Introduction: George Gilder is Chairman of George Gilder Fund Management, LLC and host of the Gilder Telecosm Forum. He is also a Senior Fellow at Discovery Institute where he directs Discovery's program on high technology and public policy, and the former Editor in Chief of the Gilder Technology Report (published by Forbes Inc., 1996-2007). Mr. Gilder pioneered the formulation of supply-side economics when he served as Chairman of the Lehrman Institute's Economic Roundtable, as Program Director for the Manhattan Institute, and as a frequent contributor to A.B. Laffer's economic reports and the editorial page of The Wall Street Journal. In the 1980s he also consulted leaders of America's high technology businesses. According to a study of presidential speeches, Mr. Gilder was President Reagan's most frequently quoted living author. In 1986, President Reagan gave George Gilder the White House Award for Entrepreneurial Excellence. Mr. Gilder hosts the web's premier technology investment discussion forum, the Gilder Telecosm Forum, and co-hosts (with Steve Forbes) the annual Gilder/Forbes Telecosm Conference.
Daily Bell: Can you give us some background on your life – where you grew up and what your interests were?
George Gilder: I grew up on a dairy farm in the Berkshires in Western Massachusetts, where my prime interests were cows, birds, sports, and girls.
Daily Bell: How did you become involved in free-market thinking?
George Gilder: I didn't. I got interested in human creativity and the conditions that foster it. It is enterprise that causes free markets, not free markets that summon enterprise. Adam Smith was wrong in his assertion that the extent of the division of labor is determined by the extent of the market. It is the other way around. The extent of the division of labor – the creativity of entrepreneurs – determines the extent of the market.
Daily Bell: Who were your big influences?
George Gilder: Jean Baptiste Say of Say's Law – supply creates its own demand – introduced to me by Thomas Sowell, who devoted his thesis to the subject. Supply-side economics is not a mere elaboration of free market theory. It is a new theory, founded by Say. It says markets are mere effects of enterprise.
Now from my studies of communications technology and Claude Shannon, I am intrigued with information theory and its concept of information entropy, which registers unexpected bits. Creativity always comes as a surprise to us. No information is transmitted unless it is unexpected. In this sense, Entropy is another word for "news."
I believe that information entropy also represents entrepreneurial "profit" (the unexpected component of returns; the expected component is the interest rate). Entrepreneurial economics is the economics of entropy. My former colleague Bret Swanson has an excellent website www.EntropyEconomics.com.
The key rule of information theory is that it takes a low entropy carrier (no surprises) to bear high entropy information. That is why information gravitates to the electromagnetic spectrum, with its predictable waves guaranteed by the speed of light. And that is why creative enterprise gravitates to countries with stable currencies attuned to gold and the rule of law (no surprises).
Daily Bell: Explain your views on feminism and affirmative action as a young man.
George Gilder: I always valued the differences between the sexes as crucial to life and love.
Daily Bell: Have your views evolved since then?
George Gilder: Just grown stronger as the evidence from biology has mounted.
Daily Bell: Do you see differences between the Austrians like FA Hayek and the Fresh Water school of Milton Friedman?
George Gilder: Yes. The Austrians stress entrepreneurial creativity over free markets. When I went to China in the 1990s with Milton Friedman, he urged the Chinese to "take control over their money supply" as if the communists needed any further recommendations for "controls." I urged them to "let a billion flowers bloom." As I have said, there can be no free markets without free entrepreneurs. Entrepreneurs are not tools of the market, they are creators of new tools. The entrepreneur precedes the market. Without him, there is no market. The computerized markets of the quants careened to a predictable crash.
Daily Bell: Did you at the time you were writing Wealth and Poverty, a great book in our opinion.
George Gilder: Yes, I always preferred the Austrians for their stress on entrepreneurial creativity, but even the Austrians, beyond Von Mises, fell for the temptation of seeing entrepreneurs as products of "the free market" rather than its creator.
Daily Bell: Would you define yourself today – Republican, Conservative, Libertarian?
George Gilder: Yes.
Daily Bell: What do you think of the growing movement of Austrian economics?
George Gilder: Ever since Ludwig von Mises, the Austrians have been supreme in economics. But as far as I know no one has excelled the master.
Daily Bell: What do you think of Murray Rothbard?
George Gilder: Murray always struck me as a brilliant dogmatist, letting the ideal always trump the possible advance and allowing his hatred of bureaucracy to blur his ability to distinguish between totalitarianism and mere political muddle, between the Soviet Union and the United States, for relevant examples.
Daily Bell: What do you think of the Internet?
George Gilder: I have written several books on the Internet, beginning with Life After Television in 1990, which predicted "worldwide webs of glass and light." I think the Internet is now close to the end, because TCP-IP has become a cumbersome obstacle to communications in an age when video is the dominant form of traffic and thus the governing determinant of optimal technology. The new network will resemble a broadband synchronous version of the old telephone network, optimized for video. The current Internet, as Henry Gau has said, resembles an old telegraph system patched and upgraded for video.
Daily Bell: Is the Internet a force for freedom?
George Gilder: Yes. Communication is a form of freedom.
Daily Bell: How has your opinion of technology evolved over the years?
George Gilder: I have strengthened my view that government financed science and technology (such as global warming or "alternative" energy) are nearly always reactionary.
Daily Bell: Why did you stop writing about free-markets when you were such an eloquent proponent? Your voice has been missed.
George Gilder: I never stopped, but I wrote more about the fruits of enterprise and creativity than about the perfection of "free markets" themselves. Like "perfect competition," a cant of "free markets" has become an excuse for oppressive regulations and controls. As markets are never finally free or competition ever perfect, critics can always find reasons for new beadles and bureaucrats. Ostensible advocates of free markets, such as Paul Romer, end up denying the existence of real entrepreneurial invention (de novo) by depicting it as the mere materialist "reassembly of chemical elements."
Even Austrians depict the entrepreneur as a mere "scout of opportunities" or "arbitrageur" rather than as a creator of radical novelties based on imagination and original inspiration. They see the entrepreneur as a tool of markets rather than a creator of markets. Creation is a real thing in the world. Treating it as some kind of material process is arrant reductionism which leads to the notion that computer based financial markets are ideal. As we have seen in the recent financial crash, markets cannot function without human creativity and judgment.
Daily Bell: What do you think technology is capable of?
George Gilder: Empowerment of capitalists to defend themselves without retreat to Galt's Gulch.
Daily Bell: How is it going to change the future?
George Gilder: Enable global individualism and enterprise.
Daily Bell: Will it have a political impact? Is it?
George Gilder: Technological progress renders totalitarianism impotent. Only freedom can enable innovation and empower progress. Despots impoverish themselves.
Daily Bell: Where do you stand on fiat money versus a gold and silver standard?
George Gilder: Although I do not believe a restoration of the old gold standard is possible or desirable, I believe that gold is the monetary element and provides an extremely valuable gauge of the appropriate monetary policy. Ignoring the price of gold is perilous for any nation, such as the U.S. Gold will prevail over blind monetarism.
Daily Bell: What do you think of Congressman Ron Paul?
George Gilder: Like many movement libertarians, he always prefers the quixotic ideal (radical spending cuts) to the feasible improvement of lower tax rates. By opposing defense spending and American power he has become a shill for the enemies of capitalism and freedom.
Daily Bell: What do you think of the Tea Party movement?
George Gilder: A fully beneficial force as long as they stress tax cuts rather than spending cuts. Lower tax rates are good in themselves. Lower spending always ends up focusing on defense.
The chief damage of the new health care "reform" will come from the 16,500 new Internal Revenue Service Agents, each with $600K, assigned to enforce it. To focus on spending is wrong. It is coercive taxation that is the problem. It destroys capitalism.
Daily Bell: What do you think of the European Union and the move toward globalism generally. A good thing?
George Gilder: Global capitalism is good. Global socialism and bureaucracy is evil.
Daily Bell: Is America in good shape these days? Are you encouraged or discouraged?
George Gilder: America is in relatively bad shape. But it is showing strong signs of a revulsion against the ascendant socialism.
Daily Bell: What are some of the most influential books and web sites you can recommend to our readers?
George Gilder: Panic: the betrayal of capitalism by Andrew Redleaf and Richard Vigilante is the definitive account of the financial crash. Bret Swanson's EntropyEconomics website is excellent.
Daily Bell: Please recommend further reading from your own oeuvre as well.
George Gilder: My new book, The Israel Test, explains how anti-Semitism and anti-Zionism are chiefly forms of anti-capitalism.
Daily Bell: Thank you for your time and insights.
George Gilder is a provocative writer with a formidable intellect. The arc of his literary career is broad and glittering, and his arrival on the national scene was a literary event. He was an original thinker from the beginning, attracting attention for his plain-speaking about male/female relationships and then, before it was fashionable, the necessity for free-markets in a Western world that was trending toward socialism. Many read his 1981 bestseller Wealth and Poverty and were favorably influenced by his arguments for freedom and free-markets. The book was timely and erudite – a pleasure to read. (One can see even from the interview above that George Gilder is an artist with words.)
Anyway, the whole idea of supply-side economics, which George Gilder helped pioneer as Chairman of the Lehrman Institute's Economic Roundtable, was a sociopolitical revelation. It could be realistically implemented and supported ideologically by US conservatives of the day. It also worked. In fact, every time taxes have been cut (in the U.S.) an energetic economy has been the result. By cutting taxes, a government can actually gain revenue – because entrepreneurs work harder – which is something the Obama administration should remember as it begins to arm revenue officers with rifles to facilitate further collections.
But the major point of enlightenment as regards this interview – from our viewpoint – is the statement made about libertarian congressman Ron Paul (R-Tex). Now from our point of view, Ron Paul is a man with a cast of mind similar to George Gilder's. Gilder, however, doesn't see it that way. He seems somewhat skeptical of Ron Paul.
"Like many movement libertarians, he always prefers the quixotic ideal (radical spending cuts) to the feasible improvement of lower tax rates," Gilder states in the interview above. And then he adds of Ron Paul, that, "by opposing defense spending and American power he has become a shill for the enemies of capitalism and freedom."
He also states in answer to the next question about the impact of the US Tea Party movement, "[They are] a fully beneficial force as long as they stress tax cuts rather than spending cuts. Lower tax rates are good in themselves. Lower spending always ends up focusing on defense."
We can see from the above perspective that George Gilder believes in a robust defense posture and an expenditure (one assumes from his answers) roughly analogous to trillions being spent now by the Pentagon. Not only that, but he seems to imply that the Reagan era focus on CUTTING TAXES versus CUTTING SPENDING was a purposeful one at the highest levels – a way of presenting one's free-market bona fides without chopping expenditures. In fact, Reagan ended up increasing government, which was certainly not his stated intention.
Now leaving aside the issue of military spending – a contentious one to be sure (given America's serial, global wars) – what George Gilder is telling us is that supply-side economics allowed the Reagan era Republican party to promote free-markets without running the danger of encouraging military spending cuts. In other words, government could continue to grow at the federal level even though it was implementing free-market solutions.
This is an astonishing perspective and one that we had not fully contemplated. Perhaps we've simply not read the right articles or books, but we've believed all along that supply-side economics was proposed as a libertarian solution to the problem of OUT OF CONTROL government. In fact, we are informed herein, it was proposed as a libertarian-style alternative that allowed government to CONTINUE to grow – or so George Gilder seems to explain. (Maybe we have missed something in our analysis or misunderstood him, in which case we apologize.)
Armed with acute insights, George Gilder makes other provocative statements in this interview, and we won't presume on the reader's time to point them out. They are evident enough and are cast forth as sparks, in our view, from a brilliant mind. He is certainly not a man equipped to endorse common wisdom, though his track record shows us that he is fully capable of anticipating society's most profound transformations.
Finally, we will not pretend that this interview reveals an entirely candid George Gilder. He was obviously somewhat guarded and occasionally monosyllabic, or nearly so. But we were pleased, nonetheless, to elicit his fascinating responses on any terms and wish to state he was most gracious to give us even a little of his valuable time.
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