The most important book of the '80s may well be George Gilder's newly published "Wealth and Poverty." To read it is to study economics by flashes of lightning. Many in the Reagan camp are already pondering it.
Among them: Reagan's OMB director David Stockman. Having read the book in manuscript, Stockman pronounced it "Promethean in its intellectual power and insight. It shatters once and for all the Keynesian and welfare-state illusions that burden the failed conventional wisdom of our era." Supply-siders Jack Kemp and Paul Craig Roberts praise it in similar terms.
There is no question the book will have policy impact. It may have similar impact on public opinion, because it is the most eloquent and imaginative essay on economics in memory. Even at its most abstract, it manages to avoid being narrowly technical.
Not the least of its virtues is that it contains the best available introduction to supply-side economics.
The core of the book is simple: Wealth is produced. Production is dynamic. Supply creates demand. Any sound economic policy must recognize these facts, and conservatives have sometimes ignored them as willfully as liberals.
Among the corollaries is that demand can't create supply. Even Marx realized that what counted was the means of production. The means of consumption -- principally money -- can't increase wealth. Try to stimulate supply by creating a phony demand -- i.e., by printing more money -- and you get not production but inflation. "Stagflation," long thought to be a paradox, is actually the natural result of the kind of Keynesian fiscal policies we've been following. (Keynes, Gilder contends, was not in this sense a "Keynesian.")
How does supply create demand? Well, did Shakespeare write his masterpieces beause he sensed a global demand for "Hamlet" and "Othello"? Did Alexander Graham Bell invent the telephone because he knew people were clamoring for a way to call their distant relatives? Of course not. The producer makes a thing of value. Others, seeing its value, pay for it, sometimes for centuries.
To produce is to create, to put new things in the world. Only when they exist will there be a demand for them. There was no demand for the automobile before the automobile. Nor was there a demand for oil. The wealth of Arabia was created in Detroit. Camel-drivers had no use for it; they plodded over it for centuries. (Only the accidental jurisdiction of sheiks over that sandy terrain makes them world figures, since it allows them to claim ownership of a substance they neither produced nor made valuable.)
Consider a homelier instance: "Great Barrington, Mass., contains a Somali restaurant, a baroque music school and an Outward Bound Youth Center not because of a spontaneous need for these ventures, but because of the presence of men who chose to start themn and succeeded in creating a demand for them." Beautiful.
The original man is, by definition, he who thinks of something others -- even other original men -- haven't thought of. He is the world's true leader, not because he is elected, but because he just does it. He makes the unforeseeable new thing: the whell, the poem, the airplane. He finds his own unique niche, and nobody could have predicted it or found it for him, else he wouldn't be original.
Hence the policy task of government is not to direct economic growth -- since it occurs in little random explosions -- but to get out of the way and let it happen. That will require a more modest breeed of politician than we've been accustomed to lately -- most of whom talk as if they were the real producers and the capitalists were the predators.
Then again, we have discovered a new breed of politicians who know their place: men like Reagan, and Kemp, and Stockman. Men who read men like George Gilder. Men who understand what the materialists don't: "that faith and imagination are the most important capital goods in the American economy, that wealth is a product less of money than of mind."