| Nordhaus Takes on Time-Prices Ridley’s book itself, however, does resourcefully expound a significant innovation, what I call “time-prices.” They measure the economic value of a good or service by the amount of time you have to work to gain the money to buy it. In my view, based on money as time, they are the only real prices. As he would readily acknowledge, he did not invent this idea. Like all the inventions he recounts in his book, it occurred to many people at various times. Its full meaning and importance are still being explored, most notably by economists Gale Pooley and Marian Tupy. Perhaps the most notable progenitor of the concept is Nobel Laureate William Nordhaus of Yale. Nordhaus’ Nobel follows the usual Nobel rule of honoring economists for their worst, most fashionably banal blunders, in this case the economics of climate change and carbon taxes. But way back in 1993, in a presentation to the National Bureau of Economic Research, “Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not,” Nordhaus boldly propounded the fully Nobel worthy idea that such economic contrivances as consumer price indices, GDP deflators, hedonic adjustments, and Purchasing Power Parities totally miss the real progress of innovation. Based on a scrupulous calculation of the number of hours of work a typical laborer would have to do to buy an incremental watt or lumen of light, Nordhaus shows that technological progress has been vastly underestimated by economists and governments. As David Warsh ejaculates in his Knowledge and the Wealth of Nations (2006), “the traditional story was off by three orders of magnitude, or a factor of a thousand-fold!” As Ridley shows, “innovation has made it possible to work for a fraction of a second so as to be able to afford to turn on an electric lamp for an hour, providing the quantity of light that would have required a whole day’s work if you had to make it yourself by collecting and refining sesame oil or lamb fat to turn on a simple lamp, as much of humanity did in the not so distant past.” In Ridley’s calculation the actual mistake in the economic estimates of the productivity of lighting is about 70 thousand-fold. Now this is a stunning insight. It overturns entire applecarts of iPhones and eider ducks. It means that virtually everything you read about industrial stagnation, inequality, economic growth, the plight of the middle class, the extent of poverty, the level of real interest rates, the advance of innovation, the need for government stimuli are radically and irretrievably wrong. Today’s Prophecy By all means read Ridley for the incandescent details. But don’t believe anything he writes about information theory or order or disorder or information entropy. He simply knows nothing about it. Thus, he joins a club of ignorant geniuses, such as Norbert Wiener, Ray Kurzweil, Cesar Hidalgo, and even James Watson, all worshiping at the oxymoronic shrines of information as order. As Ludwig Bolzmann saw in the late 19th century, information is disorder — what you do not expect — rather than the predictable regularities that proceed from the past. As Claude Shannon expounded in 1948, information is entropy. It is the surprising bits in messages that bear the information, not the orderly low entropy conduits that carry them. To bear high entropy messages, full of surprising insights and innovations, such as Ridley’s book, it takes a low entropy carrier. Whether ink on paper or silicon and silicon dioxide chips or metal oxide disks or acoustic waves in the air, the material substrate of the carrier is irrelevant to the ideas it contains. Ideas are not thermodynamic. They are unexpected disorder. As Norbert Wiener wrote in 1948, “Information is information, not matter or energy. No materialism that does not admit this can survive in the present day.” The laws of matter are low entropy and largely determined. But information is surprise. Innovation fuses the low-entropy carriers with the high-entropy creations. By the time he gets to Vegas, maybe Ridley can figure out that the reason “innovation flourishes in freedom” is that information entropy depends on the degrees of freedom commanded by the creator of a particular invention. Regards, 
George Gilder
Editor, Gilder's Daily Prophecy P.S. Recently Donald Trump quietly signed a bill – H.R. 2881. It’s a groundbreaking new law that could save the internet. It could also help make you exceedingly rich once America reopens for business. But not in the way that the title of this new law — the “Secure 5G and Beyond Act” — might lead you to believe. See, most investors are focused on the “5G” part. But it’s the “beyond” that could help you make an absolute fortune… with an even better, bigger opportunity — as much as 3x bigger — I’m calling “15G.” Click here to learn more about this opportunity. I want to make sure you don't miss out that I am planning on unveiling a new recommendation this Friday at 9:30am. | 
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