A Nobelist Is Always Right...

 

 

WEB  ECONOMY  :  FRICTION  FREE  CAPITALISM...

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( Joseph Stiglitz ) .

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One of the basic principle of the traditional economic model

has blown up and it is the perfect news for all the economic operators : Consumers , investors , workers and entrepreneurs .

Actually , this has always been a weakness in economism .

Thanks to internet this issue is on the front burner .

Everybody believed that internet would provide us with all the necessary economic information , creating a situation of

" friction-free capitalism ".

Joseph Stiglitz , Nobel Prize for Economics in 2001 , wrote

" for over 100 years the economy has created models that are thought to deliver perfect information . Of course everybody acknowledges that information is incomplete :  but everybody hoped that the economies with less perfect information would look more like the economic models with perfect information .

One of the main results of my research was to demonstrate that it is not true : the slightly imperfection in the information could cause a deep effect on economic stability ".

In the 18th and 19th centuries economists were aware of how

unrealistic the idea of perfect information was delivered by the economic actors .

But the economy of the 20th century has completely ignored that information distortions affect the fundamental conditions of the data analysis , therefore they decided not to take them into consideration .

Joseph Stiglitz wrote " my research concluded that that kind of approach was wrong . Different people know different things.

Workers know better their skills than the company that

employs them ".

The different economic operators never have the same information regarding different business transactions .

Many have claimed that , thanks to Internet , it was time for all information to be equally delivered , notably because the cost of publishing and finding information has dropped dramatically .

Bill Gates has introduced the concept of " friction-free capitalism" , which means cheaper transactions and more perfect information .

But the web has created even more new assymetries , not only for digital divide , that is the increasing distance between people connected to Internet and those who , for economic reasons cannot access the web . Internet has created the so-called information overload : an unbearable massive bombardment of information . A bombardment that favours some people more than others .

Herbert Simon , Nobel Prize for Economics in 1978 , psychologist , used to say " hence a wealth of information creates a poverty of attention ".

Nobody wants Internet to provide equal access to information :

For example , we ask the protection of privacy in order to counteract a too much intrusive information system .

Furthermore , the capitalist oligarchies want to maintain the control over the media because they generate high profit but they do not guarantee transparency  just because of Internet .

In short , well-informed markets are a theoretical invention groundless . But if the markets cannot be well-informed there is no ground for perfect competition .

And if not information is not fairly distributed , it will always 

be asymmetric .

This situation blows the neoclassical model up : the neoclassical model moves from an assumption that is true only if it is perfectly false and , as it cannot always be true , it is

always false . But if the market is always imperfect , the legislation claimed by the economist model are not valid anymore. With no external interventions , the resources are inefficiently , unfairly and unequally distributed by the market .

The economic discipline is not self-sufficient .

In order to understand economy , culture and social structure become important in economic analysis .

The same applies to information which , in our era , 

correspond to the web...

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