All We are Saying is Give Information a Chance

Gilder writes that "When law becomes high-entropy, the flow of information halts and knowledge withers."

Again, this is because we need stable boundary conditions at the lower level of any system, in order to create the conditions for upside surprise, i.e., growth, progress, creativity, and evolution.

Thus, when "the line of demarcation between conduit and content dissolves," everything is reduced to noise (or at least no one can distinguish information from noise).

For example, "When currencies float chaotically and financial rules gyrate unpredictably, finance becomes a high-entropy and a high-profit endeavor. The economy lurches toward a hypertrophy of finance and litigation" instead of growth and progress.

I was thinking of how perfectly this captures the present economic crisis when I read a piece at PowerLine called Why Such a Pathetic Recovery? The short answer is because of all the noise Obama has inserted into the economy, and thus all the information that has been destroyed or displaced.

As we all know, the “Age of Obama" has been characterized "by record poverty, declining incomes, unprecedented numbers depending on federal poverty programs, and millions leaving the labor force in despair." Why? Or, more to the point, why haven't we experienced the typical post-recession recovery?

For the scholars cited in the piece, the stagnation has been a consequence of the "poorly designed and implemented government policies [that] have impeded capital and technological investments and hiring."

Well, yeah. No shit, Bob. By the way, when are you going to get off economics and return to the more purely spiritual subjects you also pretend to know about?

First of all, there is a Connection between the two, but I first need to lay a foundation. Remember, we're trying to interpret the PowerLine piece in terms of information theory, not just partisan point-scoring.

In this case, the policies of Obama-Reid-Pelosi have impeded capital and technological investments and hiring, which is another way of saying they have impeded the flow of economic information that is needed in order to make such decisions and commitments.

The authors say as much: "These policies impacted many key economic channels, including monetary and fiscal policies, commercial and investment banking, manufacturing, housing, and the environment."

And "many of these policies have depressed growth by distorting the normal forces of supply and demand that are critical for a market economy to function well and create new jobs" (emphasis mine).

There it is: low-entropy economic channels have been flooded with noise, thus distorting the signals necessary to make rational economic decisions.

Note also that Obama's insistence that he can interpret and enforce laws as he sees fit, only adds additional noise to the system -- or contaminates information with power. If no one knows what the law is, then no one can rely on it as a low-entropy carrier of information. Rather, everyone has to try and predict what Obama is going to do. But that's not in the realm of rational economics; rather, it's in the occult realm of mind-reading.

So, with the porkulus bill of 2009, Obama infused the economy with a trillion dollars of borrowed money, hoping it would magically turn into information. Instead, it just remained noisy cash, which various interests pocketed; rather than being used productively, individual states mostly used the illicit gift to fund transfer payments to various interest groups and/or to reduce their own unsustainable debt.

Tax policy has also been distorted by noise, rendering it "highly unpredictable, which in turn depresses the incentive for business to make long-term investments in capacity and technology, and holds business back from significantly expanding their workforce." Again, when the tax code isn't a stable carrier, it diminishes information.

So, how do we get things back on track? Obama has attempted to use the Stupid Power of the state to get the job done, but again, power is just a substitute for his non-existent knowledge. Why not give information a chance, as did Reagan, or Kennedy, or Coolidge?

What would an information-based approach look like? Here again, I think the authors have nailed it. For example, it would involve "restoring transparency and simplicity to the tax code," which is an obvious way to return it to being a predictable, low-entropy carrier.

Likewise, "reducing the U.S. corporate income tax rate, and reducing marginal income tax rates, which now exceed 50 percent in some states." Doing so would result in less information being siphoned off by the state and converted to Stupid Power.

The authors also mention changes in labor, energy, and environmental policy that would "make it less costly to hire workers and reduce the cost of becoming energy independent." And of course, there is Obamacare, which has to be the most catastrophic injection of Stupid into the economy since LBJ.

Truth always walks with humility, while stupid tends to strut omnisciently. Why is this? Ace made an offhand comment about it the other day, that "the more you know the more you realize you don't know. And conversely, only someone who knows a tiny little bit could possibly be under the illusion he knows it all."

So, all we are saying to President Stupid is to give information a chance.

(More on the high cost of Stupid.)