Saturday, 19 February 2011

A single algorithm can save the western world

The economic crises and the production crises that the western world is in the middle of are in fact the negative side of the transition from the physical goods producing industrial society, to the emerging idea-society.

The market for physical goods is the central element of the industrial society, the future idea-society will evolve on the basis of a genuine market  for the exchange of novel thinking – ideas!

 The present market mechanisms for physical goods cannot function when it comes to ideas and other non physical creations. The way society historically has coped with the problem has been to issue copyrights and patents. Patents and copyrights are in fact monopolies, but monopolies can never be dynamic solutions as they block  and skew development. A patent holder can dictate any price!

The dynamics of the capitalistic - physical products - market is due to its ability to utilize the individuals self interest.

A completely new approach is needed!

The dynamic “App market” principles are in fact primitive forerunners of the generalized market mechanism described below.

Einstein`s theory of relativity can be expressed by the formula E=mc2. This fundamental formula nevertheless resulted in a profound shift in our way of understanding physics. Likewise the new dynamic market for ideas can be expressed through a very simple algorithm that never the less will radically change our way of understanding the dynamics of society.

Just as the functioning of E=mc2 cannot be understood without much explaining, the basic algorithm of the idea market IO→C→IC does not in it self yield much meaning either.

 The new and crucial element of the algorithm IO→C→IC is the middle C which represents a registration and clearing function.

Whereas the basic structure of the market for physical goods can function as a transaction between two parties, the seller and the buyer, a dynamic market for ideas must necessarily consist of three parties, an idea-originator (seller), a registration and clearing function (institution) and an idea-consumer (buyer).

The dynamics of the physical goods market is obtained by the seller and buyer having equal rights and possibilities.
Equality between the two parties can be established as there exists a physical object to exchange, and the value of the goods is settled at the moment of exchange. In order to likewise balance the interests of the idea-originator and the idea-consumer, the idea-market must necessarily have a third party as there are no physical object to exchange, and a balanced exchange of a novel idea  must reflect the possible future value of the idea.

Trade with physical objects consists of repeated seller → buyer transactions. When it comes to the exchange and further development of ideas the diagram of repeated three party transactions must be like this.

Most of us haven’t any clue of the complicated reasoning and calculations that eventually led to the formulation of E=mc2, we just accept its validity and that it was the result of incorporating the extra dimension time.
In future most people won´t bother about the reasoning behind a market for ideas and the subsequent development of the idea-society. They will just accept the fact and know that it was the establishment of a mechanism that consistently tied and balanced the future value of an idea to its creation and its creator, that marked the starting point of a whole new era.

Since the 14th century the European countries and later the whole western world have thrived on producing goods and developing the production apparatus. We primarily sold the produce and kept the technology to ourselves until we had developed still more advanced technology.

By opening up and globalizing the world economy, the western world “let the jinn out of the bottle” as the firms henceforth freely could establish subsidieries abroad. With them went not only jobs of all sorts high and low, but also the newest technology and the novel understanding and ideas.
The exodus of the electronic industry to the Far East is the most shining example of said phenomenon.

Before the internationalization of the economy one could say “what´s good for the company is good for the country” that´s regrettably not always the case now. The company was the cow we should feed well and take good care of so that it thrived, it would then provide us with the necessities of life. Now we have removed the fences, the cow can freely wander off and in most cases it does! We are left without butter on our bread!

By and large the companies and investments live their own free international life and the old industrial nation states are left poor behind.
Danish companies employ more people abroad than are employed in Denmark!

The basis for progress and prosperity has wandered off into the international realm.

If we are to get renewed prosperity we urgently have to transform our western economies to the idea-society structure.
The unpalatable alternative of continuing the present course will make us end up in a situation where we have to lower our living standards and societal level to that of our competitors in the Far East.
If you are interested in the reasoning and scientific argumentation you can go to the article below: "A market for ideas within firms or coreporations". That is the short version. 
For the full version go to the other blog
named "Science History and the Future"
For Danish readers it will be far easier to understand "Idesamfundet"

1 comment:

  1. ".. where we have to lower our living standards and societal level ... "

    Not quite so: we stand now with a higher standard, both of material infrastructure and overall level of education/skill, and in future we will only be able to increase these at the same rate as/in competition with teh rest of the world. To do this we must have HONEST money (not Zimbabwe/USA dollars) so that we (and all nations) can fairly evaluate our alternatives.