Notes:BC1.EF.The Secret of Enterprise

2014/11/22 User:Jeff

An outline of the ideas in the prologue of Gilder's 2012 edition of Wealth and Poverty.

Wealth and Poverty was first published in 1981.

In 1981 "socialism was dead" but few stepped up to hail capitalism as triumphant. Most seemed to view capitalism as faute de mieux that was saved by charities and regulations and the New Deal. But capitalism is

"the supreme expression of human creativity and freedom, an economy of mind overcoming the constraints of material power."

"a dynamic force of constant creation, pushing human enterprise down spirals of declining costs and greater abundance"

Supply side vs. incentive-reward.

In the supply side model, taxes are "the price of earning and investing income - that yielded increasing revenues as the rates were reduced." A controversial idea.

• Some accept the behavioral model of stimulus and response, in which lower rates are the stimulus of reward for more work and risk taking which yield more taxes.

Gilder writes that a successful economy is driven more by the "unimpeded flow of information. . . Increasing revenues come not from a mere scheme of carrots and sticks but from the development and application of productive knowledge."

• Greed vs. information and knowledge

The acceptance of stimulus-response encourages the idea that capitalism is a greed based system.

On the contrary - greed "prompts capitalists to seek government guarantees and subsidies that denature and stultify the works of entrepreneurs. Greed . . leads as by an invisible hand to an ever growing welfare state - to socialism."

It is the expansion of information and knowledge that generates growth and progress.

It is a competitive pursuit of knowledge. (CW emphasis)

• Capitalism is not a zero-sum dog-eat-dog game.

The winners teach the losers how to win through the spread of information.

The success of some is not at the expense of others. Free economies "climb spirals of mutual gain and learning."

Capitalism's moral center is a golden rule of enterprise: The good fortune of others is also your own.

"Not only does capitalism excel all other systems in the creation of wealth and transcendence of poverty, it also favors and empowers a moral order."

• Altruism: capitalism favors altruism, an orientation toward the needs of others (a slight warping of the meaning of the word which also means selflessness)

Quotes Richard Posner, a professor of law and economics at the University of Chicago. "Because the individual cannot prosper in a market economy without understanding and appealing to the needs and wants of others, and because the cultivation of altruism promotes the effective operation of markets, the market economy . . . also fosters empathy and benevolence, yet without destroying individuality."

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