Journey to the information society – Unlearning and learning
Phuah Eng Chye (8 May 2021)
We are mid-way in the journey to the information society. Most people now have access to some form of connectivity but there are large pockets that do not. The information sphere is also half-way in its migration. Economic activities; the organisation of business, employment and capital; and processes and record-keeping are partly virtual and automated, and partly physical and manual. Laws are still being revamped or created to keep up with the expanding information sphere.
However, there is mounting resistance. Everywhere, individuals or groups are digging in their heels to defend their turf. Displaced stakeholders are striking back hard; forming populist movements and even electing populist governments. Emotions are spilling over in the battle between science-based and belief-based perspectives. The public clamours for reforms on privacy, platform and content moderation. Politicians wave the flag to lead the charge on national dignity and security.
It is a worry the trend favouring reversion to the traditional and physical is prevalent among developed societies. Are these signs that developed societies are losing confidence in their future? Externally, their leadership and values are being challenged by developing economies with different models which are closing the gap. Internally, developed societies are becoming inherently more unequal, youths are saddled by high borrowings to study and after graduating, find jobs were transient, their future insecure and houses unaffordable. Despite being market-oriented and possessing competitive firms, their economies have turned anorexic and financialised. The anaemic conditions have been aggravated by the pandemic and it seems their economies can only be sustained by unbounded government spending and central bank liquidity.
Is this the kind of society envisaged by mainstream economic thinking? I hardly think anyone would endorse such outcomes. Something must has gone wrong somewhere. Societies should figure out what they want and what they must do differently to get better outcomes, better futures. Clearly, this involves a change in economic paradigms. But learning new paradigms usually requires unlearning the old ones.
What to unlearn
Here are some traditional paradigms to unlearn.
- Industrial model. Policy-makers seem wedded to the narrative of reviving manufacturing activities. But one would be hard pressed to find an example of successful reindustrialisation in developed, aging economies. It’s not just about adding a few factories but reflating the shrunken manufacturing sector share of GDP and employment back to meaningful levels. There are headwinds such as high costs (regulation, healthcare and property) and workforce supply and attitudes. Demographic aging results in smaller households which assuage a fall in aggregate demand and capital formation. Critically, aging interrupts generational continuity in replacing retiring entrepreneurs and maintain traditional work cultures. In any case, the numbers of manufacturing firms will be whittled by the new forms of competition incorporating rapid obsolescence, convergence, technology and new generational cultures. Even if developed countries were able to successfully re-industrialise, it is likely to be based on the new technology-driven models that would not generate the same levels of employment and wages. Developed countries should think about designing information models to replace the industrial models.
- Middle-class and trade unions. The yearning to rebuild the middle class persists. Some even think it is critical to revive trade unions to address the declining income share of labour and growing inequality. This assumption is likely to prove fallacious. Labour’s woes are due to information disruption that are decoupling economic growth from wages and employment. In developed economies, polarisation is eroding the ranks of the middle class and enlarging the size of the bottom. Can the rebuilding of the middle class and trade unions be achieved if the number of factory workers continue to decline? It is more effective to focus on ensuring higher wages, improving job opportunities and social protections for workers in a service and gig economy.
- Immigration. Liberal migrant policies have been touted as a source of economic dynamism. But immigration is unlike what it was in earlier decades – an invisible pool of labour and talent to tap when needed, neglected when not. Immigrants are now more diverse in terms of race, religion and cultures. In developed countries with an already large migrant population, crowding can tip the political balance. Societal frictions rise when locals (including graduates) find themselves have to compete against immigrants for temp work. Unrestrained immigration, rising costs and extensive welfare systems are an untenable combination that impose a severe strain on public resources (education, housing, medical, infrastructure and security). Undocumented immigrants create information blindspots and difficulties for problem-solving. Immigration should be integrated into a larger paradigm that balances the use of internal and external human capital.
- Inflation-based monetary policies. Inflation-based paradigms have not provided convincing explanations for monetary events over the past three decades. This is because the reliability of inflation measurements is undermined by intangibility, financialisation (growth and return connectivity of financial assets) and large central bank interventions. Therefore, monetary policy needs to forsake inflation targeting and other traditional notions and explore the management of monetary repricing effects on financial and social stability.
The mainstream policy paradigms should be discarded as they cannot be used to overturn the logic of informationalisation, globalisation and financialisation. In this regard, events during the pandemic underlines the futility of supporting legacy models and the urgency of investing in information-based models for the future of society.
What to learn
There is substantial fear that humans will be overwhelmed in the information society; that their roles, skills and authority will be rendered meaningless by robots, algorithms and globalisation. Hence, the visions of the information society are mainly dark; dominated by fears that information will be misused to turn society into a dystopia. This is a misunderstanding and we need to confront these fears.
As an analogy, there are fears that information will be used to subject individuals and society to invasive surveillance. Yet, surveillance plays a prominent role in exposing crime, detecting corruption, fraud and misbehaviours by officials and personalities, promoting public health, facilitating communication and debate, and even facilitating the organisation of anti-movements. The misunderstanding is that smartphone and platforms centralise control over information. In fact, smartphone and platforms also widen the distribution of data, content, communications and intelligence based on concentration-fragmentation patterns. In particular, smartphones are indispensable tools for citizens who want information and empowerment. Stripping citizens of their smartphone would be akin to removing their basic rights.
Hence, information is a double-edge sword with countervailing forces that work to balance power between the people in charge (governments, monopolies) and citizens. If there are gaps or failings, it is because policy has not given sufficient consideration to making information work for society or built sufficient safeguards to ensure the information society is a democratic one.
We need to learn to cope with the disruptive challenges thrown at us by information. We must manage much better information effects such as intangibility, size, transparency, speed, modularity, complexity, concentration-fragmentation, convergence, polarisation, transience, financialisation and globalisation. We should recognise information is shrinking the physical aspects of society while expanding the information sphere. This is driving changes in organisations, markets, communities, nations, products, activities, communications, work, crimes, assets, laws and values. It is altering economic, social and legal relationships – raising the importance of access, transactions and inter-dependencies relative to physical and static concepts.
Chris Shaw points out “this is the move from the logic of industriousness (that of building and constructing) to the logic of dialogue and the flow of information through networks of interconnectivity”. This brings about “the development of new constraints, as the current economic cycle stagnates and a networked globalisation is open to vulnerabilities (nationalism, trade wars, pandemics, the move to extremely competitive and destructive forms of network, etc.)”.
Several paradigms can be explored to understand how information can be harnessed to benefit society at large.
- Abundance. We don’t really know much about managing abundance as economic theory is largely based on scarcity. Alex Danco argues “worlds of scarcity are made out of things. Worlds of abundance are made out of dependencies. That’s the software playbook: find a system made of costly, redundant objects; and rearrange it into a fast, frictionless system made of logical dependencies. The delta in performance is irresistible, and dependencies are a compelling building block: they seem like just a piece of logic, with no cost and no friction. But they absolutely have a cost: the cost is complexity, outsourced agency, and brittleness. The cost of ownership is up front and visible; the cost of access is back-dated and hidden”. He adds that in “reorganizes our consumption away from ownership and towards access…But there’s a cost. The more you can access, the less it’s yours”.
As a matter of comparison, an industrial economy is scarce. But scarcity implies ample space to accommodate the expansion of private rights – ownership of assets, privacy and freedoms. An information society is abundant. Production constraints are eased for physical products and unbounded for digital ones. But abundance is a mirage due to crowding. In this context, abundance expands space but it also generates overload (of information, rules and claims) within short time frames. Crowding by competing claims and conflicts at critical points can choke flows (supply, access) and result in system failures. Information societies are more vulnerable to failures in distribution and dispute resolution than to shortfalls in production or efficiency. We should think about how to organise society for abundance rather than for scarcity or production.
- Transparency. Various aspects of transparency – such as disclosure, privacy and data-sharing – are extensively analysed but a holistic perspective is lacking. In this regard, transparency surfaces problems and differences in social, political and economic identities. It removes the opacity buffers that cushions society from conflicts. Transparency reveals the power of information. While centralised control of information can be used to threaten individual freedoms (concentrate power), transparency implies information is widely distributed by and to individual agents over multiple platforms which fragments control. Transparency and power thus sit uneasily with each other. Information disorder (reality bubbles, disinformation campaigns) are an outcome from rival groups propagating content to serve their vested interests. Though many profess to champion transparency, they actually wish to wrest control over transparency – others should be transparent but not themselves. Unequal access or rights to information poses the biggest danger to a democratic information society.
The rules of transparency are especially important for an information society. The rules on privacy, data-sharing, content and disclosures determines what it is like to live a world where visibility is high, and affects how information can be used to solve problems and to shape the type of society we want. It should not be overlooked that transparency increases vulnerability while fostering a harsh crowd-driven environment. Transparency brings to light misconduct or politically incorrect content (current and historical). Individuals, firms or communities can be targeted and crowds manipulated to clamour for instant punishments or retribution. This ends up promoting sanitisation and superficiality to mitigate these risks. This undermines free speech in society. It also leads to more disputes which impedes coordination. In my view, challenges posed by transparency should be resolved through information-based approaches. Hence, information monopolies (e.g. platforms) should be addressed by breaking their strangleholds on information. Workers’ rights are protected by making employer relationships (contracts) transparent and by ensuring workers and customers have the necessary information to protect their right to choose. Information disorder should be addressed by promoting transparency and authentication rather than through reducing information flows (e.g. censorship). Coordination should be enhanced through efficient dispute resolution. Lastly, the harshness of transparency should be mitigated by fostering a regime of forgiveness. Transparency is an important feature of the information society and deserves greater consideration.
- Concentration. Inequality is viewed as a source of many economic ills. But inequality paradigms are generally built on the capital-labour divide which carries much ideological baggage. But ideology loses relevance in the autonomous information society. In this context, the traditional solutions to redistribute income are losing efficacy. Education and knowledge are no longer the panaceas they used to be because humans are no longer the main vehicles for knowledge. Income and wealth are increasingly organised around non-human assets. In this regard, inequality should be viewed as an outcome of information effects. The rebalancing of income, wealth, ownership and social burdens should be viewed as an organisational challenge that is aimed at maximising the value of human capital. Potential initiatives include addressing bottlenecks in income distribution, focusing on the redistribution of capital and returns, and ensuring fairer sharing of burdens in a society of individuals.
- Financialisation. Different interpretations of financialisation leads to different perspectives. My approach is to define financialisation as an information-driven process. Information and rules are key to the monetisation of value because they facilitate ownership and tradability. In a financialised economy, the rising levels of debt assets and asset prices complement physical output in supporting economic growth. The consequence is to dramatically shrink the proportion of physical collateral underpinning the value of financial capital. This paradigm offers different insights. First, it highlights that since information is no longer the preserve of traditional financial intermediaries, structural changes in financial intermediation will occur across the entire value chain. Second, as monetisation expands, the social consequences of monetary repricing is amplified because it affects a broad range of public goods while the diminishing share and value of social (non-monetised) goods and services makes income essential for survival. Lastly, financialisation affects savings and risk behaviours, returns and globalises asset price connectivity with significant macroeconomic consequences. The key question is what would constitute sound monetary policy in this paradigm. In addition, can monetary policy be extended to address social challenges (such as by redistributing the benefits of financialisation)?
- Globalisation. Many aspects of the information society are global in nature and they are coming up against national sensitivities. Rana Dasgupta explains “the most momentous development of our era, precisely, is the waning of the nation state: its inability to withstand countervailing 21st-century forces, and its calamitous loss of influence over human circumstance. National political authority is in decline, and, since we do not know any other sort, it feels like the end of the world. This is why a strange brand of apocalyptic nationalism is so widely in vogue. But the current appeal of machismo as political style, the wall-building and xenophobia, the mythology and race theory, the fantastical promises of national restoration – these are not cures, but symptoms of what is slowly revealing itself to all: nation states everywhere are in an advanced state of political and moral decay from which they cannot individually extricate themselves. Why is this happening? In brief, 20th-century political structures are drowning in a 21st-century ocean of deregulated finance, autonomous technology, religious militancy and great-power rivalry’. In this regard, “big data companies (Google, Facebook etc) have already assumed many functions previously associated with the state, from cartography to surveillance. Now they are the primary gatekeepers of social reality: membership of these systems is a new, corporate, de-territorialised form of citizenship, antagonistic at every level to the national kind. And, as the growth of digital currencies shows, new technologies will emerge to replace the other fundamental functions of the nation state”.
Rana Dasgupta argues “even if we wanted to restore what we once had, that moment is gone. The reason the nation state was able to deliver what achievements it did – and in some places they were spectacular – was that there was, for much of the 20th century, an authentic fit between politics, economy and information, all of which were organised at a national scale. National governments possessed actual powers to manage modern economic and ideological energies, and to turn them towards human – sometimes almost utopian – ends. But that era is over. After so many decades of globalisation, economics and information have successfully grown beyond the authority of national governments. Today, the distribution of planetary wealth and resources is largely uncontested by any political mechanism. But to acknowledge this is to acknowledge the end of politics itself. And if we continue to think the administrative system we inherited from our ancestors allows for no innovation, we condemn ourselves to a long period of dwindling political and moral hope. Half a century has been spent building the global system on which we all now depend, and it is here to stay. Without political innovation, global capital and technology will rule us without any kind of democratic consultation, as naturally and indubitably as the rising oceans”. He suggests “the new order of nations only made sense if these were integrated into a society of nations: a formal global society with its own universal institutions, empowered to police the violence that individual states would not regulate on their own: the violence they perpetrated themselves, whether against other states or their own citizens” and that perhaps “we need to find new conceptions of citizenship”.
Economic journeys are made easier with a well-defined model. This is exactly the problem for the information society. The popular versions tend to be dystopian while utopian visions of an information democracy – of how information should be used to meet people’s needs – are oddly missing. Progress towards an information society will thus be determined our ability to unlearn legacy paradigms and to discover new ones.
Traditional economic models do not offer a good roadmap. In the past when information systems were rudimentary, capitalism offered several unique advantages – property rights, rule of law and markets to overcome the information shortfalls. As information capabilities grew, these features of capitalism became embedded within an information society. In other words, it has made the ideology of capitalism redundant. Markets are no match for platforms in coordination. The concern is no longer rule of law but regulatory and dispute overload and jurisdictional overlap.
Today, information operates at the core of any economic model and it is autonomous. Success will be largely determined by how well and purposefully societies use information. Some argue information (and technology) is making authoritarian systems (governments and private platforms) more palatable, efficient, productive, innovative, consumer-oriented and demand-sensitive.
I don’t believe a distinction should be made between a capitalist or communist information society. China’s success has been spectacular. But in my view, this has little to do with communism. China’s success derives from its massive investments in the technologies of the future, its facilitation of information use, organisational meritocracy, and its focus on poverty eradication. If China veers from this path, then its economy is likely to go astray. Hence, a distinction can be made between China as the information-disruption model versus the legacy Western model that is becoming more inward-focused, resistant to information disruption and becoming increasingly difficult to coordinate.
As individuals, communities, businesses or economies, we need to get on board the journey to the information society if we don’t want to be left behind or suffer the consequences of economic regression from the loss of information-driven growth. We therefore need to master the new paradigms and design the appropriate information rules to enhance innovation, organisation, distribution and democracy to enhance the well-being of society.
Alex Danco (26 October 2019) “Everything is amazing, but nothing is ours”. https://alexdanco.com/2019/10/26/everything-is-amazing-but-nothing-is-ours/
Chris Shaw (30 September 2020) “Beyond building: Networks as constraints”. The Libertarian Ideal. https://thelibertarianideal.com/2020/09/30/beyond-building-networks-as-constraints/
Commission on Global Economic Transformation (May 2019) “Macroeconomic management meets the new economy”. Institute for New Economic Thinking. https://www.ineteconomics.org/uploads/papers/INET_CGET_Macro_Report.pdf
Magnus Lodefalk, Andreas Hatzigeorgiou, Carl Alm (27 April 2021) “Migration can play a role in the post-pandemic reboot of global trade”. Voxeu. https://voxeu.org/article/migration-and-post-pandemic-reboot-global-trade
Phuah Eng Chye (2015) Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society. http://www.amazon.com/dp/B01AWRAKJG
Phuah Eng Chye (10 March 2018) “Organisation of households: Shrinking households, labour market frictions and societal cultures”. http://economicsofinformationsociety.com/organisation-of-households-shrinking-households-labour-market-frictions-and-societal-cultures/
Phuah Eng Chye (2 March 2019) “Future of work: Transition to the information society”. http://economicsofinformationsociety.com/future-of-work-transition-to-the-information-society/
Phuah Eng Chye (8 June 2019) “The information society landscape”. http://economicsofinformationsociety.com/the-information-society-landscape/
Phuah Eng Chye (14 September 2019) “Information and development: Escaping the industrial maturity trap and moving forward to an information society”.
Phuah Eng Chye (9 November 2019) “Information and organisation: China’s surveillance state growth model (Part 1: China’s state model)”. http://economicsofinformationsociety.com/information-and-organisation-chinas-surveillance-state-growth-model-part-1-chinas-state-model/
Phuah Eng Chye (23 November 2019) “Information and organisation: China’s surveillance state growth model (Part 2: The clash of models)”. http://economicsofinformationsociety.com/information-and-organisation-chinas-surveillance-state-growth-model-part-2-the-clash-of-models/
Phuah Eng Chye (7 December 2019) “Information and organisation: China’s surveillance state growth model (Part 3: The relationship between surveillance and growth)”. http://economicsofinformationsociety.com/information-and-organisation-chinas-surveillance-state-growth-model-part-3-the-relationship-between-surveillance-and-growth/
Phuah Eng Chye (28 March 2020) “The transparency paradigm”. http://economicsofinformationsociety.com/the-transparency-paradigm/
Phuah Eng Chye (15 August 2020) “Economics of data (Part 3: Relationship between data and value and the monetisation framework)”. http://economicsofinformationsociety.com/economics-of-data-part-3-relationship-between-data-and-value-and-the-monetisation-framework/
Phuah Eng Chye (26 September 2020) “Economics of data (Part 6: Data and poverty eradication)”. http://economicsofinformationsociety.com/economics-of-data-part-6-data-and-poverty-eradication/
Phuah Eng Chye (24 October 2020) “Hayek: Economic models in the pandemic and information society”. http://economicsofinformationsociety.com/hayek-economic-models-in-the-context-of-a-pandemic-and-the-information-society/
Phuah Eng Chye (7 November 2020) “Information rules (Part 1: Law, code and changing rules of the game)”. http://economicsofinformationsociety.com/information-rules-part-1-law-code-and-changing-rules-of-the-game/
Rana Dasgupta (5 April 2018) “The demise of the nation state”. The Guardian. https://www.theguardian.com/news/2018/apr/05/demise-of-the-nation-state-rana-dasgupta?CMP=Share_iOSApp_Other
Ricardo Perez-Truglia (2020) “The effects of income transparency on well-being: Evidence from a natural experiment”. American Economic Review. https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20160256
Tyler Sonnemaker (5 April 2021) “Uber gave drivers more control to prove they’re independent. Now the company is taking back control because drivers actually used it”. Business Insider. https://www.businessinsider.com/uber-california-driver-independent-contractors-pricing-destinations-prop-22-passage-2021-4
 See Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society.
 See “Hayek: Economic models in the pandemic and information society”.
 See “The information society landscape”.
 In fact, the inability of economies being able to move upwards from manufacturing is perceived as a development trap. See “Information and development: Escaping the industrial maturity trap and moving forward to an information society”.
 See “Organisation of households: Shrinking households, labour market frictions and societal cultures”.
 See “Future of work: Transition to the information society”.
 Magnus Lodefalk, Andreas Hatzigeorgiou and Carl Alm argue migration has the potential to promote economic recovery through facilitating foreign trade, investment, and offshoring.
 Crowding – large numbers in short time frames – are a feature of the information society.
 See “Economics of data (Part 3: Relationship between data and value and the monetisation framework)”.
 The Commission on Global Economic Transformation (CGET) provides a critique of traditional macroeconomic management paradigms.
 See The anorexic and financialised economy: Transition to an information society; “The transparency paradigm”.
 “Information rules (Part 6: Disinformation, transparency and democracy)”.
 Tyler Sonnemaker reports how “Uber gave California drivers more control by allowing them to set their own prices for rides and see passengers’ destinations before picking them up”. But “too many drivers took advantage of the control Uber gave them, picking the most profitable rides while declining others, making it harder for customers to get rides and hurting Uber’s business”. Uber ended up revoking the driver-friendly price-setting and passenger destination features .
 Ricardo Perez-Truglia has interesting research on the effects of income transparency in Norway and discuss its implications for the ongoing debate on transparency policies.
 See “Economics of data (Part 6: Data and poverty eradication)”.
 See “Economics of data (Part 3: Relationship between data and value and the monetisation framework)”.
 See “Information and organisation: China’s surveillance state growth model (Parts 1-3).