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The Economics of Knowledge and Power

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The engine of economic growth is the product of the creative and enterprising mind.  No society is able to sustain itself without economic growth and while the engine of economic growth is human creativity, it is precisely the lack of creativity that leads to failure of societies and entire cultures.  The question has always been, what are the necessary conditions for creativity to flourish and once understood, how can those conditions be harnessed into organizing principles of society?  Conversely, it must also be understood how and under which conditions creativity is suppressed, that has been so destructive to societies throughout history.

Knowledge without any power is powerless to create and power without knowledge is too dumb to create.  The ideal, or the equilibrium position is that balance between power and knowledge which allows for the most creativity.  To accomplish this, we must first understand who holds the power and who holds the knowledge.  These can often be two entirely separate groups.  Knowledge, being a function of the human mind is dispersed among all living people.  As a clearly self-evident and observable fact, we can say that knowledge is decentralized in the extreme.  Power, on the other hand, is not.

Consider for a moment, the brilliant young man with what he thinks is a great idea, entirely the creation of his mind.  Without any power to bring his idea into reality, or even attempt it, the economy will not realize any growth, or if the idea fails, it will not realize the new information regarding the failure of the idea.  Understanding failure is also important because with failure comes information valuable to successive creators.  Information necessary to avoid taking failed pathways.  The young man, however, needs to be empowered in some way to simply attempt his creation.  But if power is strictly centralized, beyond the reach of the creative, both power and knowledge are wasted.

It is in this model, that we can understand why central governments never seem to work and how societies run in such a manner, have crippling economic conditions.  When power is so centralized as to be walled off from the creative minds, economic retardation results, creativity disappears and government does things that appear to be stupid and even nonsensical.

The United States of America, just prior to the Industrial Revolution, was in a state of perfect equilibrium between knowledge and power.  With power so decentralized, in a Constitutional Republic, where laws and rules were infinitely more predictable than today, creativity exploded and more people were moved out of grinding poverty than at any time in human history.  This equilibrium was upset once more when the successes of the Industrial Revolution, ironically, altered the power structure, which has never really been properly addressed since then.

Ultimately, if America is to be a prosperous nation again, it will require great leadership.  Leadership with the kind of courage we don't have now and from the kind of people who don't run our government today.  We need to disempower central government, repeal many thousands of laws and regulations.  In other words, we need to re-establish, as close as we can, the conditions nearest equilibrium between power and knowledge.  If we can even come close, it will lead to still another great economic boom for America and the world once again.

Everyone can understand how the balance between power and knowledge fuels economic growth, simply by looking at the internet.  The internet has democratized power in a way never achievable at any point in human history.  Through the internet, the creativity and ingenuity of the human mind now has a vehicle through which ideas can be tested, proven and realized.  The internet, however, is but one realm of the economy.  Yet it provides a stark, modern day example of explosive economic growth possible when knowledge and power are in equilibrium.

Our policy makers and representatives ought to be lobbied to bring that same equilibrium to every single aspect of the world economy.  The benefits waiting for the entire human race are immeasurable.



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