Thursday, September 12, 2013

Busting Out of Our 99,000 Year Economic Slump

Williamson asks, "Are you so sure that your preferred model of education or health care is the right one?" Yeah, I'm pretty sure. What's not to like? It's less expensive, no government agents force you to do anything, you get to keep your own doctor (or pick your own school), and there are no death panels (or soul-destroying political agendas).

"So sure that you'd be willing to stick a gun in somebody's face over the issue?" Nah. I would prefer that both be rooted in consumer choice and voluntary transactions, i.e., freedom and information and not power and coercion.

Again, going back to Gilder's thesis, power is a substitute for knowledge. Political power has always existed in the world. What has been lacking is information -- usually due to political power blocking its channels.

One source of human information is the genome. Let's stipulate that for all practical purposes it hasn't changed a great deal in the past 100,000 years or so. We might call it a low-entropy carrier, in the sense that it is quite ordered, and doesn't contain sufficient information to facilitate or account for any human advance. In this way, we are like any other species, which settles into an evolutionary niche and then stays there.

Which would explain why there was almost no human progress for roughly, oh -- rounding up -- about 100,000 out of those 100,000 years.

Focusing in on just the past two millennia, "If you make a chart of the world's GDP from A.D. 1 until now, you will see a flat line that lasts for the better part of two thousand years. And then the line goes vertical around 1750."

So if we want to be perfectly accurate, Homo sapiens was mired in a deep slump for about 99,737 years. Not a promising debut -- and if you were a betting man, you would have had no earthly reason to believe anything would suddenly change after 99,000 years of stasis.

Even the Obama economic slump -- and the FDR slump before that -- hasn't lasted 99,000 years. It just feels that way.

But the underlying reason for the slumps is similar: power over information. Why is this distinction so important?

I would say it is because what is really unleashed after 1750 is freedom -- i.e., ordered liberty -- and therefore human creativity, the latter of which is more or less infinite. Unlike the genome, which is obviously finite, the human mind is boundless. All progress is human progress; and power is just one type of noise that interferes with it.

First principles are important. Duh! In reality, poverty is the universal condition. Again, it has been man's fate nearly throughout his existence. Deviations from poverty are the rare exception. Therefore, we want to study quite closely the conditions that make this possible. I mean, right?

The left either ignores such questions, or turns them on their head. The leftist's first principle is envy, i.e., someone has more than I do, or something I want. Never mind how he acquired it. I want it!

But envy is a prime example of an ordering mechanism that destroys information. It's easy enough -- assuming sufficient power, i.e., violence -- to make everyone equal. At the cost of nullifying all the information in the system.

For example, we could have "full employment" tomorrow merely by forcing everyone to grow their own food. Or, at this rate, Obama will achieve full employment by forcing a sufficient number of workers -- each one a module of information -- out of the job market. Well played! That's what I call an organized community. Idle, but organized.

Another point the left forgets is that the real minimum wage is always zilch. Sure, you can pay a fast food worker more than he's worth, but here again, this will only destroy information, for example, information pertaining to a fast food worker's economic worth.

So, exactly what happened at 1750ish o'clock? "For the first time in history, the living standards of the masses of ordinary people... undergo sustained growth." And "Nothing remotely like this economic behavior has happened before" (Robert Lucas, in Williamson).

Such a leap certainly can't be explained by genetics; it's not as if "we were monkeys in 1749 and Ben Franklin in 1750."

And yet, a certain ontological -- or at least existential -- leap did occur around that time. Surely it cannot be a mere cosmic coincidence that Adam Smith's The Wealth of Nations was published the same year as the Declaration of Independence. For, taken together, these two texts delineate exactly what it took for man to finally bust out of his epic losing streak.

Seen in this context, we can see how a Karl Marx -- and all his intellectual spawn -- was the great echoing antithesis to the unleashing of human progress. You might say that he represents the voice of the primordial demon that would keep us shackled to our low-entropy state of existence, in which there is no income inequality because poverty is so evenly distributed.

More generally, everywhere Marxian ideas have reappeared in history -- say, in the figure of Obama -- it has been in the form of power trumping -- and humping and thumping -- information.

According to Gilder, the conventional account of our recent economic success doesn't even begin to do justice to the magnitude of the transformation:

"The central scandal of traditional economics has been its inability to explain the scale of per capita economic growth over the last several centuries. It is no small thing." He says that there has actually been "a 119-fold absolute increase in output in 212 years," and that conventional economic models can only account for about 20 percent of that.

What accounts for the rest?

To be continued...


Blogger Open Trench said...

I always thought the Old Kingdom Egyptians had something popping in the way of economic mojo; but it could have all been due to the alien visitors and not human agency.

For God's sake Dupree put me out of my misery now. This is awful.

9/12/2013 09:09:00 AM  
Blogger julie said...

The cry of the lonely masochist...


poverty is the universal condition

And the only "natural" one, as well.

there has actually been "a 119-fold absolute increase in output in 212 years," and that conventional economic models can only account for about 20 percent of that.

Back in the early decades of the 20th century, I think most people were generally aware of that, inasmuch as they recognized that they lived as nobody in history had lived, and they looked to a future that could create almost anything man could imagine. The further leftward the culture drifts, the less that future seems possible - in the minds of the leftists, because they aren't interested in in genuine progress, only power, and in the minds of everyone else because they are ever more trapped in the world the left has created. Hoverboards? Impossible - government regulations would never allow for them.

9/12/2013 09:44:00 AM  
Blogger mushroom said...

Well played! That's what I call an organized community. Idle, but organized.

Yes, it's much easier to organize a bunch of people who don't have anything else to do, like earn a living.

Similarly, my nephew, who has been a dairy farmer most of his life, was talking about why the grain farmers have a better lobby. They don't have to milk the cows twice a day.

9/12/2013 09:46:00 AM  
Blogger John Lien said...

What accounts for the rest?


Steam engine > coal > dynamo > internal combustion engine > oil > Haber process (for fertilizer) > electrical grid.

He's got to mention this.
Most of the credit goes to England and Germany.

I guess the key question is what system best gets the inventions out of the labs and into the world?

As we have discussed this before, we may have picked the low-hanging techno fruit. I can easily believe this is a 200 year blip and we may be leveling off again like that one Economist believes.

9/12/2013 10:50:00 AM  
Blogger John Lien said...

No, wait. Put coffee and tobacco at the beginning of the list. Yeah, that's it.

And julie raises a good point.

OT, that was a funny lament.

9/12/2013 11:15:00 AM  
Blogger mushroom said...

Very true. Coffee gave us the modern world. The Arabs were good for something.

You couldn't drink straight water in the cities. Beer, for all its nutritional value, is not the ideal breakfast drink. Though I have heard it is pretty good on cereal. Coffee houses that popped up in London were the original Blog/Fakebooks without cat pictures.

However, giving credit to England for steam power is roughly equivalent to giving Haiti credit for Albert Pujols. Newcomen was English but the Watt is Scot.

9/12/2013 12:41:00 PM  
Blogger Open Trench said...

I like all the amenities and creature comforts which society of late affords us.

I like soft sheets, good wine, blazing fast internet, and chasing after sensual pleasure when not too lazy to get up.

Not to mention e-cigarettes, vapor pens, and other new-fangled indulgences.

Life is good. Too bad at the core I'm a screaming train-wreck.

I love all except the way I ruin my own mind.

Great post, Bob. Very fresh, very provacative treatment of the subject. You are one of the most inventive minds on the internet.

9/12/2013 01:22:00 PM  
Blogger John Lien said...

Mush, I was thinking of Watt the Scot. I probably should have said Great Britian, but you know, those folks, they all look alike to me.

9/12/2013 01:41:00 PM  
Blogger julie said...


They do look alike, pretty much, but once they start talking it's easy to tell who's who. Or perhaps "arguing" is a better term, there...

9/12/2013 03:20:00 PM  
Blogger Open Trench said...

Plant alkaloids are very good.

Rate these, in order:

Delta 9 Tetrahydrocannabinol

Where would we be without our plant friends?

9/13/2013 08:44:00 AM  

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