Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing our World
George Gilder
Regnery Publishing Company/An Eagle Imprint (2013)

Why “the ultimate strengths and crucial weaknesses of both capitalism and democracy are their relevance on individual creation”

According to George Gilder, “The central concept of information theory is a measure of freedom of choice. The principle of matter, on the other hand, is not liberty but imitation — it has weight and occupies space. The power of any science is limited by its information potential. [That is why] predictability and information operate in opposition.” So what? In fact, a lot. There is a new science, the science of information, that had not been developed until recently. Gilder’s focus in this book is on this new science.

As he explains, “In its full flower, information theory is densely complex and mathematical. But its implications for economics can be expressed in a number of simple and intelligible propositions. All information is surprise; only surprise qualifies as information. This is the fundamental axiom of information theory. Information is the change between what we knew before the transmission and what we know after it.”

Here in Dallas near the downtown area, there is a Farmer’s Market at which several merchants offer slices of fresh fruit as samples of their wares. In that same spirit, I now share four brief excerpts from Gilbert’s observations that (albeit out of context) suggest the thrust and flavor of his narrative.

On entropy: “Entropy is Janus-faced. Its upside surprises are redemptive and favorable to freedom. It is freedom of choice. But the carrier itself requires constant vigilance against entropic noise. Order is not spontaneous, but it is a necessary condition for all the surprises of freedom and opportunity.” (Page 87)

On Claude Elwood Shannon: “Beyond providing the foundation for entrepreneurial creativity, the information theory developed by Claude Shannon and his associates defined information entropy as surprise, a necessarily subjective, concept, even if measured by an objective mathematical process. Perhaps the simplest and most suggestive definition of entropy is as a measure of [begin italics] freedom of choice [end italics]: the higher the entropy, the larger the bandwidth or range of selection. A high entropy economy is necessarily a free economy.” (202)

On Nassim Nicholas Taleb: “What Taleb derides as the narrative fallacy, the ludic fallacy, the technological temptation, or the prophetic impulse is the behavioral style that makes us human. It is the baseline by which we can identify the unusual or the innovative. Our imaginative and creative faculties allow us to escape the surrounding random jungle — or desert — and construct lush civilizations with elegant cafes and other comfortable settings for hedonic writers like Nassim Taleb. They enable us to avoid an obsessive focus on the irrationalities and dangers of life, and to survive to exaggerate our responsibilities for our achievements”…to which I presume to add, our achievements for better or worse. (205-206)

On innovation: “The heroic drama of innovation — its rigor, genius, and discipline — goes on where economic and political freedoms permit it and military and industrial exigencies promote and protect it. But fashionable thought in the United States — represented by Kevin Kelly’s and Steven Johnson’s books — encourages our technological decadence.” (250)

These are among the dozens of subjects and themes Gilder examines in the book that are of greatest interest to me:

o Why there is a need for a “new economics”
o What the new economics should and should not be…also why
o The nature and extent, and significance of “noise”
o The core principles of the science of information
o How and why John Maynard Keynes “eclipses information”
o The significance of Paul Romer’s “recipes”
o The “fickleness of efficiency”
o The “black swans” of investment
o The “explosive elasticities” of freedom
o Why Israel has become and remains the “InfoNation”
o The technology evolution myth and, what in fact, is true

Here is George Gilder’s unambiguous conclusion: “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…The future is available only to entrepreneurs, on the crest of creation, seeking the entropy of giving.” I agree with him that, for better or worse, information theory enables and describes our digital world.