A Theory of Verbal Inflation

Inflating the money supply and telling verbal lies about social phenomena are structurally equivalent activities.

Each process involves minting and circulating tokens that dilute the value of accumulated social order or negentropy. Printing new dollars exploits the accumulated value of the US government and economy and dilutes those accumulated reserves. Similarly, all of the politically correct fibs that now reign within institutional contexts exploit the accumulated value of traditional intellectual institutions (academia, journalism, etc.).

Both processes emit into public circulation new tokens that are indistinguishable—to most people—from the historically more valuable tokens. The verbal form of inflation is complicated by the fact that a small minority of people are capable of separating the false coins from the true, using the intersubjective protocols of authentic scientific rationality. But for most people, claims made by institutional experts are as fungible as greenbacks. The key point is that new dollars and false ideas don't add value to the system, they increase entropy, but they accrue value to those who spend them first. In both cases, the dilution of value across the system as a whole is only noticeable after many transactions. Thus, there are strong short term reasons to embrace both processes, but only if you are close to the printers.

In finance, this concept is known as the Cantillon effect. For instance, when the US government passes multi-trillion-dollar bailouts, this seems to juice the stock market before anything else. If your cost of living increases before you get those newly printed dollars, your economic power has been transferred to whoever owns the stocks.

Much less understood is that there also exists a verbal Cantillon effect. When little white lies get added to the body of official knowledge, they first juice the stock price of the public intellectuals peddling them. If a professor publishes a book with a top New York publisher promoting a novel but utterly fantastic claim about how the world works, it juices the stock price of the author, their university, and their publisher. And why shouldn't it? The author has made a novel discovery, which nobody understood until now. Most people have no way of vetting such claims directly, so it's perfectly rational for most people to increase their respect for, and allocate money to, all of the players involved in producing this discovery. Especially if it has profound moral significance, like the author has discovered a systematic but invisible social ill and they know how to fix it.

If you're sociologically close to the printers of official knowledge, little white lies are profitable. But if you're a normal person trying to figure out how the world works, you're screwed. By the time normal people hear that the discovery was false, they've been living for years according to a false mental model. Maybe society fully updates and the false idea is washed away forever, just as the effect of money printing eventually washes out with a rise in prices and wages across the board, but individuals close to the printers profited in the short term, and most people paid a cost.

Normal people are now realizing that our appointed guardians of language, the central bankers of knowledge, are inflating the word supply. Arguably, the period from 2014 to today might eventually be considered a period of verbal hyperinflation. This is the best way to understand the numerous examples of particularly bizarre claims coming from various pockets of the institutional intelligentsia in this period. Their quantity and shamelessness are reminiscent of those old photos from 1920s Germany, which show people carting around suitcases of money and stores weighing, instead of counting, it.

Verbal inflation today feels similar. It's as if public intellectuals today are forced to outbid each other with increasingly insane takes, and then they're paid by the pound.

The result is that normal people are now drastically and correctly discounting all new coins coming down from the central bankers of knowledge. We arrive, in other words, at an economic theory of what has been called the revolt of the public, the populist explosion, the decline of trust, etc.

A lot hinges on how you estimate the rate of verbal inflation. Obviously we don't have any reliable quantitative measures. But if you think there's only moderate verbal inflation, your strategic life decisions will be very different than if you think there is hyperinflation.

Personally, I think we're seeing runaway hyperinflation and the real value of new verbal fiat is rapidly going to zero, due to systemic dynamics that are game-theoretically locked in.

This should help you understand why the problem seems more severe than ever, and also why I'm so optimistic.

The buck stops with the arrival of a fully developed crypto-economy, the technological instantiation of what Confucius called the rectification of names. But that's another post, for another day.