Wealth is Knowledge

Source: The Wall Street Journal.

George Gilder is one of the most interesting economic philosophers of all time. I think of him as being 9/10ths right about anything he chooses to talk about, except that the 1/10th he leaves out is the part the rest of us want most to grasp and fully understand.

Gilder’s input to the essay at hand is a case in point. “Wealth is most essentially knowledge,” Mr. Gilder says.

Well, yes. That’s the 9/10ths part. The 1/10th part is that no one can eat, wear, or shelter in knowledge itself.

Gilder means to draw attention to the continuum of production and consumption that is the basis of all economic thinking. People must produce in order to consume and they must consume in order to produce. In effect, production and consumption are always in equilibrium whether conditions are rich or poor.

It is in this context that wealth is essentially knowledge. With knowledge people can increase production and thereby increase consumption. In effect, knowledge transmogrifies into thicker waistlines, finer clothing and better housing.

In the end, however, I think it is wrong to think of knowledge as wealth. It would be more accurate to think (more humbly) of knowledge as the source of process improvement on the production side of the economic equation.

46 thoughts on “Wealth is Knowledge

  1. Mr Gilder makes good points about the inherent justness and generosity of capitalism, but building and keeping wealth requires more than knowledge. It requires combining knowledge with self discipline.

    Even Democrats understand that it is good to earn compound interest(or equity) and bad to pay it.

    But the majority of Americans in their peak earning years, when faced the opportunity to buy some shares in an index fund or get a new big screen TV in time for the Super Bowl, will whip out the credit card.

    Wealth is built on the willingness to delay gratification. Simply knowing you should do so and not acting on it leads to retiring on Social Security and bitching about those who controlled their impulses and waited until they could pay cash for what they wanted but did not need.

    Like

    1. RE: “Mr Gilder makes good points about the inherent justness and generosity of capitalism…”

      I think so, too. The most striking thing about process improvements is that you actually get something for nothing.

      Like

  2. “Mr. Gilder makes good points about the inherent justness and generosity of capitalism”

    Thanks for my morning laugh!
    You obviously are working with very personal definitions of “justice” and “generosity.”

    Like

    1. “Prior to capitalism, the way people amassed great wealth was by looting, plundering and enslaving their fellow man. Capitalism made it possible to become wealthy by serving your fellow man.” Walter E Williams

      Who has done more to make your life better, Bill Gates or Chuck Schummer?

      Of Jeff Bezos? Or even Elon Musk?

      Your doctor gets rich by extending your useful life. Politicians get rich by using the force of government to gain advantage.

      The difference is that if your doctor doesn’t provide you good service, you can take your business elsewhere. He has to serve you well to get your money. The politician need only serve 51% of his customers. The rest he can plunder.

      Like

      1. Your “analysis” and that of your black friend are laughable and childish. Capitalism is not some invention. It has been an aspect of human existence ever since the first hunter-gatherer decided to set aside some food for the winter.

        I have not been “plundered” by Chuck Schumer or anyone else and neither have you. Nor is Chuck Schumer particularly rich.

        https://www.opensecrets.org/personal-finances/net-worth?cid=N00001093&year=2018

        You want to argue based on nonsense comparisons? Who made your life better – FDR or Heather Bresch?

        Liked by 1 person

        1. No, capitalism is not an invention, it is what happens naturally when government excludes force and fraud from the marketplace and otherwise stays out of the way.

          But it’s more than saving for later. it’s the hunter trading meat for grains from the gatherer, making it worth his while to farm and increase the grain he can trade and for the hunter to raise meat instead of tracking it in the wild.

          It’s the engine of all human progress.

          Heather Bresch could only harm you(if you need epi-pens) because the FDA created a monopoly market. Capitalism fixed that problem, government caused it.

          FDR created the regulatory environment that made the abuses of the FDA possible.

          Like

      2. Walter Williams is certainly correct as a matter of history. Capitalism as a distinct form of economy emerged in Europe during the late Middle Ages. It makes little sense to talk about capitalism prior to that time. Even though markets, exchange, money and law all existed prior to that period, they tended to serve the purposes of social hierarchy in which Kings were at the top. This was the pattern going all the way back to the Bronze Age.

        Like

          1. “Sort of like the Biden family’s ambition”

            Not too ridiculous!

            You seem to be really confused. It is Trump who lives like a king and is doing his best to get rid of democracy. Not confused? Then you just cannot resist baseless slanders.

            Like

          2. Really?

            Biden sure does appear to be going to great lengths to protect Hunter’s interests in the Ukraine and to pass the ironically named America Competes act which will greatly benefit their investments in China.

            They have carried cronyism to new, international, heights kings could have only dreamed of.

            Like

          3. Trump is not in office right now.

            Though perhaps had the mainstream media been honest about the extent to which the Bidens are compromised by foreign investments and business arrangements, he would be.

            Like

          4. “Trump is not in office right now.” That is why my post said WAS. He still is, also.

            So once again you give him a pass. His being owned pre-dated his ascent (or descent) to the WH.

            Like

          5. You seem to think that baseless slanders are a form of legitimate political discussion. I put your constant ugly slanders against President Obama down to good old-fashioned Louisiana racism. I put your constant baseless slanders directed at Hilary Clinton down to the typical misogyny that you people wallow in. I see now that I was wrong. Joe Biden, one of the least corrupt politicians in the country, gets the same treatment. It’s just you. Your intellect. Your character. You just slime everybody who you disagree with. It is as simple as that.

            And, speaking of your intellect, we now have it on full display. The United States and NATO resisting Russian aggression against Ukraine is really about Hunter Biden’s board seat on Burisma from which he resigned about three years ago. Yeah, that makes a huge amount of sense.

            Liked by 1 person

          6. “Put [unending baseless slanders] down to truth you don’t like.”

            Uh, no.

            I think that if it is not malevolence, it could be just stupidity. Easily and eagerly gulled. Hear a slander. Like it? Repeat it. No need for common sense or critical thinking skills. Not much in the way of education required either.

            This particular “evidence” of Biden “corruption” is nothing but a partisan hit job from before the 2020 election. It has NOTHING to do with Russia massing troops on the Ukraine border. Today. That dangerous fact is the direct result of their puppet Trump doing his best to undermine NATO. If Trump were still in office, Ukraine would be part of a new USSR by now.

            Liked by 1 person

          7. Sure, and Burisma, the natural gas company in Ukraine, has nothing to gain from threats to shut down the Nordstream 2 pipeline from Russia to Germany.

            Oh, and the Crimea and Donbas parts of Ukraine historically and ethnically are Russian, and were separated from Russia by the Soviets in the 1920s

            The people who live there overwhelmingly want to be part of Russia.

            Like

          8. “The people who live there overwhelmingly want to be part of Russia.”

            They are free to move to Russia. Ukraine is a sovereign nation whose borders deserve to be honored.

            This has nothing to do with Biden, but all to do with Putin attempting to reconstitute the old Soviet Union.

            Liked by 1 person

          9. Not the old Soviet Union, the old Russian Empire.

            The Crimea and Donbas are ethically Russian. The regions were part of Russia prior to the Communist revolution. The Soviets, in the 1920s, redrew the boundaries of Ukraine for the purpose of breaking up the ethnic Russian population.

            Had the UN given Florida to Cuba, would you be equally critical of us repatriating those Americans at their request?

            Like

          10. “Not the old Soviet Union, the old Russian Empire.”

            Very little difference.

            Going back 100 years? Desperation.

            Funny how some on the Right are big fans of Putin.

            And you are saying that Ukraine is not a sovereign nation.

            Ethnic Russians are more than welcome to move back to Mother Russia. An invasion of a sovereign nation by another with questionable reasoning. Not to mention that Putin has been supporting separatists in those regions. I guess you are OK with that as well.

            “Had the UN given Florida to Cuba, would you be equally critical of us repatriating those Americans at their request?”

            One word: ISRAEL.

            Liked by 1 person

          11. “The people who live there overwhelmingly want to be part of Russia.”
            Just like the Sudetenland, right?

            As for your logic that says U.S.that U.S policy is so that Hunter Biden will profit because the company whose Board he was on more than two years ago will thrive in the event of war in eastern Europe. Just how is that supposed to work? Frankly, I think you would have to be a real dope to think that anything like gas business as usual is going to happen if Russia invades Ukraine.

            Liked by 1 person

          12. Clearly, Biden is still providing “roof” so compensation will come to the family in due time.

            But of course, the MSM buried that connection before the election.

            Like

          13. “Clearly, Biden is still providing “roof” so compensation will come to the family in due time”

            Clearly, you are a partisan hack with zero regard for the truth, the probable or even the plausible. The slanders you are slinging are not true, not probable, not even plausible. They seldom are. And you don’t give a shit about that.

            You totally dodged the question at the heart of your nonsense – how does ANYBODY make money in natural gas if war breaks out or the gas stops flowing? Who is this compensation coming from? Why would this magical wealth flow to Hunter Biden who left his picayune post at Burisma almost three years ago?

            The fact is you hijacked this thread with your silly comment about the Biden family. You can’t back it up – superannuated hit pieces on a propaganda web site don’t count. And you are too silly to back down even when you have no credible theory as to where the supposed wealth is going to come from nor what President Biden is doing to generate it.

            Pathetic. And I mean that most sincerely.

            Liked by 1 person

          14. Burisma makes money of the Nordstream 2 pipeline is not completed. No war is required. Just economic sanctions against Burisma’s competition.

            Can’t be proven, with what is available to us. But considering the past relationship, it would be willful blindness not to have Congress look into it with their greater investigative resources.

            They pursued Trump for years without half as much probable cause.

            Like

          15. “They pursued Trump for years without half as much probable cause.”

            Utter bullshit.

            Trump has always been a criminal. He has committed countless crimes in plain sight. That he has gamed the justice system for decades just confirms how rigged in favor of the wealthy it is. His criminality did not stop when he became President. What changed was the attention it got. He was impeached on two of his major crimes and was as guilty as hell by any normal standards. But, the GOP is a party of traitors and/or cowards, so he got off.

            Every week, new utterly criminal misconduct comes to life. His illegal interference in vote counting in different states, for example. And we now know that throughout his Presidency, Trump violated the Presidential Records Act constantly by cavalierly destroying official documents. Force of life-long habit – destroying evidence.

            https://www.cnn.com/2022/02/07/politics/trump-rip-documents-white-house-national-archives/index.html

            Liked by 2 people

          16. “Just economic sanctions against Burisma’s competition.”

            So, Russia invades Ukraine, and the West shuts down the new Nordstream 2 pipeline as a non-military response to this aggression. That leaves Burisma free to make money transporting gas to Europe? And then, awash with profits Burisma finds a way to funnel oodles of money to Joe Biden for helping them out? Is that about it?

            Let’s try thinking about this laughable story of imaginary corruption. . .

            1. Would ANY of these pipelines survive a war?
            2. Would the Europeans give up Nordstream Russian gas only to replace it with Russian gas piped through Ukraine?
            3. Would Russia let Burisma continue to exist and siphon off profits?
            4. Would Russia allow Burisma – if it did exist – to channel money to Biden?
            5. WHY would Burisma even want to give ANY money to someone who left them years ago?
            6. How would the Bidens hide their fabulous new wealth?

            Liked by 1 person

          17. As long as Biden gets his pudding and ice cream, he doesn’t know the difference, but his family will reap the benefits.

            Of, and the Nordstream 2 is in the bottom of the sea, so it’s pretty safe.

            Like

          18. “As long as Biden gets his pudding and ice cream, he doesn’t know the difference,”…

            Comments like tat are beneath you.

            And as long as Trump keeps peddling his lection lies and steals documents from the country, he is read to be re-instated?

            …”the Nordstream 2 is in the bottom of the sea, so it’s pretty safe.”

            You really believe that, doncha?

            Liked by 1 person

          19. “Could it be destroyed intentionally? Sure.”

            Which was exactly the point of my comment.
            In war people destroy things that are important to their enemies.

            Since the Nordstream pipelines are nowhere near Ukraine, I did not imagine their being destroyed as collateral damage. Even more vulnerable to deliberate acts of destruction is the pipeline network in the Ukraine that you claim is going to make the Biden family rich.

            I guess this in now moot as far as your bullshit goes, since you have now retreated to calling Biden senile and not the Eminence Gris maneuvering the world to unjust war against peace-loving Russia just to enrich his family.

            Seriously, you ought to be embarrassed.

            Like

          1. It is the mainstream view, which you can look up in any encyclopedia. Your book review shows only that markets, exchange, money and laws exited prior to the Middle Ages, just as I wrote. What made capitalism in Europe different was the dissolution of social hierarchies that had existed for thousands of years. Those hierarchies still exist in the East.

            Like

  3. Wealth is power. Immense wealth is immense power. This hold true whether or not wealth is earned or inherited.

    Power is bilateral, in the sense that wealth gives you power over your own life in addition to power over others politically and economically.

    It is difficult to build wealth without knowledge. Not necessarily book learning, but knowledge about business and marketing, which some have gained through intuition, emotional intelligence and “street smarts”.

    So here is the conundrum. If wealth is necessary for power, how do we avoid the Hobbesian devolution into a state of nature that is “nasty, brutish and short”? That is what government is supposed to prevent.

    Wealth is unelected power and without some constraints can create oligarchies and its brother, autocracy.

    Bottom line, developing a balance between free market capitalism and the distribution of power is the key, in my opinion. Equality of opportunity would be the goal for both political and economic health. As in affordable, quality healthcare and education for everyone and safety nets to allow the innovators and investors wiggle room without taking the nation down economically.

    We have the knowledge to make that work, just not the political will…yet.

    IMHANEO

    Liked by 2 people

    1. RE: “Wealth is power.”

      Gilder says that wealth is knowledge. Is there something in his observation that you disagree with?

      Like

      1. If we are talking about the philosophical view that knowledge, in and of itself, is wealth, then we are not talking economics.

        Along that line, there is a saying that if you are happy and have enough to live decently, you are wealthy.

        But that still puts one at the mercy of the power brokers in a societal climate where wealth is considered power.

        Liked by 2 people

      2. RE: “If we are talking about the philosophical view that knowledge, in and of itself, is wealth, then we are not talking economics.”

        Gilder specifically is not talking about that. He means that wealth is literally knowledge. For example, when you learn how to improve a process in a way that accomplishes more with less, then you have real wealth (more goods with less effort).

        Like

        1. “…when you learn how to improve a process in a way that accomplishes more with less, then you have real wealth (more goods with less effort).”

          In a capitalist society, that is not enough. Lots of people invent great stuff we never see on the shelves. It is very complicated to be financially successful in our nation. More so here than in some of the Northern European countries with regards to start ups.

          Bringing a product to market, as Don mentioned a few weeks ago, is very hard, expensive and needs a good deal of luck. In my business of advertising photography, I have seen first hand how businesses come and go, even with the best of ideas.

          So what makes a product go? Marketing, connections, lawsuits, timing, money and a drive to succeed that far exceeds the average person. And even with all those, and other qualities like optimism and high risk tolerance, about 30% fail in the first year, 50% after 5.

          To add whipped cream on top, if your new invention might threaten market share even a little on what larger companies already have, you will be sued until you either run out of money or hook up with a big, wealthy partner. Sort of the uglier side of free market capitalism.

          I suppose you could say “knowledge is wealth” if you consider a team of inventors, financiers, lawyers, advertisers, scientists and economists involved for a new product. But then that really implies that “Knowledge needs Wealth”.

          Liked by 2 people

          1. One doesn’t need to invent a new product to illustrate Gilder’s point. A formal quality assurance system will do.

            Like

    2. “Wealth is power. ”

      No. At least in the absence of cronyism, wealth is the residue of service, and the opportunity to marshal resources to serve more, and thus earn more wealth.

      No one is Scrooge McDuck making money just to roll around in it. Again, in the absence of government collusion, those who have served well will employ capital to leverage their service. They always have.

      Only kings and cronies use wealth selfishly, and even then it is not easy.

      Like

      1. I think you misunderstood. I meant that with great wealth come access to great power and I thought Wealth is Power said that.

        I wasn’t concerned about how the wealth was obtained, legally, with great service, illegally or inherited. That is another topic.

        Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s