Ideas for Economic Growth

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Shifting the wealth from one person to another is not necessarily going to add to the total GDP, but making new discoveries and innovations has great potential to grow the economy as a whole and provide new economic opportunities for many.

Steve Forbes’s review of George Gilder’s new book, Knowledge and Power, offers some interesting insights into an important basis for economic growth.

Forbes shows how Gilder build’s on Joseph Schumpeter’s ideas of innovation as the engine of economic growth—not an inconvenient wrench in the system. Forbes says Gilder is more optimistic than Schumpeter, though, because he sees capitalistic growth as unlimited if knowledge is allowed free course to grow. One example is how the science of information theory provided a solution to the problem of limited bandwidth. It ended up actually expanding the horizons of communication with wireless technology.

Forbes describes Gilder’s understanding of the cause of wealth:

“[T]he real source of wealth is new knowledge, which can come only from experiments in which you risk failure and bankruptcy. We learn from failures, as well as successes.”

Rather than fearing failure, Gilder fears that government manipulation of the economy will actually stifle growth.

Forbes explains Gilder’s point:

“Information theory makes painfully plain the foolishness and destructiveness of government efforts to redistribute wealth as a means of stimulating economic growth.”

As in the case of information theory and bandwidth, the solution wasn’t to redistribute access to bandwidth but to make discoveries that added more lanes to the information highway.

So, too, shifting the wealth from one person to another is not necessarily going to add to the total GDP, but making new discoveries and innovations has great potential to grow the economy as a whole and provide new economic opportunities for many.

Forbes summarizes Gilder’s thoughts this way:

“As long as the quest for knowledge is not thwarted–as it increasingly has been in recent times through government regulation, taxation and money debasement–Schumpeter’s worries about how much an economy can expand over time will be groundless.”

Focusing these ideas on Mississippi, is the state government injecting too much intervention into the economic system, whether by regulations, cronyist handouts, or too much dependence on federal funding? And are these policies that will encourage or hinder the growth of Mississippi’s economic pie?

>>Source: Forbes, Steve. “The Big, Positive Change Coming In Economics.” Forbes.com. 30 Oct. 2013.

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