George Gilder: This Simple Theory Explains the Success of Capitalism (VIDEO)

George Gilder is most recently the author the ground breaking The Scandal of Money: Why Wall Street Recovers but the Economy Never DoesHe is a founding fellow of the Discovery Institute and a senior fellow at the American Principles Project, which sponsored this book.

Gilder is also the author eighteen other well-regarded books including Knowledge and Power and Microcosm. After the publication of Wealth and Poverty, he became Ronald Reagan’s most frequently quoted living author.

In the following clip — from a speech Gilder gave at FreedomFest 2016 — he discusses how information theory relates to money and why all wealth is fundamentally knowledge:

…A professor at MIT named Cesar Hidalgo recently gave a good example to help you understand this concept. When an expensive car crashes into a wall, all its value disappears, although every molecule and atom remain. Value is information, the car is knowledge. And I can prove that all wealth is essentially knowledge.

…I believe that if wealth is knowledge, then growth is learning. Now to have learning, certain rules apply. Learning is most essentially experimental. If outcomes are guaranteed, learning is essentially prohibited.

…The reason capitalism is such an engine of learning and thus an engine of economic growth is because every business plan can fail; bankruptcy is possible. But if you have government guaranteeing everything by printing money whenever any enterprise is in jeopardy of falsification or bankruptcy then learning is prohibited. So the very policy that government follows to guarantee growth, intrinsically thwarts growth by arresting the learning process — by falsifying the learning process.