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August 28, 2006
An Economics Mashup
I've read two books this year that really resonate. The first was Kurzweil's The Singularity is Near, and just completed over the weekend - David Warsh's Knowledge and the Wealth of Nations.
In Singularity, Kurzweil makes the core point that the speed at which new knowledge development is occurring is exponential and close or equal to Moore's Law. Warsh makes the point that economist Paul Romer fundamentally changed the study of economics by explaining how the speed of the growth of knowledge is the prime determiner of the growth of wealth in a nation and in the process explaining why some first mover advantages seem to endure while others do not.
Read together, one sees things like the exponential decrease in the cost of lighting a room over time in Knowledge and compares that chart to its inverse in the exponential growth of most any other technology in Singularity.
I understand why we humans are bad at seeing exponential growth, and I've certainly learned firsthand that people have a poor understanding of profitability as compared to revenue - which is really the difference between efficiency and work. People are good at measuring total work, but have a hard time understanding the non zero sum, and non intuitive concept of efficiency. What still surprises me is that more people aren't questioning the orthodoxy of what we think we know about how macro and micro economics works.
Here is an example. Is the concept of inflation now just an effect based on expectations? Price deflation across the spectrum of commodities, goods, and services is the rule. Will we reach a tipping point where inflation is fully undermined by price deflation (in a beneficial way?)
Posted by hoffmang | August 28, 2006 08:04 PM