Towards an Economic Agenda

The “Great COVID-19 Lockdown” of 2020 is a point of no return for global economy, which since the ‘90s has been struggling with the growing complexity of the digital age brought about by the Third Industrial Revolution: PCs, the Internet, the World Wide Web, smartphones, etc.

The purely financial response to the “Great Recession” of 2007-2009 did not address at all the economic fundamentals underlying the crisis.

During the last three centuries, the human society accustomed itself to live in a world dominated by the economic incentives and the legal framework of the scale economies typical of the First and Second Industrial Revolution: the greater the production, the lesser the cost.

The Third Industrial Revolution is an altogether different phenomenon, which entailed a paradigm shift to focus on network effects (the greater the adoption, the greater the value) and virality (compound rate of adoption).

In the last three decades, pre-existing economic incentives and the available legal framework have not kept pace with technological and entrepreneurial change, thus creating enormous tension in the cogs of the economy and frictional heat in the tissue of society.

The COVID-19 pandemics may exacerbate these tensions and frictions up to a breaking point if no compelling action is undertaken to correct the current rigidities and create a healthy cyber ecosystem.

Let us explain the aforementioned long-run historical trends with the following graph by M. YANO, Creation of a healthy cyber ecosystem, “CEPR / VoxEU”, 14/04/2020.

On the y-axis, we plot a hypothetical measure of the productivity of the economy and, on the x-axis, we plot a hypothetical measure of the quality of the market, i.e. allocation efficiency and transaction fairness.

Every productivity improvement requires an adjustment in societal self-regulation, if market quality is not to deteriorate as a consequence of momentum change.

Furthermore, subsequent adjustments add up to previous ones in a cumulative process, where phenomena of hysteresis can hinder the evolution of the system.

Suddenly, in 2020 we are simultaneously required to:

  • Fix the issues of current intellectual property protection, whose global expansion and indefinite extension from the original 14-year length (up to almost a century in certain cases) has created: international workers exploitation, wasteful IP trolling, costly defensive and offensive IP aggregation, compression of the knowledge-sharing function of the legal instrument, slow and low-quality prior art research.
  • Fix the issues of current labor laws, whose insider-outsider matrix has created a dual labor market.
  • Fix the issues of the current securities laws, whose implied moral hazard for a government-protected financial sector has created global financial crises and huge economic inequalities.
  • Create a new legal system in order to avoid the danger of:
    • no intellectual property protection (no data ownership, data concentration in few “platform monopolies”);
    • no labor safety (the “gig economy”, blurry line between employee and employer);
    • no financial inclusion (“all data is credit data”, social credit systems).

Today, apart from some very unfortunate exceptions that deserve unconditional support, almost every country of the world is able to deploy the technologies needed to address this enormous and historic challenge.

  • Open web technologies (web standards, open source software, APIs, etc.) can dramatically reduce the technological gap of small and medium enterprises in search of new sales channels and of savings on recurring operating costs.
  • Cryptographic devices, such as data encryption and blockchain technology, allow not only to preserve privacy but also to establish data ownership, potentially fostering a well-regulated market for big data and statistical analysis.
  • Circular economy projects are now possible thanks to digital-based cross-industry networking and should be strongly supported because they re-internalize at firm-level the environmental costs of production in a more effective way than the complex carbon credits financial schemes and the simple imposition of carbon taxes.
    Furthermore, the circular economy could partly address the forthcoming employment crisis by absorbing unemployment and underemployment, especially in exurbia and rural areas.

By embracing the Third Industrial Revolution with a proactive stance, we can mitigate the tragic damage inflicted by the COVID-19 pandemics and use it as a general call to “debug” an economic system that has been already spinning around itself for too many years.

At CoVstat_IT, we do our best to provide scientifically grounded statistical forecasts of the COVID-19 pandemics on a daily basis, but as far as it concerns our own lives and decisions as free members of the human society, the future is not something to be predicted: the future is something to be achieved.

Info Autore
Da sempre appassionato d’informatica, nel tempo aggiungo per motivi di studio la curiosità per l’economia. Due interessi già per loro natura alquanto complementari, ma che con l’arrivo della tecnologia blockchain presentano ormai legami indissolubili. La vita mi ha poi portato a occuparmi di web in varie forme: amministrazione di sistema, gestione di contenuti, web design, e-commerce, web analytics, SEO, ecc.
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Da sempre appassionato d’informatica, nel tempo aggiungo per motivi di studio la curiosità per l’economia. Due interessi già per loro natura alquanto complementari, ma che con l’arrivo della tecnologia blockchain presentano ormai legami indissolubili. La vita mi ha poi portato a occuparmi di web in varie forme: amministrazione di sistema, gestione di contenuti, web design, e-commerce, web analytics, SEO, ecc.

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