Value is Knowledge - ECCIE Worldwide

Value is knowledge.

That sounds a little backward, doesn’t it? It’s easy to see how knowledge is valuable. Consider the fanciful example of traveling back in time with tomorrow’s stock market results. Such data would be worth fantastic sums of money.

I thought about the reversal of this concept as I was reading a New York Times report on the disastrous results of government’s management of General Motors. Frantic closure of GM dealerships resulted in the loss of over ten thousand jobs. Writing at Ace of Spades, Gabriel Malor explains it this way:

The truth is that the Administration was in full panic mode and were trying to chop the auto companies down to something a distracted, inexperienced bureaucracy could manage. Both GM and Chrysler ultimately rejected hundreds of Obama terminations — evidence that the President’s taskforce was making hasty and arbitrary choices.

There would certainly have been job losses if GM suffered the judgment of the free market and died in the early days of the Obama Administration, crushed beneath the weight of its unsustainable union labor commitments. Instead, the Administration screwed bolts into its neck, pumped a few hundred billion volts of deficit spending into them, and resurrected it… for the benefit of the very labor unions who broke its back. If you’re a taxpaying American, you contributed several thousand dollars to pay for this economic necromancy, even if you’ve never owned a GM car.

The difference between jobs lost during the market failure of GM, and jobs vaporized by an unqualified President and his bureaucracy, is feedback. The free market is a storm of information, flowing in many directions. Both success and failure become lessons learned. The value assigned to a product, and the value of the jobs needed to produce it, are data points in a complex system. IF union benefit costs are GREATER THAN the value of those jobs, THEN the company goes out of business AND those union workers are unemployed.

By contrast, there is very little feedback from the free market to the State. The State conjures deficit money from thin air, and believes itself capable of sustaining unlimited losses in the service of a “just cause.” Ideology is pursued in defiance of cost and benefit analysis. Politicians rarely suffer personal consequences for disastrous economic decisions. In fact, they have a good chance of manipulating such disasters into golden opportunities to acquire more power for themselves.

The State is exceptionally poor at analyzing the true value of anything. The lens of ideology is filled with clouds of hatred, occasionally sundered by blinding flashes of righteousness. The actual value of health care and medical insurance was almost completely invisible to the architects of ObamaCare. The market is beginning to react as their legislation shudders and screeches to life… by canceling the health benefits of employees entirely, because it’s much cheaper to pay the ObamaCare fines. The Democrats will learn absolutely nothing from this. Their most likely response will be to slander these employers as heartless misers. The masterminds behind ObamaCare will quietly relish the collapse of the private health insurance industry, which was one of their primary objectives all along. No data will be transmitted into the government from this market disaster. Value will not become knowledge.

As the State assumes more direct control over the economy, the amount of information transmitted through assessments of value is decreased. The overall level of information in the economy is reduced. Over the long term, this causes the total value of the economy to decrease. Value is knowledge. When knowledge is ignored, and left to wither, value declines. The illumination of data in the marketplace is snuffed out, leaving nervous investors to make wild guesses in the shadows, while consumers watch products and services vanish into the gloom. Confidence is an ingredient to prosperity. Uncertainty brings poverty, as money is hoarded and capital is frozen for safe keeping.

This is one of the reasons command economies become basket cases. An individual who spends money without regard for the value of his purchases, or his level of income, quickly becomes bankrupt. It could be said that ignorance of the data transmitted through value is a primary cause of bankruptcy.

The same is true at the national level. The market will adapt to its reduced circumstances. One school of historical analysis suggests the Dow may soon tumble to 7500 and stay there. The great lesson of socialism will be repeated one more time, as it has played out around the world, without exception: governments redistribute poverty, not wealth. Some people will find ways to make money in the dreary twilight of an economy where the light of knowledge through value has been blotted out. You probably won’t be one of them.

http://www.doczero.org/2010/07/value-is-knowledge/