George Gilder believes that most economists miss the point. Economics is all about the unknown. Entrepreneurs are the most important part of the economic system. They take risk. The success or failure is unknown. If we prevent them from having the chance of big gains, we prevent the societal benefits that they will provide. (Ironically, the vast riches often come when the companies move to a static turf-defense stage.) Qualcomm seemed to violate the laws of physics with CDMA. It was less efficient for voice communication. But much better for transmitting data. Gilder is a strong supply slide economist that enjoys remembering the glory years of the Reagan era. His has very right wing views, yet he dishes out criticism (and compliments) to those on both sides of the aisle. Information Theory provides a basis for economic thought. We already know what we know. It is what we don't know that will provide value. Government regulation usually fails because it attempts to but rules in place based on what we know. This ends up stifling some of the entrepreneurial growth. It also leads to significant energy spent "working around the rules." Huge numbers of people are employed to pay taxes (and uncover legal loopholes to avoid paying taxes.) When taxes are high, income will often "disappear"
When he gets to specifics, Gilder can sometimes run into trouble. He is strongly in favor of fossil fuels. He believes that "clean energy" policy is a waste and distracts us from optimizing fossil fuel use. This is partially correct. A lot of the "renewable" mandates are more expensive and can have negative environmental costs. However, there is already a body of regulation and subsidies to favor fossil fuel use. We should acknowledge this and spend efforts to remove the encouragement to use the "old system", in order to allow the new to flourish. Electric cars provide an interesting case. Subsidies and regulations had been put in place to encourage electric car development. Alas, there was very little uptake. Then Tesla comes along and creates the must-have electric car. The entrepreneur took advantage of some of the subsidies, but actually succeeded where the big companies had failed.
Things that are undervalued will be abused. He correctly points out cases like health care, where free coverage almost always ends up more costly as people turn hypochondriac and get unneeded healthcare. However, he fails to see that problem in other areas like energy and the environment. If we are free to shift pollution in a way that may hurt us or somebody in the future, it makes economic sense. We even have perverse cases such where people suffer from diseases of abundance and depression, only to spend resources on treating it. They are not better off. However, they have contributed to the economy. (He argues about other "manipulations of GDP", but misses out on these "negative" consumptions.)
At the core, Gilder argues that we need a predictable system that allows the unpredictable to thrive. We can't force the innovation to occur. Instead, we must ensure that the innovators get their proper rewards. This sounds great. However, it doesn't provide for the transition from "entrepreneurial risk taker" to "giant rent seeker". People are upset with the wealthy that have obscene amounts of money. However, they also take advantage of the innovations of these entrepreneurs. (I'm reminded of a Seattle city councilor constantly attacked Amazon - yet her office ordered supplies from Amazon.) How do we ensure that the innovation is encouraged without upsetting amounts of wealth. Does it make any sense for copyrights to last for decades after the death of a creator? This benefits the rent seekers rather than the creators. We also need to acknowledge that there are plenty of people that can't (or won't) make the plunge to innovate and would need some form of societal care. Who takes care of this?
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