Spontaneous Order
Somewhere in British Columbia – “Do Not Hump” says the sign on the side of the boxcar. We had no idea why the Canadian Pacific Railway is putting its nose into our private lives. But the authorities are always trying to tell us what to do.
As you know, we're making our way from Toronto to Vancouver by train. A quick summary of Canadian geography: The vast Eastern Forest gives way to the vast Western Prairie. And then you're in the vast mountains.
Don't ye hump on this train, pilgrims!
Photo credit: Tod Polson
The train chuffs along… hour after hour… day after day. Night after night. The scenery is majestic. It is fascinating. It is endless. We'll return to our travel update in just a moment…
But first, let us check in with the markets… and continue telling you what we learned from George Gilder's latest book.
The Dow lost 68 points on Wednesday. Gold gained $11 – to settle at $1,102 an ounce – after sliding for 10 straight sessions. It is up from its five-year low… but not by much. We remind ourselves that we hold gold as a financial reserve, not an investment. Still, it doesn't make us feel very good when it falls hard.
Spot gold: still going down. However, recently the entire futures curve out to December was in backwardation vs. spot (h/t Keith Weiner). That is rare, and shows that physical demand is actually quite robust at these levels, via BarCharts – click to enlarge.
Gilder doesn't make us feel very good either. First, he makes us work. He stretches from one dot to another. It can be hard to keep up with him. And he sometimes reaches too far.
The key insight in his latest book, Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World, is that an economy is fundamentally a learning system, not a way for distributing wealth.
So far, so good. But Gilder has a sour side. He attacks our friends Nassim Taleb and David Stockman for reasons that seem trivial. He believes that neither fully appreciates his point. Friedrich Hayek and Murray Rothbard – two leading Austrian School economists – also get a beating.
Rothbard was sure that any government control over the economy would be a bad thing. Hayek was willing to imagine that a minimal state might help hold things together. Both counted on a “spontaneous order” – without government – to create a free, prosperous society.
They're wrong, says Gilder. But his dots don't connect. A paradoxical “spontaneous order” troubles him. You can't have both, he says – order and spontaneity. Then he makes the extravagant claim that “order requires political guidance.”
