George Gilder

“And governmental interventions in the economy are distractions—“noise on the line”—that nearly always retard expansion. Failing to see the centrality of entrepreneurial creativity, economists everywhere have counseled governments to attend to the money supply, aggregate demand, consumer confidence, trade imbalances, budget deficits, capital flows—to attend to everything except what matters most: the environment for innovation.”

“The system failed not because it was rational, but because rational choice in the face of massive ignorance—whether attributable to folly or deceit—is meaningless. Capitalism depends not on the freedom to choose but on the free flow of information across a low-entropy carrier. Corrupt the carrier with noise, and capitalism collapses. And the great corrupter of any carrier, the great generator of destructive noise, is power. And in this case the powers assembled were immense.”

“The government began guaranteeing everything—mortgages, deposits, pensions, healthcare, industrial conglomerates, leviathan banks, solar plants, small business loans, waterfront property, corn prices, college tuitions, windmills, kitchen sinks—except for the value of its currency, which since the time of Alexander Hamilton has been its job. Meanwhile, innovation became focused on a confectionary froth of social networking and financial derivatives. Little attention was paid to the physical layer underneath. Physicists began earning vastly more in finance than in the physics of entrepreneurial creations.”

Excerpts From: Gilder, George. “Knowledge and Power.” Regnery Publishing, 2013-05-14. iBooks.

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This latest from Gilder ambitiously proposes to change the focus of economics from the allocation of scarcity and the proper use of limited resources to the free flow of knowledge and its power to innovate scarcity into obsolescence.

The endless guarantees of government (mortgages, student loans, deposits) that seeks to promote consumer (voter) demand by reducing risk has had the opposite affect.  By creating so much noise that critical information that illuminates market decisions is blocked, we have encountered bigger losses, stifled innovation and retarded growth, and in the end fewer consumer choices.