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César Hidalgo: Why information grows: The evolution of order, from atoms to
economies

Article  in  The Review of Austrian Economics · September 2015

DOI: 10.1007/s11138-015-0328-6

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Rev Austrian Econ (2017) 30:147–151
DOI 10.1007/s11138-015-0328-6

César Hidalgo: Why information grows: The evolution

of order, from atoms to economies
New York, NY: Basic Books, 2015. xxi + 232 Pages. $26.99
(hardcover)

Harrison Searles 1

Published online: 2 September 2015

# Springer Science+Business Media New York 2015

Why Information Grows is as much a grand vision as a book that lays siege to many of
the fundamental questions facing the study of our world: How are complex entities able
to emerge? How are they able to adapt to change in a far-from-equilibrium world?
These are all questions that the Austrian tradition has treated of in economics and these
are the questions that the author, César Hidalgo, tackles in this book. Hidalgo’s work is
rife with many of the main themes that characterized Austrian economics as a unique
way of thinking, from a non-equilibrium outlook to an emphasis on the markets as
epistemic orders. Despite those similarities, Hidalgo does not come at the topic of
economic complexity, as most Austrians would, from an approach motivated by the
logic of human action; instead, he comes at the problem from an angle Austrian
economists will be largely unfamiliar with.
As implied by the book’s subtitle, The Evolution of Order, from Atoms to Economies,
at the heart of that angle is the author’s consideration of economic growth as an
epiphenomenon of something more general: The growth of information, understood
as physical order. Hidalgo’s book is therefore not a book about just economics; rather, it
is a book principally about information—about how complex objects can emerge and
come to embody ever greater quantities of information. As the author notes, “energy
and matter are here by default, information needs to find ways to emerge” (p. 175). Why
Information Grows is about figuring out what has made that emergence a reality and
how humanity has learned to profit from it. Although Hidalgo presents a theory
describing the growth of information per se, he does not provide a theory of the growth
of useful information. He is ultimately unable to explain how the economy is able to
select forms of information that are useful to solving the problems of human life
because his theory does not capture how monetary calculation selects for useful

* Harrison Searles
hsearles@gmu.edu

1
Burke, USA
148 H. Searles

information in the economy. Without monetary calculation and the entrepreneurs that
make use of it, no theory, not even one as bold and otherwise illuminating as Hidalgo’s,
can explain economic order as something that has evolved to satisfy people’s most
urgent appetites.
César Hidalgo argues that emergence of the high-information ecosystems that we
marvel at can be explained with three basic principles: The self-organization of
information in far-from-equilibrium systems, the accumulation of information in solids,
and the ability of matter to compute (Ibid). In Hidalgo’s theory, the evolution of
complexity begins with the self-organization of information. Without some form of
information already existing, the forces of selection, natural or otherwise, would not
have anything to operate on and could therefore not create the opportunity for more
complex orders to evolve. Far-from-equilibrium systems get the evolution of informa-
tion stated by providing the opportunity for simple order to self-organize. In such
systems, the self-organization of information is no longer an anomaly, calling for a deus
ex machina, but is instead apart of the nature of things (p. 30). The information that
spontaneously emerges may not be great in quantity. Nevertheless, it is still informa-
tion. In an otherwise disorganized world, the emergence of even the simplest kinds of
information can be an event of cosmic importance.
However, if that information does not take a sufficiently robust form, entropy, red in
tooth and claw, shall devour it. For information to grow, then, it first needs to survive.
To do so, it must do more than self-organize, it must last long enough to replicate and
recombine itself into novel forms of information. If it does not, information shall be as
ephemeral as words written upon swift-flowing water. Solids—that is, well-ordered
associations of atoms of sufficiently robust arrangement to last—bestow information
with the chemical form needed to survive and replicate (p. 34). They may not last
forever, as not even diamonds are forever, but solids nevertheless provide just enough
robustness for information to accumulate. The self-organization of order and its
incorporation in solids can therefore bring about the emergence of a great amount of
information and provide the basic stuff of which complex orders are formed.
Such information is largely restricted to proteins, yet our world is populated by
entities far more complex than just proteins. If it were not, these words would be neither
written nor read. For such entities to evolve, those complex entities must be able to
adapt to the problems they encounter, whether it be a problem of reproduction or a
problem of evading a predator. To solve these problems, life must process information
from its environment and to use those inputs to determine which of many possible
behavioral states it should take. In short, they have to compute (p. 35–36). How they
exactly go on computing is irrelevant.
Having established the three concepts explaining the growth of information is a
universal phenomenon across all complex systems, Hidalgo uses them as a lens
throughout the entire book, applied to one complex system in particular: The economy.
How well people are able to exploit its wealth-enhancing potential depends on how
well their societies are able to process information, with the principal limit being
cognitive limits of the human mind. Hidalgo describes those limits with the concept
of the ‘personbyte,’ defined as being “the maximum amount of knowledge and
knowhow that a human nervous system can accumulate as a fundamental unit of
measurement” (p. 81–82). For the author, it’s the limitations of the personbyte that
have necessitated the growth of information in human society through innovation and
Why information grows 149

the division of labor. “Our collective ability to accumulate knowledge is therefore

limited by both the finite capacity of individuals, which forces us to chop of large
volumes of knowledge and knowhow, and the problem of connecting individuals in a
network that can put this knowledge and knowhow back together” (p. 81). In accumu-
lating information outside of the human mind yet still available for human use, the
economy enables human beings to transcend the limitations of the personbyte.
The ability to embody information in external objects, such as an iPad or a light
bulb, plays a vital role in the survival and growth of information. Hidalgo calls these
items ‘crystals of imagination’ because they embody the imagination of their creators as
in addition to a certain quantity of information derived from the imaginations of their
artificers. The knowledge and knowhow contained in the brains of those artificers are
thereby embodied in the physical form of the object. Crystals of imagination can them
be reproduced at will, adding to the information contained in society. By creating such
items, people are able to economize their personbyte by surrounding themselves with
objects that know how to do things that they do not.
In radiating across all of society, crystals of imagination serve to allow a great portion
of the population to benefit from information that would have otherwise not been available
to them. They enable everybody in the market to benefit from the ideas of other human
beings. Fitting his whimsical style, Hidalgo describes this capability as magical: “The
ability of toothpaste to provide us with access to the practical uses of the knowledge and
knowhow embodied in a stranger’s nervous system is quite magical… Products are
magical also because they endow us with capacities that transcend our individual limits.
Products augment us, and this is a great reason why we want them.” (p. 66). Although
hard-nosed economists will certainly wince at the author’s use of the adjective ‘magical’
when describing the materialistic operation of the markets, he does have a point. After a
lifetime in an affluent society where products unthinkable to our not-so-distant ancestors
are assumed as minimal standards of human existence, it can be difficult to really marvel
at the epistemic role that even the most humble products serve in our lives. As described
by Leonard Reed in his essay “I, Pencil,” millions of people all have a hand to play in the
production of a simple pencil, all applying their specific knowledge and knowhow to their
specific part in that collaborative effort (Reed 2015, pp. 7–8).
The problem of adapting the economic system to the demands of embodying all of
the knowledge and knowhow necessary to produce even a single pencil is immense. All
of that knowledge and knowhow to make such an object must be broken up and
distributed in discrete packages across the economy. All of that information would not
be able to come together if the economy does not have the computational capacity to
combine all of those dispersed in a network that can reconstitute all of that information.
More information thus requires more complex networks to store them in (p. 135). The
computational capability of the market must grow along with the information it
contains. Such growth is dependent on a “combinatorial problem of connecting
individuals in a structure that can reconstitute the knowledge and knowhow that were
chopped up in the first place” (p. 81). Here, the author’s vision of the economy’s raison
d’être is very much akin to that elucidated by Friedrich Hayek (1945, p. 519): “The
peculiar character of the problem of a rational economic order is determined precisely
by the fact that the knowledge of the circumstances of which we must make uses never
exists in concentrated or integrated form but solely as the dispersed bits of incomplete
and frequently contradictory knowledge which all the separate individuals possess.”
150 H. Searles

As a complex system, the economy needs to solve the problem of configuring all of the
dispersed information together so that they can be accessed across the economy. But
economic life simply is not about creating information. It is about creating information
that is valuable to other people. As Hayek (1945, p. 520) writes further: “[The economic
problem of society] is a problem of how to secure the best use of resources known to any
of the members of society, for ends whose relative importance only these individuals
know.” The information that is embodied within the economy has to be useful. How it
becomes and remains useful is a matter of the economy figuring out how best to configure
people and crystals of imagination to best suit the problems people want solved. Just like
any other process of adaptation, configuring the economy to the most urgent human
desires is a matter of computation.
Although Hidalgo never directly mentions the concept, it is here that we are struck by
the role that monetary calculation plays in economics. Profit and loss are more than
motivations, they are also stressors communicating bits of information across the entire
economy that impel entrepreneurs to take actions that will create useful order (Mises 1998,
pp. 230–232). Without the application of monetary calculation to economic life, entrepre-
neurs would not be able to select plans to add to the useful information available to society
from those that are wasteful. However, with monetary calculation, entrepreneurs are aided
with the use of an algorithm incorporating information outside of his own personbyte.
Overall, monetary calculation is an economy’s mode of computation and it fits so tantaliz-
ingly well into César Hidalgo’s overall explanation of the emergence of order that it is
almost frustrating that monetary calculation serves no role in Hidalgo’s theory as it is.
In addition, in Why Information Grows, Hidalgo argues that economic growth
results partially from “our species’ collective computational capacities” (p. 179). But,
in the economy, computation is only happening at the level of individuals, in the form
of monetary calculation. Collaboration emerges as the outcome of millions of entre-
preneurs imagining new innovations, and applying the calculus of profit and loss to
their actions. What enables an economy to adapt to the introduction of a new innova-
tion is not a collective calculation of costs and benefits, but the monetary calculation of
millions of producers and consumers alike. Monetary calculation is therefore the
fundamental force that provides the means of processing information to coordinate
the disparate parts of the economy together in a system that is able to exploit the
knowledge and knowhow contained within it.
From an Austrian point of view, what is most lacking in Why Information Grows is
any emphasis played, an issue that tying directly back into Hidalgo’s lack of regard for
monetary calculation. Entrepreneurs, the creative agents alert to the possibilities that
have gone hitherto unnoticed, are the dramatis personae of economic evolution.
Unfortunately, Hidalgo does not incorporate these agents of change into his account
of the growth of information in the economy. Without entrepreneurs, new forms of
information would not be created. Without them, the economy would be a dead
ecosystem. Their actions transcend beyond the shuffling of items from here to there.
They are a fundamentally creative force (McCloskey 2010, pp. 380–383). Entrepre-
neurs’ new ideas about how to organize economic life and their commitment to bring
those ideas to the market provide the economy with the creativity necessary to
consistently create new forms of information. Entrepreneurs are the vehicles for the
growth of information in the economy, without them the economy could not compute
how to best organize all of the dispersed fragments of information within it.
Why information grows 151

Hidalgo’s vision of the economy therefore cannot capture how the economy changes
to adapt to an uncertain future and so it cannot appreciate the role that the division of
labor, combined with private ownership of crystals of imagination, has played in the
growth of information over the past two centuries or so. As a complex system, the
economy cannot jump from state to state; instead, the economy can only change
through incremental change. The case for economic freedom and property rights are
inextricably linked to the necessity of such incremental change, in the form of
entrepreneurial discovery, and the recognition that the information needed to determine
whether a discovery is beneficial or not cannot be contained in a single personbyte, or
for that matter a governmentbyte.
At the end of the book, Hidalgo writes: “To fight our individual limitations we need
to collaborate. We form networks that allow us to embody more knowledge and
knowhow, because without them our ability to process information and create crystals
of imagination would be highly limited” (p. 180). Just like ‘cooperate’ and ‘share,’
‘collaboration’ is a word that must be used with care to describe the modern economy,
since it is all too easy of falling into the trap of thinking that it refers to collaboration
across all of society towards agreed upon ends, the form of encompassing cooperation
that has characterized our species for tens of thousands of years, and not the free
association of people for their own ends under the rule of law. If we want the economy
to shift to a better, more wealthy state, we must honor people’s decisions to innovate
and practice creative destruction at their own initiative, even if such actions may not
seem to be collaborative with society as a whole.
Overall, César Hidalgo’s Why Information Grows is another work in the growing
study of the economy from a complexity approach that all who study the Austrian
approach to economics would find of interest. The economy itself is a complex system
in which the growth of information has occurred at a rate that we have never seen
elsewhere in the universe. It is an epistemic order that enables human beings to
transcend the limits of the personbyte and to make use of information that they would
have otherwise not had access to in solving the problems of human existence.
Hidalgo’s argument about economic development is that societies have become rich by
learning how to overcome together the computational limits of the personbyte, which is
certainly an argument germane to the Austrian understanding of economic development.
Both the networks connecting people together and the physical objects interspersed across
those networks are able to amplify knowledge and imagination. In doing so, they push the
computational capacity of the human species to ever greater capabilities and allow for ever
more information to be dispersed across the economy. Nevertheless, without an emphasis
on entrepreneurship and monetary calculation, Hidalgo’s account of economic order is
incomplete—worthy of study, but nevertheless incomplete.

References

Hayek, F. A. (1945). The use of knowledge in society. American Economic Review, 35(4), 519–530.
McCloskey, D. N. (2010). Bourgeois dignity: Why economics can’t explain the modern world. Chicago:
University of Chicago Press.
Mises, L. (1998). Human action: A treatise on economics. Auburn: Ludwig von Mises Institute.
Reed, L. E. (2015). I, pencil: My family tree as told to Leonard E. Reed. Foundation for Economic Education.
http://fee.org/files/doclib/20150601_IPencilPDFupdatecolor.pdf. Accessed 18 Jul 2015.

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