Entropy Economics

See our latest in The Wall Street Journal . . .

The suppression of debate over the origin of the novel coronavirus highlights a broader problem. Governments were once the chief impediments to free speech and free markets, but extremely large private companies may have become the greater danger. These hyperscale firms serve as hubs and gateways in the highly networked knowledge economy. They are well-positioned to exert special control over information—and other companies.

China’s stalling and lying about Covid’s origins weren’t surprising. On the other hand, the behavior of U.S. officials and scientists was startling. They dissembled over their intimate knowledge of gain-of-function research at the Wuhan Institute of Virology and their early suspicions the virus was “engineered.” But who expects politicians and bureaucrats to be honest and competent? That’s what an open society is for. Truth and accountability are the responsibility of a free press—and a free internet. 

What happens when the press and the internet aren’t so free? Over the past year, YouTube, Twitter and Facebook joined with a partisan press to block and throttle discussion across a range of Covid-19 topics. They discouraged and erased talk of the Wuhan lab-leak hypothesis, cheap and safe generic treatments such as ivermectin, Sweden’s heterodox decision to stay mostly open, and the inefficacy (and cruelty) of school closures. continue reading (subscription required) . . .

America’s overwhelming reliance on microchip manufacturing in southeast Asia is an increasing economic and security weakness. China’s flybys into Taiwanese airspace in recent days are just the latest reminder. If the U.S. doesn’t ramp up domestic capacity, a China-Taiwan scuffle could block our most important technology companies from access to their most important components. continue reading . . .

Every couple years, we update our original 2014 blog post that asked the question, “What would an iPhone have cost in 1991?” The purpose is to measure — at least in a rough way — the progress of technology by looking at the components and features integrated in smartphones owned by billions of people. In past years we’ve focused on the three most basic (and easily measurable) components: computation, digital storage, and communications bandwidth. This time, we will also look at another revolutionary facet of smartphones: their cameras. As luck would have it, the digital camera story also has a beginning in our arbitrarily chosen year. 

In May 1991, Kodak unveiled the first digital single-lens reflex (DSLR) camera aimed at professional photographers. Called the DCS 100, it used the frame of a Nikon F3, but instead of film it contained a 1.3-megapixel Kodak image processor. It was the middle of the personal-computer revolution, and digital photography presented an array of at least theoretically attractive advantages over film and photo paper. Photographers would be able to capture, see, store, transmit, and manipulate digital photos — computer files composed of bits — far more quickly and easily. 

A lack of faith in the future. That could be the central problem with today’s perilous politics.

It’s an age-old dilemma because it’s far easier to tear down than to build up. Gravity and thermodynamics say so. For thousands of years, individuals or small groups struggled each day to to find food and shelter. Growing meant seizing land or treasure. Then the Industrial Revolution led to an escape from this zero-sum trap. 

Technology and creative collaboration unleashed a positive-sum explosion not only in living standards and life spans but also in the total number of humans and the rights they enjoyed. Suddenly, radically different futures were possible. This novel ability to think about the future then propelled additional waves of investment, discovery, and equality. 

Despite our riches, there’s evidence the rate of future-orienting activities has slowed in recent years. This downshift of constructive behaviors could be both a cause and effect of recent attacks on the American idea itself. If growth slows and opportunity recedes, many will question whether the system is fair. On the other hand, pessimistic zero-sum thinking can close off the vast opportunities of a collaborative, pluralistic society.

The chief constraints on the world are physical and temporal. Abundant information, however, helps us evade and sometimes conquer these facts of life. Without the internet, life in the middle of the COVID-19 pandemic would be far nastier and more brutish, even more solitary, and shorter, too. 

In our current predicament, the fundamental shortcomings of space and time are amplified. SARS-CoV-2 can’t replicate without our cells and our proximity to each other. So we separate for a period longer than the viral lifetime. Yet our bodies need calories, and time does not stop for debts and rents to be paid. 

So we must buy time with information. 

Extreme physical dis-connectivity requires extreme virtual connectivity. The speed of the virtual scale-up has been impressive. Teachers have adroitly shifted to meet with 30 million school children online. Colleges the same. Zoom video conferencing has spread faster than the virus, and Microsoft Teams added 12 million users in just one week, growing by more than a third to 44 million. Communities are leveraging social networks to support neighbors in a crunch. The government is (finally!) allowing doctors and patients to use FaceTime and Skype for remote video check-ups. The American internet infrastructure has handled increased demand admirably, with internet service providers and mobile carriers adding capacity and suspending data usage limits. 

Not every activity can be replicated online, however. And so we call on the wealth generated by our information-rich economy. Cash infusions, liquidity, loans, and forbearance can smooth away the sudden halt of face-to-face work — at least for a time. Massive investments in hospitals and medical supplies will save many of today’s ill, and tomorrow’s too. Wealth in a very real sense is resilience. 

But wealth must be constantly regenerated. We can only rely on past productivity for so long. And so we must get back to work — as quickly as possible, in as many places as possible.