How Does Your Information Garden Grow?

EconTalk Extra
by Amy Willis
Cesar Hidalgo on Why Informati... Hidalgo Follow-up...

Physicist Cesar Hidalgo's new book, Why Information Grows was the subject of this week's episode. While Hidalgo and Roberts's ideas about information and the networks that transmit it have much in common, we'd like to continue to explore some of these ideas with you.

What's your reaction to the questions for thought below? Share your own in the comments, or share the results of a conversation you've had with friends. However you do it, we love to hear from you.

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1. How is "information" distinct from "knowledge?" Essayist Michel de Montaigne once wrote, "We can be knowledgeable with other men's knowledge, but we can't be wise with other men's wisdom." How does Montaigne's remark apply to the way Hidalgo thinks about knowledge and information?

2. Hidalgo emphasizes the process and importance of the accumulation of information, while Nobel laureate F.A. Hayek, seemed to emphasize something different, particularly in his famous article "The Use of Knowledge in Society." How does Hayek's conception of knowledge differ from Hidalgo's?

3. Hidalgo describes the price system as follows:

So, the price system--I agree[?] it helps reveal information about supply/demand things. But there is much more to the economy than that. It's not just about making commercial transactions. What makes an economy work at the end is that we figure out things that are worth transacting. And that's a part, you know, of the economy that I haven't seen that much explaining the theories in which the things that get produced, more or less are assumed to be there because they are either widgets or they are, you know, some sort of object that we assume that it's there. And the focus has been most on the commercial transactions among those things that exist, rather than on the interactions that have to happen among people to bring things into existence.
How accurate is this description? Does it go beyond "mainstream," or textbook, economics, or is it, as Roberts suggests, "a bit of a straw man?' Explain.

4. When Roberts asks Hidalgo about the growth of China, he responds, "...what explains for me the growth of China is not low prices, but the relatively low price of high capacity." What does he mean by this, and what does it suggest about the potential for continued growth in China?

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COMMENTS (3 to date)
saloni writes:

Knowledge is extreme different from information.
Suppose a monopolist has an information about the demand curve and discriminating ways. But without knowledge he may not be able to earn extra profit as he will not be able to judge which type of discrimination to use or if there is sudden change then how to respond via prices.

Information is all about knowing the formulas to operate in economy. Knowledge tells where to apply those formulas.

Michael Bromley writes:

A thought on your question on China:

However much social capital Communist China maintained, it was kept alive in the Chinese diaspora with Hong Kong as its central bank, as it were. Without the post-war presence of Hong Kong, China today is a vastly different place.

Taiwan surely played an important role in the reentry of cultural knowledge and creativity, as well, but in my experience working with U.S. consumer goods manufacturing and South American export markets in the late 80's/ early 90's, mainland China consumer goods manufacturing was as driven by Hong Kong agents and manufacturers working with buyers of international Chinese ethnics to source from the mainland as from U.S. major market retail buyers and, subsequently, U.S. brands moving production there. The former paved the way for the latter.

I think Hidalgo gives too much credit to mainland China in this. Certainly mainland conditions allowed for scalability, which you pointed to as an essential Chinese advantage in manufacturing, but it had to scale up from somewhere.

Michael C Price writes:

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