Knowledge is key

How many keys are there in a piano? Eighty-eight. How many songs are in a piano? Trick question: There are no songs “in” a piano. Songs are created in the minds of human beings. And you are right, the potential number approaches infinity. The value of a piano is not the 88 keys. The value of a piano is the unlimited beauty you can create with it.

The physicist-economist Cesar Hidalgo writes that “the universe is made up of energy, matter, and information, but information is what makes the universe interesting.” He illustrates this idea with a story about a Bugatti supercar. The cost per pound of this vehicle is thousands of dollars.

“So now imagine you make a mistake, and you end up crashing it against the wall and the car is completely destroyed. Well, you destroy the value of the car, but all of the atoms are there. The atoms were not destroyed in that crash. So, what that tells you is that you destroyed information, destroying the order of the atoms, the way that they were arranged. And by doing that you destroyed the value. And that helps you understand that there might be an important connection between our ability to create these very unique combinations of order and economic value.”

Wealth is not about the number of atoms we have. Wealth is about knowledge. In 2018 Paul Romer and William Nordhaus shared the Nobel prize in economics for recognizing the true nature of wealth as knowledge. This is something that Julian Simon heavily emphasised and has said for many years, and his contribution was to shift the debate on resource use away from the physical limits of finite earth to look at knowledge as the fount of value.