mr. Gilder has limited success here. His explanation of Information Theory is a little on the nebulous side and its application to economics appears almost metaphysical at times -- functioning almost as a quasi-mystical activity.
The present reader was left bemused by this, more than irritated.
The second book Mr. Gilder wrote seems almost indefensible. This book is concerned with the spewing of as much bile as is possible at those whose ideolog[y/ies] do not fall in sync with this own. At times he reads more a Fox News guest talking head. This book begins 13% [Kindle Edition] in to the book with: "Obama's hope-and-change Marxism. Not long after this the Environmentalists come in for an attack, and the author repeatedly returns to them: "The factitious and febrile campaign against global warming is only the latest binge of self-abuse among the children of prosperity." Here's a favorite: "Socialism in all its forms...is in practice a conspiracy of the greedy to exploit the productive."
And the hits just keep on coming.
Some of his statements this reviewer agrees with; some he does not; some he does -- partially.
The point is not whether one agrees or disagrees with the observations/reasoning but that the manner in which these are made are combative or, at worst, incendiary.
This could have been a great analysis and theoretically forward looking book...instead it has fallen into mysticism and polemic.
Neutral Recommendation
July 30, 2013
A caveat: my review is based on only a partial reading of the book. Wasn't worth finishing.
I went into this book looking forward to Gilder's ideas about the relationship between information and economics. Having read some of his stuff in the 90s, I was usually impressed by his straddling of the worlds of economics and high tech. The idea that the surprise of innovation drives economic growth, which is the main message of the book, was one that on the surface resonated with me.
However, this book was a disappointment. I suppose the Rush Limbaugh endorsement on the back cover should have been a warning. Not because of the ideas, because I like to have my assumptions questioned, but because the level of discourse in the book seemed closer to talk radio than an intellectual discussion. He takes Claude Shannon's work and terminology regarding information and applies it to economics, but IMHO it felt very forced.
In this book Gilder does a lot of hand-waving and name-dropping (of people, of tech, and of scientific theories), and too often feels the need to toss in tidbits about what a smart guy he is. It felt like he had a worldview that he was fitting a theory into and not vice versa. In short, this book read more like something from a policy wonk and a economist.
As a counter-example, Nicholas Nassim-Taleb is wildly self-confident and totally obnoxious at times, but I find that his writing focuses on his ideas and theories, getting into them deeply enough that you can follow a trail if you are interested in questioning his ideas.
I went into this book looking forward to Gilder's ideas about the relationship between information and economics. Having read some of his stuff in the 90s, I was usually impressed by his straddling of the worlds of economics and high tech. The idea that the surprise of innovation drives economic growth, which is the main message of the book, was one that on the surface resonated with me.
However, this book was a disappointment. I suppose the Rush Limbaugh endorsement on the back cover should have been a warning. Not because of the ideas, because I like to have my assumptions questioned, but because the level of discourse in the book seemed closer to talk radio than an intellectual discussion. He takes Claude Shannon's work and terminology regarding information and applies it to economics, but IMHO it felt very forced.
In this book Gilder does a lot of hand-waving and name-dropping (of people, of tech, and of scientific theories), and too often feels the need to toss in tidbits about what a smart guy he is. It felt like he had a worldview that he was fitting a theory into and not vice versa. In short, this book read more like something from a policy wonk and a economist.
As a counter-example, Nicholas Nassim-Taleb is wildly self-confident and totally obnoxious at times, but I find that his writing focuses on his ideas and theories, getting into them deeply enough that you can follow a trail if you are interested in questioning his ideas.
August 4, 2013
I just finished reading George Gilder's new book, Knowledge and Power (published by Regnery), which won this year's Leonard E. Read Book Award at www.freedomfest.com. I consider Knowledge and Power a revolutionary work in the tradition of Hayek’s famous essay ‘The Use of Knowledge in Society’ and Thomas Sowell’s influential book Knowledge and Decisions. Gilder makes the argument that decision-makers must reject the deterministic/mechanistic systems of human behavior and build their policies and economic models on the concepts of human creativity, free will and the unexpected.” His entire book is built around his thesis that “the freer an economy is, the more this human diversity of knowledge will be manifested….Capitalism is not chiefly an incentive system but an information system.” Of course, I'm also pleased that he cites my own work on the misgivings of GDP. -- Mark Skousen
December 7, 2013
One or two strong ideas were entirely spoiled by, what I can only describe as, a massive avalanche of partisan bullsh*t.
Gilders core new insight is that capitalism is very similar to data transmission. The infrastructure (government, regulation, monetary policy) playing the roll of the wire and the actual execution, innovation, and well... business playing the roll of the data. It's actually a pretty good idea... but he seems to have confused a useful metaphor, one that can provide hints on how things might work and what choices should be made, for an actual exact mechanism, one that dictates policy absolutely.
A second strong idea, though I suspect not a new one for him, Is that the massive wealth imbalance isn't actually so horrible because almost all of that wealth is invested. It's not as if bill gates is sitting on hundreds of billions of bags of rice and we are all starving. His "wealth" is more of a representation of his earned power in guiding an company, and through that an economy. It's not a flawless idea, but it's one with some merit
The absurdities, however, abound.
Gilder makes it clear that though he loves both technology and engineering, he thinks that all pure research outside of information theory is entirely wasted. He seems oblivious to the fact that most of the technology he so loves is enabled by discoveries coming from pure research, often within his lifetime. He is more dramatically and vehemently anti-science than any author I have read to date, casually dismissing any and every claim that he dislikes regardless of the level of consensus regarding it. This came to, an absolute absurdity when in chapter 7 he literally, and specifically calls out and denies the second law of thermodynamics. I don't mean to say "he says something that would violate the second law of thermodynamics", but rather that he says "The second law of thermodynamics is bunk, and does not exists".
His casual dismissal of any science he disagrees with is made all the more frustrating by his inclusion of any science that happens to support the policies or opinions that he likes, or for that matter that he can misinterpret as such. The book is coated in a thick veneer of "scientism" that just about anyone with a science/engineering background will see for what it is.
He has several assumptions that guide much or most of his thought throughout the book, which he doesn't bother to defend at all. These range from quite explicit (Gilder believes global warming is patently false in every way, and possibly some sort of left wing conspiracy) to the implicit ( The growth of the economy is the greatest, and possibly the only good. Because people act in it freely all other needs are satisfactorily addressed by it ) to the subtle ( God is the source of all good creations, all wealth comes from a special divine spark in individual heroic entrepreneurs)
Perhaps more frustrating than his dubious ground-rule-assumptions, are his policy suggestions which are always straight down the line U.S. republican, even when that is not the only outcome of his economic model... and in one case when they actively disagree with it. The non sequitur of this sort are both baffling and infuriating.
He frequently quotes other popular economics and science books, (about 3/4s of which I have read) I can say that for the first 2/3rds of the book, he appears to have miss-understood most of what he has read (though I can only be sure regarding the books where we have overlap, and with the strong exception being the book "the information" which he seems to have understood quite well) In the last 1/3 of the book he casually reviews several other books, and states his points of agreement and disagreement. Interestingly in this section he seems to have much stronger comprehension of the books he is siting, with thoughtful and reasonably coherent disagreements.
In short, I feel like with this book Gilder has completely discredited himself as a rational and coherent thinker. Read at your own risk.
Gilders core new insight is that capitalism is very similar to data transmission. The infrastructure (government, regulation, monetary policy) playing the roll of the wire and the actual execution, innovation, and well... business playing the roll of the data. It's actually a pretty good idea... but he seems to have confused a useful metaphor, one that can provide hints on how things might work and what choices should be made, for an actual exact mechanism, one that dictates policy absolutely.
A second strong idea, though I suspect not a new one for him, Is that the massive wealth imbalance isn't actually so horrible because almost all of that wealth is invested. It's not as if bill gates is sitting on hundreds of billions of bags of rice and we are all starving. His "wealth" is more of a representation of his earned power in guiding an company, and through that an economy. It's not a flawless idea, but it's one with some merit
The absurdities, however, abound.
Gilder makes it clear that though he loves both technology and engineering, he thinks that all pure research outside of information theory is entirely wasted. He seems oblivious to the fact that most of the technology he so loves is enabled by discoveries coming from pure research, often within his lifetime. He is more dramatically and vehemently anti-science than any author I have read to date, casually dismissing any and every claim that he dislikes regardless of the level of consensus regarding it. This came to, an absolute absurdity when in chapter 7 he literally, and specifically calls out and denies the second law of thermodynamics. I don't mean to say "he says something that would violate the second law of thermodynamics", but rather that he says "The second law of thermodynamics is bunk, and does not exists".
His casual dismissal of any science he disagrees with is made all the more frustrating by his inclusion of any science that happens to support the policies or opinions that he likes, or for that matter that he can misinterpret as such. The book is coated in a thick veneer of "scientism" that just about anyone with a science/engineering background will see for what it is.
He has several assumptions that guide much or most of his thought throughout the book, which he doesn't bother to defend at all. These range from quite explicit (Gilder believes global warming is patently false in every way, and possibly some sort of left wing conspiracy) to the implicit ( The growth of the economy is the greatest, and possibly the only good. Because people act in it freely all other needs are satisfactorily addressed by it ) to the subtle ( God is the source of all good creations, all wealth comes from a special divine spark in individual heroic entrepreneurs)
Perhaps more frustrating than his dubious ground-rule-assumptions, are his policy suggestions which are always straight down the line U.S. republican, even when that is not the only outcome of his economic model... and in one case when they actively disagree with it. The non sequitur of this sort are both baffling and infuriating.
He frequently quotes other popular economics and science books, (about 3/4s of which I have read) I can say that for the first 2/3rds of the book, he appears to have miss-understood most of what he has read (though I can only be sure regarding the books where we have overlap, and with the strong exception being the book "the information" which he seems to have understood quite well) In the last 1/3 of the book he casually reviews several other books, and states his points of agreement and disagreement. Interestingly in this section he seems to have much stronger comprehension of the books he is siting, with thoughtful and reasonably coherent disagreements.
In short, I feel like with this book Gilder has completely discredited himself as a rational and coherent thinker. Read at your own risk.
June 19, 2019
Very good. Interesting stuff, though I should have read his "Wealth and Poverty" first
November 29, 2013
The fundamental worldview that governs this book is seriously misguided, but given the amount of influence the Discovery Institute played in its creation, I'm not terribly surprised.
Nevertheless, the dubiousness of Gilder's underlying metaphysics does not constitute a rebuttal against his more specific claims, which pose a variation of the constrained-downside/unconstrained-upside that Taleb calls "barbell" logic in Antifragile. This is a theory of capitalism by way of learning curves, in opposition to theories centered around equal exchange or rent collection.
This book was most enlightening in presenting an underling logic that unites seemingly-at-odds political commitments: reduced government *and* increased funding to the military; against the Affordable Care Act *and* for Social Security & Medicare; for traditional families and religious values *and* against taxation on the wealthy and estate taxes; and even political support for Israel based upon its unique value to the world.
It's pretty clear that many, if not most, of these commitments are more post hoc rationalizations than derivatives from first principles, but the fact that the links between these commitments and the theory Gilder puts forward are at least *plausible* is remarkable.
I will be spending some more time on Gilder's discussion of supply-side economics; it is here that he is most lucid, and most deserving of attention. As a result I will withhold comment as I feel myself ill-equipped to judge.
On the other hand, his attempts at delving into science and philosophy are misguided and error-prone, and are best passed-over (including the majority of Part 1). He shows early-on an understanding of the distinction between entropy in physics and entropy in information theory, but then proceeds to use the terms near-interchangeably throughout the remainder of the book.
Above all, Gilder is a priori resistant to any non-teleological explanations, of anything. This does not make his (very teleological) information theory of capitalism *wrong* necessarily, but it does make it scale-dependent, rather than scale-invariant, as Gilder hopes.
Nevertheless, the dubiousness of Gilder's underlying metaphysics does not constitute a rebuttal against his more specific claims, which pose a variation of the constrained-downside/unconstrained-upside that Taleb calls "barbell" logic in Antifragile. This is a theory of capitalism by way of learning curves, in opposition to theories centered around equal exchange or rent collection.
This book was most enlightening in presenting an underling logic that unites seemingly-at-odds political commitments: reduced government *and* increased funding to the military; against the Affordable Care Act *and* for Social Security & Medicare; for traditional families and religious values *and* against taxation on the wealthy and estate taxes; and even political support for Israel based upon its unique value to the world.
It's pretty clear that many, if not most, of these commitments are more post hoc rationalizations than derivatives from first principles, but the fact that the links between these commitments and the theory Gilder puts forward are at least *plausible* is remarkable.
I will be spending some more time on Gilder's discussion of supply-side economics; it is here that he is most lucid, and most deserving of attention. As a result I will withhold comment as I feel myself ill-equipped to judge.
On the other hand, his attempts at delving into science and philosophy are misguided and error-prone, and are best passed-over (including the majority of Part 1). He shows early-on an understanding of the distinction between entropy in physics and entropy in information theory, but then proceeds to use the terms near-interchangeably throughout the remainder of the book.
Above all, Gilder is a priori resistant to any non-teleological explanations, of anything. This does not make his (very teleological) information theory of capitalism *wrong* necessarily, but it does make it scale-dependent, rather than scale-invariant, as Gilder hopes.
February 3, 2014
This book had a promising start. Gilder's premise is that entrepreneurial creativity is responsible for 80% of all growth in a functioning capitalist economy. However he doesn't do the work of proving that theory, which would have been interesting. Instead he tries to shoehorn the whole of economics into information theory. The carrier is the government, regulatory, and social structure that carries the information, namely the creation of surprises (i.e. entrepreneurial creativity). That goes exactly nowhere because, unlike information theory applied to traditional communications, you can't put hard and fast figures on the content and noise components that information theory work with. Without hard numbers it's no more than an interesting analogy. Not very useful.
Then Gilder goes off on a complete rant about everything green or liberal. He's a total climate change denier, and completely down on alternate energy. Interesting topics, but I don't want to read his unsupported opinions. I want analysis, facts, figures, argument, not just a tirade. Mr. Gilder loses all credibility when he says that nuclear energy is the cheapest available energy today, costing only $.02 per kwh. That figure is pure fantasy. Energy cost over the life cycle of a new nuclear plant in America would be 20 to 40 times that much.
This book was a waste of time and money.
Then Gilder goes off on a complete rant about everything green or liberal. He's a total climate change denier, and completely down on alternate energy. Interesting topics, but I don't want to read his unsupported opinions. I want analysis, facts, figures, argument, not just a tirade. Mr. Gilder loses all credibility when he says that nuclear energy is the cheapest available energy today, costing only $.02 per kwh. That figure is pure fantasy. Energy cost over the life cycle of a new nuclear plant in America would be 20 to 40 times that much.
This book was a waste of time and money.
April 12, 2014
I don't believe the author has an actual understanding of information theory. This book reads like the author read an overview on the topic and is now overreaching to try and apply information theory concepts to his own economic and political philosophy.
July 20, 2013
I am going to be reviewing this further on Mablog, but this was simply a gorgeous book.
August 31, 2020
This one was way better than wealth and poverty. Represents a new defense of capiltalism based on information theory. Also covers the recession and bail outs of 2008.
October 3, 2021
I previously read Gilder's "Life After Google," which often went over my head. Although this book occasionally went over my head, too, I found it easier to follow. In the first half of the book, Gilder explains information theory, which includes a few key concepts. One important concept is that information is surprise. It is always something unexpected. Another important concept is that information arises out of seeming chaos or "entropy," not out of order. Order is the enemy of information because there is no "surprise" in order. Even so, information requires a stable channel through which to travel, and the channel itself must have order and be stable. Gilder gives some examples of how information theory revolutionized technology, but he later applies this to economics. Gilder thinks that the backbone of the economy is entrepreneurs, and true innovation always arises out of entropy. The healthiest economies are those in which money (the channel) is low-entropy, and investments are high-entropy. But socialist policies reverse this.
Gilder also has some wonderful stuff toward the end about how reductive materialism and rational determinism have taken over physics and biology and as a result have prevented significant innovation in these fields. Essentially, these scientists assume everything is just one big (ordered) machine, ignoring high-entropy factors like human consciousness. The problem with this is they are trying to create information out of order instead of entropy. He makes an interesting observation about how Richard Feynman used to subscribe to this kind of physical reductionism, but late in his life he recognized that this was a dead end and gave it up.
As I was reading this, I kept coming back to Nassim Taleb of "black swan" fame. He argues something very similar. To my surprise and joy, Gilder devotes a large section to Taleb. Interestingly, he disapproves of his book "The Black Swan" but highly approves of his later book "Antifragile," both of which I've read and thoroughly enjoyed.
I also enjoyed the bit at the end where he speaks of capitalism being born of love and giving. A capitalist first invests his money and resources in a high-entropy system, uncertain of whether it will pay off. He begins with giving and taking risks with hopes that out of this high-entropy investment will come valuable information.
This is quite a sophisticated book but is filled with lots of paradigm-shifting stuff and is worth the effort to read.
Gilder also has some wonderful stuff toward the end about how reductive materialism and rational determinism have taken over physics and biology and as a result have prevented significant innovation in these fields. Essentially, these scientists assume everything is just one big (ordered) machine, ignoring high-entropy factors like human consciousness. The problem with this is they are trying to create information out of order instead of entropy. He makes an interesting observation about how Richard Feynman used to subscribe to this kind of physical reductionism, but late in his life he recognized that this was a dead end and gave it up.
As I was reading this, I kept coming back to Nassim Taleb of "black swan" fame. He argues something very similar. To my surprise and joy, Gilder devotes a large section to Taleb. Interestingly, he disapproves of his book "The Black Swan" but highly approves of his later book "Antifragile," both of which I've read and thoroughly enjoyed.
I also enjoyed the bit at the end where he speaks of capitalism being born of love and giving. A capitalist first invests his money and resources in a high-entropy system, uncertain of whether it will pay off. He begins with giving and taking risks with hopes that out of this high-entropy investment will come valuable information.
This is quite a sophisticated book but is filled with lots of paradigm-shifting stuff and is worth the effort to read.
September 8, 2013
I've always been fascinated by George Gilder. At at least three times in my life he has written a book which caused me to rethink basic principles. The first two were Wealth and Poverty and Microcosm. The first was the substantive bible of the Supply Side revolution in economics. It did not make outlandish claims about how tax rate reductions would be always neutral (as Jude Wanniski seemed to do) but it did present a clear case (later affirmed by the results of the 1981 and 1986 tax acts) for reducing and simplifying the tax code. The second gave a compelling roadmap for much of the technological revolution we have lived with in the last three decades.
I need to admit that I served on a national board with Gilder in the 1970s. One funny story should explain - this was well before the publication of W&P. We had a Ripon Society board meeting in New York and on Friday night George called and said he would have to miss dinner because he had gotten on the plane wherever he was and got so absorbed in his work that he failed to get off when the plane landed in NYC. He promised he would be there on Saturday. Mid-day Saturday he called from another location and said it had happened again and so he was in yet another city but not NYC. He never did get to that board meeting.
Several of Gilder's books start with a hero. So in Microcosm he spent a lot of time on Carter Mead. Mead was at Caltech and Gilder did a superb job of explaining Mead's thoughts on how things would keep getting smaller and faster. In his latest book, Knowledge and Power, he latches on to Claude Shannon - the Bell and MIT engineer who built a framework for information theory.
The book is divided into three sections - one on theory where he establishes that communications systems including economic systems can be divided into content (knowledge and information) and power (the conduit). Content is messy and unpredictable; the conduit is opaque but predictable. For conduit to be successful in economic transactions one needs to have things like property rights, stable exchange rates, etc. In economics it is an old argument advanced by many of the Austrian economists. You do not need to know why a dollar can be exchanged for something but you do need to have some certainty that the value of the dollar is not subject to constant negotiation. Hayek raised similar points in his writing on knowledge. I found this section dense, but worth the slog.
The second section of the book then applies the theory to real world examples. Mess up the conduit with inordinate regulation or other distortions and the knowledge benefits soon become less robust. The second section is almost a practical implications discussion of the theory section. It is quick and simple and I think mostly on target.
The third section has a series of responses those that might be in opposition to Gilder's thoughts on the relationships between knowledge and power. Four are presented below as examples.
He begins by taking on a group of economists that do not understand the power of entrepreneurial spirits. He chooses David Stockman and Paul Samuelson for special consideration. Ultimately, economics is not just about transactions but about the ability to be what Smith called the "bull headed brewer" going forward with an idea despite what others think. But this kind of thing cannot be planned. After WWII Paul Samuelson and others in his camp argued that the demobilization would present us with a pretty severe downturn. In the 1946 elections, Congress switched hands. In a very short period of time the percentage of GDP devoted to the federal sector went from 46% to 14%. But growth happened. He seems a lot less concerned about debt to GDP ratios and even deficits, if those things allow the entrepreneur to thrive. As Hayek argued in the Fatal Conceit, planners can never get it right because they cannot understand the "knowledge of time and place" that each of us carries on our own. He does a good brief review of the tenuous position of American tax policy pointing out that ours is the highest corporate tax structure in the world. He pokes fun at California and its tax follies. Neither is productive for encouraging explorations into entrepreneurial growth.
A somewhat opposite point of view was first presented in two books by Nicholas Taleb (Fooled by Randomness and The Black Swan). Gilder argues that Taleb is interesting but ultimately wrong in his conclusion that unexpected and serious events will come in increasing frequency. Included in Gilder's critique are the "random walk" theorists that argue it is impossible to beat the market. Inherent in markets is the ability of a person who understands a detail that others do not - to exploit that knowledge - it is certainly present in the process of innovation and likely as present in the financial markets.
The third group might be called the apostles of the machine. He reviews the writings of George Dyson and Ray Kurzweil (and a couple of others like Kevin Kelly). Several years ago Kurzweil wrote a long book called the Singularity which argues that computers will somehow become human or that humans will become anthro-robotic. He suggests that computer intelligence will soon dwarf human intelligence. Gilder rejects the notion in part because one cannot separate intelligence and creativity. One of my favorite lines in the book is his dismissal of much of modern science which he suggests has devolved into "politics, panics and cartels."
Arnold Kling and Peter Theil are then discussed. Kling wrote a book called the Great Stagnation which was written about in this blog about the time it came out. It is a pessimistic tract that posits that we've taken all the low hanging innovation fruit off the table and will be stuck with low economic growth in the future. Theil takes a slightly different tack to the argument by positing that big things (like teleportation) are not going to happen. Gilder, ever the optimist, says neither idea is correct. We do not know where the next good idea will come from - but he asserts unless the conduit level gets too oppressive (from regulation or unsound tax policy) that things will happen. He points out that the risk of stagnation is always present - witness that the US in 2010 began to export talent back to countries like Israel - where the entrepreneurial spirit is in better shape.
I originally got the book as an Audible presentation. But I was so intrigued with it that I also got the electronic version from Amazon. Forbes has a review of it that calls it his best work, and I think that is probably true. The Forbes review quotes one of Gilder's conclusions - “The ultimate strength and crucial weakness of both capitalism and democracy are their reliance on individual creation. But there is no alternative except mediocrity and stagnation. Demand-based systems can never flourish in a world where events are shaped by millions of human beings, acting unknowably, in fathomless interplay and complexity, in the darkness of time.”
I need to admit that I served on a national board with Gilder in the 1970s. One funny story should explain - this was well before the publication of W&P. We had a Ripon Society board meeting in New York and on Friday night George called and said he would have to miss dinner because he had gotten on the plane wherever he was and got so absorbed in his work that he failed to get off when the plane landed in NYC. He promised he would be there on Saturday. Mid-day Saturday he called from another location and said it had happened again and so he was in yet another city but not NYC. He never did get to that board meeting.
Several of Gilder's books start with a hero. So in Microcosm he spent a lot of time on Carter Mead. Mead was at Caltech and Gilder did a superb job of explaining Mead's thoughts on how things would keep getting smaller and faster. In his latest book, Knowledge and Power, he latches on to Claude Shannon - the Bell and MIT engineer who built a framework for information theory.
The book is divided into three sections - one on theory where he establishes that communications systems including economic systems can be divided into content (knowledge and information) and power (the conduit). Content is messy and unpredictable; the conduit is opaque but predictable. For conduit to be successful in economic transactions one needs to have things like property rights, stable exchange rates, etc. In economics it is an old argument advanced by many of the Austrian economists. You do not need to know why a dollar can be exchanged for something but you do need to have some certainty that the value of the dollar is not subject to constant negotiation. Hayek raised similar points in his writing on knowledge. I found this section dense, but worth the slog.
The second section of the book then applies the theory to real world examples. Mess up the conduit with inordinate regulation or other distortions and the knowledge benefits soon become less robust. The second section is almost a practical implications discussion of the theory section. It is quick and simple and I think mostly on target.
The third section has a series of responses those that might be in opposition to Gilder's thoughts on the relationships between knowledge and power. Four are presented below as examples.
He begins by taking on a group of economists that do not understand the power of entrepreneurial spirits. He chooses David Stockman and Paul Samuelson for special consideration. Ultimately, economics is not just about transactions but about the ability to be what Smith called the "bull headed brewer" going forward with an idea despite what others think. But this kind of thing cannot be planned. After WWII Paul Samuelson and others in his camp argued that the demobilization would present us with a pretty severe downturn. In the 1946 elections, Congress switched hands. In a very short period of time the percentage of GDP devoted to the federal sector went from 46% to 14%. But growth happened. He seems a lot less concerned about debt to GDP ratios and even deficits, if those things allow the entrepreneur to thrive. As Hayek argued in the Fatal Conceit, planners can never get it right because they cannot understand the "knowledge of time and place" that each of us carries on our own. He does a good brief review of the tenuous position of American tax policy pointing out that ours is the highest corporate tax structure in the world. He pokes fun at California and its tax follies. Neither is productive for encouraging explorations into entrepreneurial growth.
A somewhat opposite point of view was first presented in two books by Nicholas Taleb (Fooled by Randomness and The Black Swan). Gilder argues that Taleb is interesting but ultimately wrong in his conclusion that unexpected and serious events will come in increasing frequency. Included in Gilder's critique are the "random walk" theorists that argue it is impossible to beat the market. Inherent in markets is the ability of a person who understands a detail that others do not - to exploit that knowledge - it is certainly present in the process of innovation and likely as present in the financial markets.
The third group might be called the apostles of the machine. He reviews the writings of George Dyson and Ray Kurzweil (and a couple of others like Kevin Kelly). Several years ago Kurzweil wrote a long book called the Singularity which argues that computers will somehow become human or that humans will become anthro-robotic. He suggests that computer intelligence will soon dwarf human intelligence. Gilder rejects the notion in part because one cannot separate intelligence and creativity. One of my favorite lines in the book is his dismissal of much of modern science which he suggests has devolved into "politics, panics and cartels."
Arnold Kling and Peter Theil are then discussed. Kling wrote a book called the Great Stagnation which was written about in this blog about the time it came out. It is a pessimistic tract that posits that we've taken all the low hanging innovation fruit off the table and will be stuck with low economic growth in the future. Theil takes a slightly different tack to the argument by positing that big things (like teleportation) are not going to happen. Gilder, ever the optimist, says neither idea is correct. We do not know where the next good idea will come from - but he asserts unless the conduit level gets too oppressive (from regulation or unsound tax policy) that things will happen. He points out that the risk of stagnation is always present - witness that the US in 2010 began to export talent back to countries like Israel - where the entrepreneurial spirit is in better shape.
I originally got the book as an Audible presentation. But I was so intrigued with it that I also got the electronic version from Amazon. Forbes has a review of it that calls it his best work, and I think that is probably true. The Forbes review quotes one of Gilder's conclusions - “The ultimate strength and crucial weakness of both capitalism and democracy are their reliance on individual creation. But there is no alternative except mediocrity and stagnation. Demand-based systems can never flourish in a world where events are shaped by millions of human beings, acting unknowably, in fathomless interplay and complexity, in the darkness of time.”
September 28, 2020
As a long time (former) listener of Freakonomics, his criticism of Steven Levitt in the first page of the book was gripping. Wait. It doesn't stop there. He picks on everybody from modern technologists: Steven Johnson to Kevin Kelly, to more classific figures such as Adm Smith. He says every one of them fails because they look at economy/technology too deterministically ignoring the entrepreneurs making it dynamic. It would have been nice, if he's given us a tool to descirbe the social phenomenon that lets us compare collective individual skills of American entrepreneurs vs Chinese for example. Nevertheless, I certainly enjoyed his style of writing to battle the ideas with those mentioned.
His subsequent idea is that information is about a surprise instead of a pattern, which he's borrowed it form the mathematician Claude Shannon. That surprise is what we call creativity. That surprise is what drives economy forward.
I don't think I can think abstractly enough to criticize that viewpoint yet. My initial thought is entrepreneurs start from pattern matching so he can make money from his hypothesis? So to him, it is a pattern finding even if it might come out as a surprise to a third party. And I'm not sure if a pattern is strong enough words to replace traditional idea of information. Our brain tries to find patterns in a chaotic world. Should we call that information seeking? Our brains are not looking for a surprise (well I guess sometime). I guess in his mind, we are just pattern finding animals. Hm, overall his proposition seems just extreme. Looks like he's inflating the word information with news. News is no doubt about surprises. Information seems to capture more to me. And they are not the same thing. He is reducing the word to fit into this particular narrative.
About his political view, I do appreciate the diversity of opinions he's contributing. You can tell from the amount of criticism this book's getting in reviews. Coincidentally, I just finished reading Good Economics for Hard Times by Abhijit whose comments were full of praises even thought that contained quite a strong socialism flavor. George's type of libertarian book is extremely unpopular today especially in the academic community. So his opinion was refreshing. Here's one interesting comparison I found: Abhijit has allocated most of his criticism towards tax cut as it changes nothing in people's motivation. And George says taxing the riches is nothing to do with motivation. It is the trust in capitalists that know better where to invest money than the government does. I think both of these guys are extreme at the end of the day. But, given how unpopular George's side is, I need to actively seek out on his side of opinions.
I went on a rant a little. This book is definitely challenging and thought-provoking.
His subsequent idea is that information is about a surprise instead of a pattern, which he's borrowed it form the mathematician Claude Shannon. That surprise is what we call creativity. That surprise is what drives economy forward.
I don't think I can think abstractly enough to criticize that viewpoint yet. My initial thought is entrepreneurs start from pattern matching so he can make money from his hypothesis? So to him, it is a pattern finding even if it might come out as a surprise to a third party. And I'm not sure if a pattern is strong enough words to replace traditional idea of information. Our brain tries to find patterns in a chaotic world. Should we call that information seeking? Our brains are not looking for a surprise (well I guess sometime). I guess in his mind, we are just pattern finding animals. Hm, overall his proposition seems just extreme. Looks like he's inflating the word information with news. News is no doubt about surprises. Information seems to capture more to me. And they are not the same thing. He is reducing the word to fit into this particular narrative.
About his political view, I do appreciate the diversity of opinions he's contributing. You can tell from the amount of criticism this book's getting in reviews. Coincidentally, I just finished reading Good Economics for Hard Times by Abhijit whose comments were full of praises even thought that contained quite a strong socialism flavor. George's type of libertarian book is extremely unpopular today especially in the academic community. So his opinion was refreshing. Here's one interesting comparison I found: Abhijit has allocated most of his criticism towards tax cut as it changes nothing in people's motivation. And George says taxing the riches is nothing to do with motivation. It is the trust in capitalists that know better where to invest money than the government does. I think both of these guys are extreme at the end of the day. But, given how unpopular George's side is, I need to actively seek out on his side of opinions.
I went on a rant a little. This book is definitely challenging and thought-provoking.
February 28, 2014
Knowledge and Power is one of the rare books that earns a five-star rating from me. It's not that the book was so well written, and it is not that it was so entertaining. The fact of the matter is that the book changed my outlook on economics.
Gilder presents the case for the economy of a nation being an information system. He doesn't say it is like an information system, but that it is an information system. And he goes on to then relate the importance of information to the economy and express how valuable information is to a business. He expresses how important the learning curve is to a business, gaining knowledge of what customers desire and how to meet needs. He also treats the creativity of entrepreneurs as the most important information in the system. What was eye-opening to me was that even a free-market economy without creativity will not bring prosperity – Adam Smith's unseen hand is not sufficient to create wealth.
If his understanding is correct, what worries even conservative politicians about government policy may not be worth attention or concern. What is most important is allowing businesses to be driven by the entrepreneurs whose ideas can bring success. Also important is allowing these creators to plow their earnings back into profitable ventures because they have learned how to succeed. In addition, not allowing businesses to fail keeps business leaders from learning from mistakes – it squelches that information.
There is a spiritual side to all of this, and that is that all the reductionism that tries to understand the world in terms of mechanistic laws or materialism inevitably fails because it fails to understand human freedom in the midst of the system, the information upon the medium. The element of surprise and human creativity tends to ruin all the oversimplifications that attempt a bottom-up explanation of how an economy works, how a society is organized, etc. Mankind in this book is elevated to his rightful position as being in the image and likeness of God. Like God, man has freedom and man can create, though man's efforts here are limited and flawed. To treat man as a machine is to misunderstood the world in which we live.
The biggest flaw in the book was that it seemed to be put together from other sources in a piece-meal fashion, which resulted in some redundancy and predictability. I would have rather read something that was a fresh presentation in orderly form of the application of information theory to society and economics. I also felt that the chapter near the end of the book that tried to equate capitalism with giving was a bit of a stretch and seemed more like propaganda than honest consideration of the relationships between suppliers and consumers.
I've always wanted to read something by George Gilder, and I'm only disappointed that I hadn't made the effort earlier. He has other gems that I hope to investigate in the future.
Gilder presents the case for the economy of a nation being an information system. He doesn't say it is like an information system, but that it is an information system. And he goes on to then relate the importance of information to the economy and express how valuable information is to a business. He expresses how important the learning curve is to a business, gaining knowledge of what customers desire and how to meet needs. He also treats the creativity of entrepreneurs as the most important information in the system. What was eye-opening to me was that even a free-market economy without creativity will not bring prosperity – Adam Smith's unseen hand is not sufficient to create wealth.
If his understanding is correct, what worries even conservative politicians about government policy may not be worth attention or concern. What is most important is allowing businesses to be driven by the entrepreneurs whose ideas can bring success. Also important is allowing these creators to plow their earnings back into profitable ventures because they have learned how to succeed. In addition, not allowing businesses to fail keeps business leaders from learning from mistakes – it squelches that information.
There is a spiritual side to all of this, and that is that all the reductionism that tries to understand the world in terms of mechanistic laws or materialism inevitably fails because it fails to understand human freedom in the midst of the system, the information upon the medium. The element of surprise and human creativity tends to ruin all the oversimplifications that attempt a bottom-up explanation of how an economy works, how a society is organized, etc. Mankind in this book is elevated to his rightful position as being in the image and likeness of God. Like God, man has freedom and man can create, though man's efforts here are limited and flawed. To treat man as a machine is to misunderstood the world in which we live.
The biggest flaw in the book was that it seemed to be put together from other sources in a piece-meal fashion, which resulted in some redundancy and predictability. I would have rather read something that was a fresh presentation in orderly form of the application of information theory to society and economics. I also felt that the chapter near the end of the book that tried to equate capitalism with giving was a bit of a stretch and seemed more like propaganda than honest consideration of the relationships between suppliers and consumers.
I've always wanted to read something by George Gilder, and I'm only disappointed that I hadn't made the effort earlier. He has other gems that I hope to investigate in the future.
June 3, 2014
The subtitle for Knowledge and Power by George Gilder is "The Information Theory of Capitalism and How it is Revolutionizing Our World." Unlike many book titles, this one gives the reader a good view of what they are going to get. Gilder, founder of the Discover Institute and famously (or infamously) called Ronald Reagan's most quoted living author, leaves no question of his political leanings.
Gilder's basic premise is that a market economy is, at its core, an information system. Information about allocation of resources and prices are what sustain or impede an economy, and the more information flow there is, the easier it is to properly allocate resources and set prices. A fundamental axiom of information theory is that new information is always a surprise, and a healthy economy needs to be full of economic surprises. The best way for that to happen, argues Gilder, is in a "high entropy" system.
Such a system is high on "noise" and low on "signal", but signal cannot be found without the noise. Put another way, there has to be a lot of experimentation, and with that a lot of failure, in order to produce a few successes. These successes are what we call growth, and the only thing that can prevent stagnation or recession. Lest we think that Gilder is promoting a highly inefficient system, he points out that even failures produce information. Whenever an entrepreneur tries something and fails, he informs the economy about something that doesn't work, allowing the next thing to be tried.
Gilder writes that governments, by design, are low entropy systems. They are big, operate on very long time scales, and have to appeal to a massive constituency. In a system like that failures are very expensive, and speed is not an option. Thus, low entropy in that changes are gradual (if ever) and retreating from an entrenched institution, whether successful or not, is extremely difficult.
The policy implications for all this is that for an economy to flourish it has to be free from the low entropy systems of government. Gilder argues that the role of government is to provide for basic infrastructure, support property rights, and maintain enough regulatory bureaucracy to keep the economic playing field level.
The book is well written and well argued, even if you don't agree with all of his conclusions. I found it to be a solid entry in modern economic books, even for an amateur like myself, and Gilder presents enough new ideas to keep the intellectual juices flowing.
Gilder's basic premise is that a market economy is, at its core, an information system. Information about allocation of resources and prices are what sustain or impede an economy, and the more information flow there is, the easier it is to properly allocate resources and set prices. A fundamental axiom of information theory is that new information is always a surprise, and a healthy economy needs to be full of economic surprises. The best way for that to happen, argues Gilder, is in a "high entropy" system.
Such a system is high on "noise" and low on "signal", but signal cannot be found without the noise. Put another way, there has to be a lot of experimentation, and with that a lot of failure, in order to produce a few successes. These successes are what we call growth, and the only thing that can prevent stagnation or recession. Lest we think that Gilder is promoting a highly inefficient system, he points out that even failures produce information. Whenever an entrepreneur tries something and fails, he informs the economy about something that doesn't work, allowing the next thing to be tried.
Gilder writes that governments, by design, are low entropy systems. They are big, operate on very long time scales, and have to appeal to a massive constituency. In a system like that failures are very expensive, and speed is not an option. Thus, low entropy in that changes are gradual (if ever) and retreating from an entrenched institution, whether successful or not, is extremely difficult.
The policy implications for all this is that for an economy to flourish it has to be free from the low entropy systems of government. Gilder argues that the role of government is to provide for basic infrastructure, support property rights, and maintain enough regulatory bureaucracy to keep the economic playing field level.
The book is well written and well argued, even if you don't agree with all of his conclusions. I found it to be a solid entry in modern economic books, even for an amateur like myself, and Gilder presents enough new ideas to keep the intellectual juices flowing.
May 28, 2020
I’m on a Gilder kick right now. This volume did not disappoint.
His points here, while extremely simple (and largely because they are extremely simple) have far reaching implications and applications.
There are about two layers of takeaways here, and as an aside, any book with more than one layer of takeaways goes into the “killer profound” pile. The first layer are those points that relate to practical/functional economics and/or governmental policy. The second layer, those outer limits, are in the realms of ontology, epistemology, philosophy, and eschatology. In other words, Gilder has written a book about economics with some clear principles that mean much in a lot of areas far beyond mere money.
That First Layer
Some of the simplest arguments in that first layer, if I understand Gilder’s points correctly, include: government regulation more often harmful than it is helpful, the national deficit is not our most pressing problem, and that taxes destroy production, and thus the economy as a whole. He’s done a good job of convincing me.
Additionally, Gilder makes a strong case that insider trading should be allowed (and even encouraged). He won me over on this point also.
But on to those broader takeaways…
The Outer Limits
Gilder’s thesis is that free-market capitalism is chiefly rooted in information rather than incentive. From here, he draws inferences all over the map, connecting information theory to capitalism and free markets. Along the way, some other things start to shine through. The following are, in my own words, some of those shining points of application that struck me personally. These points are a blend of what Gidler says and what I infer. I’ve not taken the time to sort out which is which, so just hang in there with me.
Parable Of Talents
Free-market capitalism is chiefly rooted in information rather than incentive. Its drivers, entrepreneurs, must act from generosity over and against greed. The successful entrepreneurs use of riches is courageous and curious reinvestment over and against consumptive depletion.
Here, Gilder strikes directly at the heart of both big government and socialism. An attempt on the part of government agents to redistribute the crop is a sure fire way to demolish the whole barn, and burn the field with it. The best course of action is to trust the people who have generated the wealth in the first place to steward it and produce more. A central fallacy of socialistic thought is the portrayal of all wealthy people as Scrooge McDucks swimming in their seas of gold, uncaring, unfeeling, and unwilling to share. The reality is starkly the opposite. Few are more selflessly generous than those wealthy entrepreneurs who have sacrificed much, at personal expense, in order to produce good for society and those they employ, while assuming upon themselves enormous amounts of responsibility and risk. These understand the stakes, and are the most logical agents to leave in control of the wealth they’ve generated.
At the end of the day, the greedy Scrooges who have no rights to the money they love so much are those trying to claw it away and re-invest it in programs and policies that will deplete it within a generation - or, as he’s known in scripture, the man who buried the talent. In case I wasn’t clear about that, I’m saying that in Jesus’ parable the good stewards are capitalists and the talent burier is a socialist. Gilder makes this point abundantly clearly, and well. I don’t feel any need to repeat all his reasoning in this review.
Now, I do feel in all this that Gilder seems to fail at giving homage where due to human depravity. Nonetheless, I still agree with his point that on a purely functional level, businessmen acting out of pure self-interest just don't get very far. There are operative principles that reward those who reinvest intelligently rather than revel indulgently.
I am in mind to write further on this from a Biblical standpoint. If I were to, it would probably be in the form of an article titled something like: Eschatological Entrepreneurism: An Applied Economics of the Parable of the Talents. The clickbait title would be more like Why the Kingdom of Christ Will Not Be An Egalitarian Socialism.
Limits
Ultimately, this book is truly about ontology and epistemology. The dedication page of the book has this quote:
The finale of the book is an attempt to display just where those limits lie. Gilder draws out a robust argument against the mechanistic determinism and naturalistic materialism which form the basis of a modern secular humanist worldview. In other words, Gilder’s ultimate gripe is with Darwin.
Just as computers can’t function without autonomous actors creating their inputs, so markets can’t function without external agents (entrepreneurs). All this is rooted in the reality that the world can not function without the active agency of God. (Gilder stops short of saying “God”, but leaves the implicative hole so large that the reader can’t miss it.) In other words, a central argument of this book on economics turns out to be:
This is remarkable, and as much as I want to go on, the best course at the moment is to commend the book. Don’t take my word for it; read it.
His points here, while extremely simple (and largely because they are extremely simple) have far reaching implications and applications.
There are about two layers of takeaways here, and as an aside, any book with more than one layer of takeaways goes into the “killer profound” pile. The first layer are those points that relate to practical/functional economics and/or governmental policy. The second layer, those outer limits, are in the realms of ontology, epistemology, philosophy, and eschatology. In other words, Gilder has written a book about economics with some clear principles that mean much in a lot of areas far beyond mere money.
That First Layer
Some of the simplest arguments in that first layer, if I understand Gilder’s points correctly, include: government regulation more often harmful than it is helpful, the national deficit is not our most pressing problem, and that taxes destroy production, and thus the economy as a whole. He’s done a good job of convincing me.
Additionally, Gilder makes a strong case that insider trading should be allowed (and even encouraged). He won me over on this point also.
But on to those broader takeaways…
The Outer Limits
Gilder’s thesis is that free-market capitalism is chiefly rooted in information rather than incentive. From here, he draws inferences all over the map, connecting information theory to capitalism and free markets. Along the way, some other things start to shine through. The following are, in my own words, some of those shining points of application that struck me personally. These points are a blend of what Gidler says and what I infer. I’ve not taken the time to sort out which is which, so just hang in there with me.
Parable Of Talents
Free-market capitalism is chiefly rooted in information rather than incentive. Its drivers, entrepreneurs, must act from generosity over and against greed. The successful entrepreneurs use of riches is courageous and curious reinvestment over and against consumptive depletion.
For to everyone who has, more shall be given, and he will have an abundance; but from the one who does not have, even what he does have shall be taken away. (Matthew 25:29, NASB)
Here, Gilder strikes directly at the heart of both big government and socialism. An attempt on the part of government agents to redistribute the crop is a sure fire way to demolish the whole barn, and burn the field with it. The best course of action is to trust the people who have generated the wealth in the first place to steward it and produce more. A central fallacy of socialistic thought is the portrayal of all wealthy people as Scrooge McDucks swimming in their seas of gold, uncaring, unfeeling, and unwilling to share. The reality is starkly the opposite. Few are more selflessly generous than those wealthy entrepreneurs who have sacrificed much, at personal expense, in order to produce good for society and those they employ, while assuming upon themselves enormous amounts of responsibility and risk. These understand the stakes, and are the most logical agents to leave in control of the wealth they’ve generated.
At the end of the day, the greedy Scrooges who have no rights to the money they love so much are those trying to claw it away and re-invest it in programs and policies that will deplete it within a generation - or, as he’s known in scripture, the man who buried the talent. In case I wasn’t clear about that, I’m saying that in Jesus’ parable the good stewards are capitalists and the talent burier is a socialist. Gilder makes this point abundantly clearly, and well. I don’t feel any need to repeat all his reasoning in this review.
Now, I do feel in all this that Gilder seems to fail at giving homage where due to human depravity. Nonetheless, I still agree with his point that on a purely functional level, businessmen acting out of pure self-interest just don't get very far. There are operative principles that reward those who reinvest intelligently rather than revel indulgently.
I am in mind to write further on this from a Biblical standpoint. If I were to, it would probably be in the form of an article titled something like: Eschatological Entrepreneurism: An Applied Economics of the Parable of the Talents. The clickbait title would be more like Why the Kingdom of Christ Will Not Be An Egalitarian Socialism.
Limits
Ultimately, this book is truly about ontology and epistemology. The dedication page of the book has this quote:
“For David Rockefeller…who taught me the limits of knowledge and power and the valor of virtue.”
The finale of the book is an attempt to display just where those limits lie. Gilder draws out a robust argument against the mechanistic determinism and naturalistic materialism which form the basis of a modern secular humanist worldview. In other words, Gilder’s ultimate gripe is with Darwin.
Just as computers can’t function without autonomous actors creating their inputs, so markets can’t function without external agents (entrepreneurs). All this is rooted in the reality that the world can not function without the active agency of God. (Gilder stops short of saying “God”, but leaves the implicative hole so large that the reader can’t miss it.) In other words, a central argument of this book on economics turns out to be:
For by Him all things were created, both in the heavens and on earth, visible and invisible, whether thrones or dominions or rulers or authorities—all things have been created through Him and for Him. He is before all things, and in Him all things hold together. (Colossians 1:16-17, NASB)
And He … upholds all things by the word of His power. (Hebrews 1:3, NASB)
This is remarkable, and as much as I want to go on, the best course at the moment is to commend the book. Don’t take my word for it; read it.
January 3, 2014
Great book, very insightful from a man who knows what he is talking about. It is helpful to know about Technology, Capitalism, Economics, and Information Theory to get a grasp of what Gilder is talking about. It's not a light read but it is powerful.
Knowledge is key, it leads to innovation which most everyone benefits from. The world we live in today is a much better place because of the human mind and what it has accomplished when given the freedom to create. What summed it up best for me in the book is if Henry Ford asked what people wanted they would have said "A faster horse" fortunately for us he had bigger dreams than that.
Knowledge is key, it leads to innovation which most everyone benefits from. The world we live in today is a much better place because of the human mind and what it has accomplished when given the freedom to create. What summed it up best for me in the book is if Henry Ford asked what people wanted they would have said "A faster horse" fortunately for us he had bigger dreams than that.
April 11, 2014
It is a book that draws parallels between physics, chemistry, biology and eventually economics to explain the phenomenan of entrepreneurship and how the invention of information theory has impacted all these fields in a positive fashion. Some of the chapters are very dry and rooted in gory details of information theory about wireless communication and required a 2nd reading (actually listening an audio book chapter twice) to under and grasp fully. But I am glad I did finish this book since it gives me a great some great ways to think about what constitutes "information" (entropy) and how entropy is at the root of all innovation ... something that I could not have made sense of on my own.
July 24, 2016
Smart, i feel privileged to listen to this author and the like-minded ones. Learned about George Dyson through this book and going to check those works as well.
February 1, 2018
A new context for economics
Gilder discards the left and the right and delivers a new context for grasping human progress. Ignore this book at your own peril.
Gilder discards the left and the right and delivers a new context for grasping human progress. Ignore this book at your own peril.
May 26, 2023
Tonic for statist and socialistic times.
Again 5/23. Like the information theory of capitalism Gilder describes, this is full of productive and fertile ideas.
Again 5/23. Like the information theory of capitalism Gilder describes, this is full of productive and fertile ideas.
January 3, 2021
This book stared off well with a good premise but quickly descended into trivialities. In Knowledge and Power Glider attempts to apply information theory to economics, a pursuit which I think would beare much fruit under rigorous analysis, but this book does not do that. Glider gives us a very basic breakdown of information theory and then jumps right into giving us his credentials and references (he worked closely with George W. Romney [Mitt Romney’s father] during his time at Bane Capital and is acquainted with such figures as Benjamin Netanyahu) expecting us to put the pieces together. But perhaps I am being to harsh... there are some good critiques of both Keynesian and Austrian Economics and some interesting ideas in this book, the best of which is Glider’s critique of “spontaneous order” in economic theory and the idea that liquidity equates to low information systems.
That being said, after finishing the book you come away with a sick feeling that this book only exists as a justification of neoliberal economics and imperialism. The basic premise of which is not to create a totalitarian state or an anarcho capitalist stateless society but a stable and regulated economy. A economy that gives capitalists the widest breath to operate while still being able to protect their physical and intellectual property with state power. The analogy to information theory Glider uses is to a stable frequency band corralling “chaotic” digital information to its destination before it is decoded at the receiver antenna. The frequency band being the state and the chaotic information being the entrepreneur that propels the economy forward. Initially this theory seems quite plausible, and indeed it apes on the ideas of brilliant economists like Joseph Schumpeter, but without any academic rigor whatever and some ludicrous deduction; not least of which is the claim that growth is infinite because capitalist innovation is “anti-entropic.” Of course, even if innovation is anti-entropic in the context of human civilization, it is not anti-entropic in the larger environmental or universal sense. Modern civilization requires transforming high entropy fossil fuels into lower entropy energy and less complex molecules to fuel its high entropy society. Naturally, Glider ignores this flaw in his theory but ironically spends quite a lot of the book deriding alternative energy for being wasteful (which is true).
All Glider provides is metaphors and nothing more, which is a shame since information theory has so much potential in explaining natural phenomena.
That being said, after finishing the book you come away with a sick feeling that this book only exists as a justification of neoliberal economics and imperialism. The basic premise of which is not to create a totalitarian state or an anarcho capitalist stateless society but a stable and regulated economy. A economy that gives capitalists the widest breath to operate while still being able to protect their physical and intellectual property with state power. The analogy to information theory Glider uses is to a stable frequency band corralling “chaotic” digital information to its destination before it is decoded at the receiver antenna. The frequency band being the state and the chaotic information being the entrepreneur that propels the economy forward. Initially this theory seems quite plausible, and indeed it apes on the ideas of brilliant economists like Joseph Schumpeter, but without any academic rigor whatever and some ludicrous deduction; not least of which is the claim that growth is infinite because capitalist innovation is “anti-entropic.” Of course, even if innovation is anti-entropic in the context of human civilization, it is not anti-entropic in the larger environmental or universal sense. Modern civilization requires transforming high entropy fossil fuels into lower entropy energy and less complex molecules to fuel its high entropy society. Naturally, Glider ignores this flaw in his theory but ironically spends quite a lot of the book deriding alternative energy for being wasteful (which is true).
All Glider provides is metaphors and nothing more, which is a shame since information theory has so much potential in explaining natural phenomena.
January 2, 2019
I have to get this book back to our public library tonight, so my comments will be brief.
The writing at times is dense, but the insights are valuable. I feel like I ought to read this book again because I know I didn't absorb it all. Maybe another time. I would give the book 5 stars if it were a little easier to read.
Here are a few of my takeaways:
Information is surprise. You encounter something new, something unexpected, and there is value in that. Information, therefore value-creation, thrives in a predictable, low-entropy environment, also known as the carrier. This wisdom is also present in sayings like "Markets don't like uncertainty."
Traditional Economics cannot account for wealth-creation, party because economics is backwards-looking, and partly because economics concerns itself with irrelevancies like known inputs and predicted outputs. Human ingenuity can't be predicted with specificity. Planned economies fail because they are inflexible.
If you "spread the wealth around" as candidate Obama wanted to do (i.e., redistribute wealth by force of government), you remove the ability of entrepreneurs and investors to create wealth for everyone. Dumb capital allocation is a recipe for societal poverty.
US securities laws like "Sarbox" insure that only insiders have helpful information about their investments, leaving the average public investor at an information disadvantage, exactly the opposite of the intended effect. M&A activity increased because a potential acquirer receives more complete information about a planned investment than does the general public or even the shareholder of the target company. Investments made without information are no different from gambling, and do not contribute to wealth formation on the whole.
Almost all wealth creation comes from intellectual activity. Sand in its native state isn't particularly valuable. Microchips are.
Gilder sprinkles nuggets throughout, including this one from page 274: "The difference between the value of an item to the giver and its value to the recipient is the profit. Profit is thus an index of the altruism of an investment."
There's a lot more, but that's all the time I have for now.
The writing at times is dense, but the insights are valuable. I feel like I ought to read this book again because I know I didn't absorb it all. Maybe another time. I would give the book 5 stars if it were a little easier to read.
Here are a few of my takeaways:
Information is surprise. You encounter something new, something unexpected, and there is value in that. Information, therefore value-creation, thrives in a predictable, low-entropy environment, also known as the carrier. This wisdom is also present in sayings like "Markets don't like uncertainty."
Traditional Economics cannot account for wealth-creation, party because economics is backwards-looking, and partly because economics concerns itself with irrelevancies like known inputs and predicted outputs. Human ingenuity can't be predicted with specificity. Planned economies fail because they are inflexible.
If you "spread the wealth around" as candidate Obama wanted to do (i.e., redistribute wealth by force of government), you remove the ability of entrepreneurs and investors to create wealth for everyone. Dumb capital allocation is a recipe for societal poverty.
US securities laws like "Sarbox" insure that only insiders have helpful information about their investments, leaving the average public investor at an information disadvantage, exactly the opposite of the intended effect. M&A activity increased because a potential acquirer receives more complete information about a planned investment than does the general public or even the shareholder of the target company. Investments made without information are no different from gambling, and do not contribute to wealth formation on the whole.
Almost all wealth creation comes from intellectual activity. Sand in its native state isn't particularly valuable. Microchips are.
Gilder sprinkles nuggets throughout, including this one from page 274: "The difference between the value of an item to the giver and its value to the recipient is the profit. Profit is thus an index of the altruism of an investment."
There's a lot more, but that's all the time I have for now.
June 12, 2020
Garbage that ironically increases in value the more time passes and the more the author is proven wrong. It does have the honor of being the most ironic book I've ever read. I never imagined a book based on information theory would have so much noise that it overwhelmed any semblance of a signal. I would still like to read a better written and researched book on this topic. Although after the horrible attempt here I will most likely separate it into one book on information theory and a different book on supply side economics.
I will keep this book as a time capsule of the toxic culture and thinking that were so prevalent in the decade it was written in. Calling Obama a socialist is no different from calling Trump a fascist. It irrelevant if the author says one or those or the other. Left or right wing we should all decry ideologues that use those words. I'm left wondering how much to comment on specific ideas in the book. Does the author deserve my respect? Certainly not on the merits of this book.
I will however honor the good faith of people that venture to read this book. You are likely trying to gain knowledge and the topic intrigues you. Here are four points that will increase your knowledge and help you understand why this book is garbage. The first point is to look at the actual data on Kyoto cherry blossoms mentioned in the book. Don't read left or right wing analysis. Don't look at a chart. Go get the actual data (up to the most recent year) and build the chart yourself. Then reflect on what was in the book. The second point is to do the same thing with US exports over time. Go back to at least 1940 and look at the trends. Chart it yourself and perhaps do some research on any changes that jump out at you. The third is to read Daniel Kahneman's Thinking, Fast and Slow or at least a summary of the book. The critical piece there is system 1 vs system 2 thinking. The fourth point is to look at the long term trend on Alphabet stock from IPO to today. Then ask yourself a question: what is more important, the percentage increase from pre-IPO to IPO or the absolute dollar increase from 2004-today? Where is there more information?
I will keep this book as a time capsule of the toxic culture and thinking that were so prevalent in the decade it was written in. Calling Obama a socialist is no different from calling Trump a fascist. It irrelevant if the author says one or those or the other. Left or right wing we should all decry ideologues that use those words. I'm left wondering how much to comment on specific ideas in the book. Does the author deserve my respect? Certainly not on the merits of this book.
I will however honor the good faith of people that venture to read this book. You are likely trying to gain knowledge and the topic intrigues you. Here are four points that will increase your knowledge and help you understand why this book is garbage. The first point is to look at the actual data on Kyoto cherry blossoms mentioned in the book. Don't read left or right wing analysis. Don't look at a chart. Go get the actual data (up to the most recent year) and build the chart yourself. Then reflect on what was in the book. The second point is to do the same thing with US exports over time. Go back to at least 1940 and look at the trends. Chart it yourself and perhaps do some research on any changes that jump out at you. The third is to read Daniel Kahneman's Thinking, Fast and Slow or at least a summary of the book. The critical piece there is system 1 vs system 2 thinking. The fourth point is to look at the long term trend on Alphabet stock from IPO to today. Then ask yourself a question: what is more important, the percentage increase from pre-IPO to IPO or the absolute dollar increase from 2004-today? Where is there more information?
April 6, 2021
It is an exhilarating book. Guilder knows how to build up to something, how to come back to something, how to use a phrase like a drumbeat to marshal his arguments. This book has energy.
It is a wide-ranging book. He is even-handed with those he opposes. Notably, Paul Krugman, who is praised for his strengths while his follies are repeatedly pointed out. Gilder considers alternatives over and over, and as he starts out it is hard to tell if he's going to come out for or against. And he goes everywhere.
This is a somewhat difficult book. Information theory begins with Gödel and Turing and goes on from those heights. It defies the laws of physics, and we are used to thinking that physics is as high as it gets. Gilder has to unpack some of the theory and demonstrate it, and it took some effort, not least, in that it is all new to me.
What I like most is that it is not doom laden. There is plenty about folly and destruction, but the challenges do not overwhelm good old Guilder. He is not naively positive and optimistic for the sake of being nothing else either. The book is robust. It demonstrates what the problem is, what the solution must be, and how people have implemented it. You want to get more information theory under your belt.
I really enjoy anything that demonstrates how materialism is an illusion (he also takes on scientism). Materialism in the realm of economics! The book is about the greater adventure to be had when the stultifying grip of materialism is broken by the alignment of knowledge and power.
It is a wide-ranging book. He is even-handed with those he opposes. Notably, Paul Krugman, who is praised for his strengths while his follies are repeatedly pointed out. Gilder considers alternatives over and over, and as he starts out it is hard to tell if he's going to come out for or against. And he goes everywhere.
This is a somewhat difficult book. Information theory begins with Gödel and Turing and goes on from those heights. It defies the laws of physics, and we are used to thinking that physics is as high as it gets. Gilder has to unpack some of the theory and demonstrate it, and it took some effort, not least, in that it is all new to me.
What I like most is that it is not doom laden. There is plenty about folly and destruction, but the challenges do not overwhelm good old Guilder. He is not naively positive and optimistic for the sake of being nothing else either. The book is robust. It demonstrates what the problem is, what the solution must be, and how people have implemented it. You want to get more information theory under your belt.
I really enjoy anything that demonstrates how materialism is an illusion (he also takes on scientism). Materialism in the realm of economics! The book is about the greater adventure to be had when the stultifying grip of materialism is broken by the alignment of knowledge and power.
August 2, 2023
While multifaceted, a central theme of George Gilder’s book Knowledge and Power is the importance of information in a productive economy. The stock market, for example, is neither casino nor “random walk”, but rather an arena of information: the winners are those with the best information; volatility is a function of having less information. By extension, successful entrepreneurs are able to best utilize the information they have to properly allocate their profits as reinvestment. When government (whether well-meaning or rapacious) is overinvolved via taxation / subsidies, protectionism, or bureaucratic mandate, such obfuscates information needed for the aforementioned allocation. System failures exist not because of irrational decision making, but rather rational choice in the face of massive ignorance. The key issue in economics is not aligning incentives with some putative public good, but aligning knowledge with power (hence the book’s title). The book also touches on various other concepts at both the micro and macro levels. This includes, for example: Qulacomm’s success due to its uncanny ability to distinguish signal from noise; Austrian / Supply Side economists vs. Keynesian / Demand-Side economists; Claude Elwood Shannon’s theory of Entropy, and relatedly Nassim Taleb’s concept of Antifragility; and an almost Randian perspective on the avarice of Socialism as the tool of the greedy and feckless to exploit the productive through government redistribution of wealth while ironically smearing the productive as the venal ones.
October 6, 2018
Gilder has some excellent ideas in this book: traditional economics can only describe what happened in the past, but cannot predict the future. Information is defined only as surprises. The entrepreneur is the one person who look out for resources, risk his capital to provide goods and services to consumers. Only sometimes he succeeds. This chaotic offer of goods and services is the real information and thus real power. Without supply of these goods and services, there naturally cannot be any demand for them. Newly started up companies employ many more people than usual; big companies tend not to innovate but get more efficient over time, trimming employment in general. He insisted that owner-managers are the only people who can direct companies in the original vision, and generally berated career managers who tend to enrich themselves.
This is unfortunately the only good idea from this book. For the next half of the book he devoted chapters attacking ideologies that he does not agree with. So global warming, asbestos, renewable energy, Keynesian economics (even though it did save our banking system), the progressive tax rate, were all relentlessly attacked mostly from a theoretical stand point without the data to support his arguments.
The longer I am into this book, the worse it gets.
This is unfortunately the only good idea from this book. For the next half of the book he devoted chapters attacking ideologies that he does not agree with. So global warming, asbestos, renewable energy, Keynesian economics (even though it did save our banking system), the progressive tax rate, were all relentlessly attacked mostly from a theoretical stand point without the data to support his arguments.
The longer I am into this book, the worse it gets.
November 27, 2023
I have always had a soft spot for George Gilder and until now I have been able to forgive him for his right-wing politics and advocacy for supply side economic theories, though I sit on the other side of the aisle. He's genuinely smart and has some good ideas. Even his not so good ideas can be provocative and get me thinking. The basic thesis of this book is that knowledge is a key determinant of economic growth with an impact that is uncounted or undercounted in standard economics and accounting. I think that is certainly correct and that it has a lot of interesting implications for planning, policy, investing and running businesses. There's enough material there for a great book. Unfortunately, Mr. Gilder does not develop his idea in the directions that I would have found interesting. Instead, he jumps the shark, going off on a diatribe against everyone on the planet that he disagrees with. It's bad enough when he advocates for allowing trading on inside information, but then when suggests that the Second Law of Thermodynamics is wrong, he completely lost me. Still there is something about him that I like. Even when I think his positions are dead wrong, I find him hopeful and smart. I'll probably keep reading his books.
July 8, 2019
A good dive into Gilder's information theory as applied to economics. Energetic and sharp as ever. I loved the entire premise that the word precedes the world. Very good also in dismantling false beliefs spread by classical economics.
I am however very surprised of the bad faith (and effort) that he puts into denying the existence of rivalry and violence between social classes. He's also very in denial of the imperfections of capitalism, and seems to always assume that political confrontations between countries and populations are subsumed by technological innovation - and his utter disregard for the field of sociology makes him blind to all the questions that his theory can't answer. He loves bringing forth that climate change is a non-issue that will be resolved by technological advancement (sic) and he goes to contradict himself in his criticism of other economists' works.
Overall, the internal contradictions and denials of the book made me question the validity of the premise that the author wanted to defend. Way to go Mr. Gilder: discrediting yourself and your entire theory of capitalism because you are trying to b.s. your reader.
I am however very surprised of the bad faith (and effort) that he puts into denying the existence of rivalry and violence between social classes. He's also very in denial of the imperfections of capitalism, and seems to always assume that political confrontations between countries and populations are subsumed by technological innovation - and his utter disregard for the field of sociology makes him blind to all the questions that his theory can't answer. He loves bringing forth that climate change is a non-issue that will be resolved by technological advancement (sic) and he goes to contradict himself in his criticism of other economists' works.
Overall, the internal contradictions and denials of the book made me question the validity of the premise that the author wanted to defend. Way to go Mr. Gilder: discrediting yourself and your entire theory of capitalism because you are trying to b.s. your reader.
July 30, 2019
At times, I found myself nodding in agreement, and other time, not so much. There a lot to be said in defense of the entrepreneurial spirit and how it should t be dampened with restrictive legislation or over-burdensome taxation, but I’m not ready to jump off the cliff of saying anything that stands in the way of unbridled price/demand/market discovery is evil.
What I thought authentic was the parallel between physics/mathematics and real world applications. Information theory relies on discovery of information in discovering that information, one needs a very transparent and understandable backdrop on which to make mistakes, learn, reapply, fail, try again, etc without un-evening the playing field by way of subsidies, government sponsorship, or guarantees/backstops. The latter creates “noise” or friction in transmitting information to the right parties. It wasn’t always easy to understand, but the author went out of his way in each closing paragraph of a chapter to further distill the points of entropy and how the physics of theory have real world application.
What I thought authentic was the parallel between physics/mathematics and real world applications. Information theory relies on discovery of information in discovering that information, one needs a very transparent and understandable backdrop on which to make mistakes, learn, reapply, fail, try again, etc without un-evening the playing field by way of subsidies, government sponsorship, or guarantees/backstops. The latter creates “noise” or friction in transmitting information to the right parties. It wasn’t always easy to understand, but the author went out of his way in each closing paragraph of a chapter to further distill the points of entropy and how the physics of theory have real world application.
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