Capitalism vs. socialism: economist George Gilder weighs in

This is a rush transcript from "Life, Liberty & Levin," October 14, 2018. This copy may not be in its final form and may be updated.

MARK LEVIN, HOST: Hello America, I'm Mark Levin. This is "Life, Liberty & Levin." We have a great guest, George Gilder, how are you?

GEORGE GILDER, CO-FOUNDER, DISCOVERY INSTITUTE: Great to see you, Mark.

LEVIN: I've read you for years, you know, it's first time we've never met. In fact, we've never talked before. Now, you attended Harvard and you still are successful. That's a good thing.

GILDER: I wasn't successful at Harvard.

LEVIN: Yes, you pioneered the formulation of supply side economics when you served as Chairman of the Lehrman Institute's Economic Roundtable. Program Director for the Manhattan Institute, you're the author of "Men in Marriage," "Visible Man," "Wealth and Poverty," which was a big book that had a big influence on me. "The Spirit of Enterprise," "Microcosm," "Telecosm," and "The Silicon Eye." And now your newest book, "Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy." All right, there's a lot to unravel here, but let's get started this way. Capitalism versus socialism. Explain.

GILDER: Well, capitalism is -- derives from the Latin word for head, caput, and capitalism is the mind-based system and the key characteristic of the human mind is that we're creative, and as Albert Hirschman, the Princeton economist once put it, creativity always comes as a surprise to us, and if it didn't, planning would prevail and socialism would work.

Creativity is the foundation of capitalism. And this is -- and socialism is based on planning. It's based on the assumption that we'd already know all we need to know in order to plan our future, and so it leads to tyranny, and that's really the difference. Liberty versus tyranny as someone once put it.

LEVIN: Isn't this the general problem with progressivism, across the board. That is they think they know all they need to know, and now it's just a matter of redistributing ideas, redistributing wealth, redistributing -- it isn't part of the problem, that's easy for people to understand whereas the future is difficult for people to understand.

GILDER: The future is unpredictable and in order to deal with it successfully, you'll have to learn, and learning has a lot of constraints. Economic growth is the increase of knowledge and the increase of knowledge is learning, and the most widely documented phenomenon in all business is called the learning curve, with every doubling of total sales, you get a 20 percent to 30 percent drop in prices or in costs. And this drop in cost is evident across all industries. Documented by -- of the Bain & Company and the Boston Consulting Group and all these learning curve-base consultancies.

Learning is the heart of capitalism. Learning is finding out things you don't already know. And that depends on openness to creativity, to surprise, and surprise is really crucial to capitalism. You can't predict the products of a really creative process.

LEVIN: So when the government gets in the business of regulating that, of redistributing wealth, of punishing some businesses, subsidizing other businesses, am I correct in hearing what you're saying is it's an attack on many things but especially knowledge.

GILDER: If you -- a government guarantee prohibits learning and thus prohibits economic growth. All economic growth is fundamentally learning. All wealth is fundamentally knowledge, as Thomas Sowell observed, the Neanderthal in his cave had all the physical resources we have today. The difference between our age and the Stone Age is entirely the growth of knowledge, and the growth of knowledge is learning, and that means economic growth is primarily learning, and learning can't be guaranteed.

Learning is finding out things you don't already know. So any guarantee prohibits learning, and thus prohibits growth.

LEVIN: Isn't that not grand irony, then, that the progressive mind-set claims that their decisions are based on science and knowledge, when in fact, it's not based on science or knowledge, it's based on an ideology?

GILDER: It's definitely based on doctrine and dogma. It's really -- in my new book, "Life After Google," I do a criticism of what I call Google Marxism.

LEVIN: What is Google Marxism.

GILDER: Well, Marx, his great error, his real mistake, was to imagine that the industrial revolution of the 19th Century, all those railways and dark satanic mills and factories and turbines and the beginning of electricity represented the final human achievement in productivity.

So in the future, what would matter is not the creation of wealth, but the redistribution of wealth. Well, Google comes back today and says that it's search engines, it's machine learning, it's artificial intelligence, it's robotics, it's biotech is the ultimate human attainment, and in the future, most of us will be able to retire to beaches while Sergei Brynn and Larry Page of Google fly off to remote planets with Elon Musk in a winner-take all universe.

And this is a belief that Bill Buckley used to call immanentizing the eschaton. The eschaton is final things, final days, and each generation of technologists imagine that their technological vision, whether it was railroads or spaceflight or artificial intelligence is the final attainment, and this is really what socialism is about.

It's about saying that what we have now is all we're going to get, that we know as much as we need to know to plan the entire future, and that is fundamentally hostile to human creativity.

LEVIN: This mind-set, this Google Marxism, it cuts across all these platforms, doesn't it? Facebook, Twitter, how about the Silicon Valley? You've referenced that in the past as, I think, Silicon Valley Marxism, isn't that right?

GILDER: Yes, well, there are a lot of philosophers and philosopher kings in Silicon Valley and when they pronounce on public issues, they imagine that their technology is an eschaton, it's an ultimate thing and it actually usurps human minds.

My friend Ray Kurzweil introduced the concept of a singularity, the moment when our computer technology would exceed human minds on all dimensions, and at that point, the technology would produce new machines and a cascade of inventions that leave humans far behind.

LEVIN: Is that possible?

GILDER: No.

LEVIN: Why?

GILDER: Because this artificial intelligence is a machine. And remember, I stressed surprise. Machines, if machines surprised you, they're probably breaking down. Machines are really deterministic almost by definition, and determinism in information theory, which underlies all of Silicon Valley, information is what's not determined by the machine. Information is the creativity of capitalism.

LEVIN: So machines have masters called human beings.

GILDER: Machines have masters. Kurt Godel back in 1931 proved that any logical scheme, including a computer, anything, is necessarily dependent upon axioms outside the box. What's inside the box is the machine, but any machine is necessarily dependent on what Alan Turing called an oracle -- a source of creativity, surprise, outside the box.

LEVIN: Can machines have judgment?

GILDER: No, not really. They can repeat or imitate processes of judgment supplied to them by human beings, but every symbol that's employed in the machine has to be defined by a human interpreter, and so, so the whole idea that these machine shuffling symbols actually have meaning without human providers is itself delusional, and I think it's really ironic that all these brilliant computer scientists of Silicon Valley have lost track of the very essence of their science. The essence of their science was begun by Turing and Godel and nothing in artificial intelligence has refuted these original insights which necessarily make computers dependent on human inputs.

LEVIN: So if we understand technology -- macro technology -- we have really nothing to fear, do we?

GILDER: No, I mean, this is just continued a evolution of the economy. It's not as big a change at all as between agriculture and factories in the 19th Century. This complete transformation of the global economy with the first machines of the industrial revolution, exceeded an impact and drama this introduction of robotics, which is just kind of an extension of all the existing robots that run our existing factories. It just -- but on the other hand, it isn't -- it is exciting, these new machines that are being generated, and they will, like all previous machines increase employment.

Human beings are not employed because they're unproductive. They're employed because they are productive. And so machines that render human beings more productive render them more employable, not less employable. This whole fantasy in Silicon Valley that their AI is going to destroy jobs everywhere ...

LEVIN: What's AI.?

GILDER: Artificial intelligence, their artificial intelligence, their machine learning is going to destroy jobs. Everybody out there believes that, but it's nonsense. All such machines enhance human capabilities, and thus, make humans more employable and better jobs and more exciting jobs and safer jobs.

LEVIN: And improved lifestyles.

GILDER: What?

LEVIN: And improve lifestyles.

GILDER: Of course, in a steady expansion is of knowledge and wealth.

LEVIN: And, of course, who services these machines? You need engineers, you need mechanics, you need whatever, you need people who develop software. People who develop hardware and so forth and so on. But when we come back, I want to ask you something about cryptocosm. This is a big word that has a lot of meaning, and you're telling me, before we came on the program and what you're saying in your book is that Google one day will be rather passe.

In fact, there's going to be technology that leapfrogs it and Facebook and Twitter and all the rest of them. This is fascinating.

Ladies and gentlemen, don't forget, almost every week night you can watch me on Levin TV, Levin TV. Here's how you sign up. Go to crtv.com/mark, crtv.com/mark or give us a call at 844-LEVIN-TV. 844-LEVIN-TV. We'd love to have you over there. We'll be right back.

LEVIN: Now, George Gilder, "Life After Google." So you feel that we're on the precipice of leapfrogging these platforms, these technologies like Google and Facebook and Twitter and so forth. You use this word cryptocosm. You can explain?

GILDER: The internet needs a new security architecture. Anybody who goes on the internet knows it. The constant demand for new user names, passwords, PINs, mother's maiden names, all the apparatus of security defeats itself on the internet today, and on the internet ...

LEVIN: What is the purpose of all that?

GILDER: It's supposedly to stop fraud and to create a basis for transactions on the internet. The internet wasn't designed for transactions. It was designed for e-mail and hyper texting and communication. With communication's first protocol; and today, since it's becoming a commercial engine, the internet, it needs a security first protocol, and today, you have to virtually strip naked before the camera in order to conduct a transaction on the internet. You have to know yourself -- usernames and passwords for all the hundreds and thousands of possible web pages in which you might transact. It's just absurd system.

LEVIN: Cumbersome.

GILDER: Cumbersome and moreover, it's a kind of porous pyramid that we're all the money and power rises to the top, to companies like Google and Facebook and whatever. And the cryptocosm is a new architecture for the internet that's based first on security.

Security first in which rather than having you learn user names and passwords for all websites across the internet, instead, you have a particular identity established on a blockchain which is immutable database through time.

LEVIN: All right, hold on. What is a blockchain?

GILDER: A blockchain is an immutable database distributed across the internet. Rather than have all your data in some big data warehouse in the Cloud, as they call it, instead all the data is distributed across all the nodes of the network, so that any hacker who hacks one computer can gain nothing except what's in that particular computer, because the information is distributed across the network, you have to capture 51 percent of all the nodes on the network in order to defraud the network.

LEVIN: Let me try it this way. You've got a bulk of information about me, Mark Levin, but bits and pieces are in different parts. So if somebody hacks this part, they don't have enough for this part. They hack this part, they don't have enough for this part.

GILDER: They hack the entire blockchain which includes your identification in a time stamped immutable form is distributed across all the nodes with the entire blockchain in its mathematically compressed form on every node, and the nodes are constantly communicating with one another. Unless you capture 51 percent of all the nodes on the internet which is essentially impossible, you can't change anything on the blockchain.

LEVIN: Is this being developed now?

GILDER: It's being developed now, it was invented, essentially by a few academics, but it was essentially incorporated in a product by Satoshi Nakamoto in 2008 and it's 10 years later, it's become the heart of what's called the cryptocosm and all sorts of embellishments and elaborations of it are under way today, and it's the most exciting thing that's going on in the world economy. It's like a new internet, plus a new global financial system being incubated simultaneously today all around the world.

LEVIN: Now this new financial system. Are you talking about things like Bitcoin. What are these new financial systems? Who's behind our new financial system?

GILDER: Well, today, of the existing financial system -- a lot of people don't realize it, but it's essentially come to the end of the line. I wrote about it in the scandal of money. Today, the biggest industry in the world economy by far is currency trading. Just shuffling currencies back and forth. It's 73 times as big as all trade in goods and services, it's 25 times all global GDP and it doesn't even accomplish stable or meaningful monetary values across the world economy.

Its sole function really is to endow Central Banks with the capability of generating money and imposing some 250 -- it's doomsday pot of $250 trillion of debt on the world economy. This system is not going to be viable over the future, so it's providential in my view today that scores of thousands of the most brilliant young entrepreneurs in the world economy are creating a new monetary system.

LEVIN: A private monetary system?

GILDER: It's public, it's private, it's ubiquitous, it starts with Bitcoin, which, as I explained in my book has various flaws that mean that it is not going to be in its current form, at least, the foundation for a new currency. Satoshi was trying to create a new gold and gold is the one monetary element has endured through the centuries and has been the monetary premise for all the greatest eras of industrial development in the history of the world. The great miracle of capitalism was founded on money, which was identified as gold, and Satoshi wanted to create a new digital gold, and he almost did it, and now there are thousands of people trying to actually accomplish this goal, and when they do, it will once again restore money on a real basis that allows it to be a measuring stick rather than a magic wand for Central Banks.

LEVIN: We'll be right back.

TODD PIRO, CORRESPONDENT, FOX NEWS: : Live from "America's News Headquarters," I'm Todd Piro. President Trump authorizing additional disaster assistance for Florida in the wake of Hurricane Michael. This expands on the previous funding authorized by the President the day after the Category 4 storm made landfall. Hurricane Michael was the strongest storm to hit the mainland US in 50 years. At least 19 people killed by the storm and that number could rise as emergency workers continue clearing debris.

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LEVIN: So George Gilder, people are going to think we're painting a brave new world here, but you're saying these are not abstractions or theory, these are realities in their infancy. That is this new form of international currency. Or this new form of communication and technology. This is called cryptocosm.

GILDER: The cryptocosm.

LEVIN: So again, what does that mean exactly and how will society react to such a thing? I mean, it's rather revolutionary.

GILDER: Well, it's revolutionary but it restores the individual identity as the heart of the world economy. It allows facts and truths to be established on the internet. It makes the individual paramount. It exalts the individual human mind, the creative force in the world, the most powerful intellectual entity in the history of the universe, paramount, again.

You know, people talk about artificial intelligenceusurping the human mind, but when big blue defeated Kasparov in chess, Kasparov was using 14 watts between -- 12 and 14 watts of energy. Big blue was using effectively giga watts of energy. Billions of watts of energy and was linked to other databases all across the world economy.

The human mind is all that created big blue, all that programmed big blue, all that provided any intelligence to big blue. The human mind is the ultimate creative force in the image of their creator, and this is the heart of what the cryptocosm does, it reestablishes the individual creator as the heart of the system rather than having some great system of databases in the Cloud be the heart of the system.

LEVIN: And it's all without government.

GILDER: It's all without -- well, government is very important. Government provides what in information theory would call a low entropy carrier, that's a predictable carrier for the creative surprising contributions of capitalism, but the low entropy carrier, that is the predictable systems of family, morality, regulation, law, epitomized by the genius of the Constitution and the founders. That's a low entropy carrier that allows high entropy, unpredictable surprises of creativity.

LEVIN: But then there is big government, which is different, which regulates, which taxes.

GILDER: And guarantees, and this is what I drill it on. When you guarantee something, you prohibit learning. Learning is a process where you have to be -- where it has to be falsifiable. You have to be able to disprove your learning process, and if you can't, if it's guaranteed by the government, it prohibits learning, and thus stifles economic growth.

LEVIN: And what is -- I've never quite understood, we have this debate about net neutrality. It sounds counterintuitive to me. What is net neutrality?

GILDER: It's a scheme of price controls for the internet. You know, the only thing that really matters with regard to whether all the various bits and bites are treated equally across the internet is how much bandwidth there is. If there's a lot of investment in bandwidth, net neutrality is inevitable.

If you have the best content for the internet, you want it to be on everybody's conduit. You don't want to restrict it to one particular set of pipes. If you have the best communication system across the internet, you want everybody's content on it. There's no incentive to buy a serve -- twist or suppress or allocate a bandwidth unless bandwidth is scarce and what makes bandwidth scarce are laws, are net neutrality laws that impose price controls across the internet on every connection, and thus, mean that companies like AT&T go off and buy Time Warner and Verizon pursues the "Huffington Post" rather than really focusing on the huge opportunities and providing bandwidth for an ever expanding cryptocosm.

LEVIN: So your pun will be, government keep your hands off us it. Leave it alone, you politicians, you don't even know what you're talking about. Pretty much?

GILDER: Pretty much. I think you pretty much have it.

LEVIN: Ladies and gentlemen, don't forget, most week nights, we'd love to have you over at Levin TV where I do my program there on our digital TV show. You can join us by going to crtv.com/mark, crtv.com/mark or call us at 844-LEVIN-TV, 844-LEVIN-TV. We'll be right back.

LEVIN: Apple, Amazon, Google -- these are like the biggest corporations in the world, but ten years from now, they may not be, right?

GILDER: Well, ten years ago the biggest corporations in the world by market cap were Exxon, Walmart, the Petroleum Bank, China Petroleum and the Industrial and Commercial Bank of China. Ten years later, the top four companies in the world are Apple, Amazon, Google and Microsoft by market cap. I mean, who would have predicted that? And I believe that in the next ten years, there will be a similar turnover, and there will be cryptocosmic companies who will dominate the list of the top market caps in the world.

LEVIN: Do you think, back to your industrial revolution point, we are in a constant state of economic revolution. Depending on, you know, the extent to which the government interferes, like you were saying, socialism, I mean, pure socialism or communism, I mean, they kill knowledge, they kill -- they're police states, but the freer society, the more progress, the more liberty, the better the quality of life. I mean within rules and laws, we understand that. We have the Constitution, is that about right?

GILDER: Yes, absolutely. It can accommodate surprise. A surprise to a socialist is always a disruption of the plan.

LEVIN: That's right. You once wrote, "A successful economy depends on the proliferation of the rich, on creating a large class of risk-taking men, who are willing to shun the easy channels of a comfortable life in order to create new enterprise, win huge profits and invest them again." Do you think our country today, do you think most people -- forget about the elites -- do you think most people still believe that?

GILDER: I hope so. Polls indicate that young people are increasingly estranged from capitalism. I think largely because of a great government effort to guarantee futures through the student loan program. $1.5 trillion of guaranteed money for students. Those aren't really loans. Loans require a bank to scrutinize the borrower and it's an intelligent learning process in capitalism.

This is guaranteed money for the university system, and the university system took the money and ran. Students ended up paying just as much as before, but all the prices went up faster than in any other product in the whole economy. It's one of the great scandals of recent decades, but it shows the effects of government attempts to guarantee stuff. You guarantee stuff, you stifle learning and you produce failure.

LEVIN: Is this why -- let's just take an example, a prominent example. Climate change, so-called. Is this why we can never have an honest debate about it. Suddenly you are a denier. You can't even discuss the so-called science, you can discuss anything. It shuts down knowledge, shuts down debate, shuts down the human mind and we just all line up.

GILDER: Absolutely.

LEVIN: You have examples of that, too, right?

GILDER: I think that's as good as example as there is. You aren't allowed to debate -- I mean climate change is a real phenomena, climate is constantly changing, however, you know, the Roman period, the Minoan period, the Medieval climate and we're just as hot by most evidence, substantially hotter than it is today, and so it's hard to say that climate change is a big threat today when previous episodes of global warming were regarded as optimal or great triumphant periods of human advance and progress.

So I think it's really rather bizarre, this effort to suppress any -- but this is a way to blame Trump for the weather, Republicans for the weather. Imagine, has the left ever developed such an ingenious campaigning strategy as to blame the weather on the Republicans? People are always dissatisfied with the weather. It's worth remembering, though, we had dust bowls back the 1930s when temperatures were just about as high as today, and you know, the weather is always changing. It's always unsatisfactory, and if you can blame it on the Republicans, you've got a big political coup.

LEVIN: That's right. So knowledge and anti-knowledge, it seems to be reversed when it comes to the left. We'll be right back.

George Gilder, you have something called "The Israel Test." What's "The Israel Test?"

GILDER: Well it's a book I wrote about five or six years ago which focused on Israel as the epitome of a successful inventive society. It's really the most successful technological country in the world today. Most of American companies are dependent on Israeli laboratories and inventions, the cryptocosm really began in Israel when the Vitalik Buterin visited the country and found -- he was an advocate of Bitcoin and he found Mastercoins and named coins and colored coins as they called them and he established ethereum which has since produced some $20 billion of new initial coin offerings in the last 12 months, which really is solving this 90 percent drop in initial public offerings.

LEVIN: Why Israel?

GILDER: Because Israel is creative, and the image of their creator, it's inventive, it's really the epitome of a creative capitalist country, and that's why it's hated. That's why it's so -- why there's so much hostility to it. There's no other reason.

LEVIN: It used to be a socialist economy, but under Netanyahu, they've moved -- turned to capitalism.

GILDER: Netanyahu turned it around and it's now a flourishing capitalist economy despite a big government burden imposed by the military defenses which they've got to maintain, and so essentially, the big question of the Israel test is, do you admire success? Do you try to emulate success and achievement or do you envy it and resent it? And the people who succeed in the world admires people -- other successful people, and want to emulate them, want to imitate them. The failures in the world look at success and envy and resent it, and that's really the great divide, in all our hearts and across the world economy, and I sum it up as "The Israel Test."

LEVIN: Very good. We'll be right back. George Gilder, we are going to do the impossible here. In one minute and a half, where you see this country in ten years?

GILDER: It's life after Google. It is dominated by an entirely new architecture of the internet and an entirely new basis for global money and an entirely new financial system. It's transformed America as one of our recent Presidents described it, only transformed in a way that restores the rights and identities of individuals that understands that the one paramount source of creativity in the world economy is the human mind and it is modeled on the distribution of the human mind.

The human mind is not all conglomerated in a few clouds, it distributed around the world and what determines whether a society succeeded or failed is whether they accommodate the surprising and providential creativity of human beings, creative in the image of their creator. That is really the great issue. I think the cryptocosm endows individuals once again with control over their content, with control over their identities, with avenues for their aspiration and creativity.

LEVIN: We shouldn't fear it. We should embrace it. It's been a great pleasure.

GILDER: Thank you so much, Mark. I appreciate it.

LEVIN: See you next time on "Life, Liberty & Levin."

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