Life After Information Theory
Posted January 06, 2021
In an era of COVID and climate change, it is better to be safe than sorry — or so our governors proclaim.
There is little or no room for capitalism in a world ruled by experts concerned first with health and safety.
But if capitalism is chiefly an information system rather than an incentive system, what makes it capitalist?
Is it merely its root in the Latin caput, meaning head? Is capitalism the mind-centered system? Or is it defined and permanently disfigured by its coinage in the mind of its enemy Karl Marx?
Can a system be “capitalist” if all its outcomes and priorities are shaped by government, if its money is merely an expression of government power, its banks are mostly nationalized, and its investments are mostly guaranteed by the state?
While universities specialize is grandiose critiques of what they call “capitalism,” the United States and most other countries have moved on to “life after capitalism.”
Information Theory Reigns Supreme
In information theory, wealth is knowledge, growth is learning, and money is tokenized time — what remains scarce when all else is abundant. Ensuring the advance of learning is the scientific method of falsifiability. Capitalist ventures are experimental tests of entrepreneurial ideas. They yield knowledge and learning because they can fail.
As Claude Shannon showed in 1948, information is measured by surprisal, unexpected outcomes, what he described as “entropy.” Creativity always comes as a surprise to us. Deterministic processes can yield no information. Information is an expression of degrees of freedom, possible choices.
Under socialism, determinism prevails. Wealth is power and growth is empire. Slavery is peace, ordained in the “plan” conceived and enforce by “experts.” Banned or abated are the surprises of human creativity. We are consigned to “Glome,” C.S. Lewis’s world of ‘Till We Have Faces, where even the queen wears a mask.
Denied faces, we are barred from learning and freedom.
Government guarantees attempt to suppress surprise. Money becomes tokenized influence with politicians and bureaucrats attempting to nullify time and steal from the future in the name of planning it.
When the world moves to life after capitalism, the socialist rules prevail. The capitalist constraints of time and truth persist, but they are hidden behind facades of socialist goals, moral claims, “equal outcomes,” and party interests.
The progenitor of the prevailing theory of information was Shannon. He began with a theory of cryptography, a theory of how information can be concealed or protected. He understood that communication and concealment were two sides of the same theory.
If all is determined, all is known, and concealment is meaningless. Expressing information and suppressing it, both entail freedom. Both require the surprises intrinsic to free minds.
Because his wartime work on cryptography, written in the mid-1940s, was immediately classified, his Mathematical Theory of Communications came out first in 1948 and defined the field of information theory. But Shannon’s ideas began with his work on relays and switches, which yielded the concept of the bit of information (two possible choices) and established the capacity of electronic devices to perform all Boolean logic. His insights continued with his wartime cryptographic work, where he first used the phrase “information theory.”
Although Shannon later expressed skepticism toward the extension of information theory beyond communications, he had already in 1940 published a pioneering paper on genetic codes, entitled An Algebra of Theoretical Genetics. Written well before James Watson and Bernard Crick discovered the helical structure of the bearer of the genome, Shannon was among the first to conceive of the genetic system as an information scheme rather than a chemical process. As late as 2000, James Watson still balked at the meaning of his own discovery. In his books on DNA, published in 2003 and 2017, Watson was still denying the primacy of information in genetics, declaring that life is “nothing but physics and chemistry.”
As the political world moves beyond capitalism, economic progress is transcending the political world. With pioneering work on “time-prices,” Marian Tupy and Gale Pooley are launching economic measurement beyond the realms of fiat money. Measuring real prices by the number of hours and minutes a person must work to buy goods and services, they debunk the prevailing measures of inflation and deflation used by economists with their fiat monies and arbitrary baskets of goods and services. They substitute the unchanging standard of time.
Returning to Shannon’s cryptographic foundations, entrepreneurs have developed the blockchain as a vehicle of unchangeable monies and timestamped truths in economics.
Time-prices already show that economic progress continues far faster than economists estimate. Far from plunging into negative realms, as if time could move backwards, real interest rates remain between 3-4%. Far from making false claims of growth, China has been growing faster rather than more slowly than even the Communist Party claims. Therefore, in this era of “life after capitalism” in the West, China for all its political repression may well be the leading major capitalist country.
But for investors attending to time prices, the most promising capitalist regimes are Israel and Taiwan.
Our Daily Prophecies will employ these new tools of measurement to guide investment beyond the spurious signals of fiat monies and GDPs and discover new surprising “moonshots” of learning and creativity.
Editor, Gilder's Daily Prophecy