Elena Veduta's answer on Open letter on the Digital Economy 08.10.2017

Elena Veduta's answer on Open letter on the Digital Economy

Elena Veduta

New economic model:

"Smart" economic plan for "smart" Government


The global crisis, manifested in the growing chaos, gives rise to new problems that civilization has not encountered before. Earlier problems of an exit from crisis were solving by military means. Now that a world war between nuclear powers is impossible, it will be necessary to solve the problem of getting out of the crisis peacefully. A conscious (planned) transition to a new economic model is required that makes it possible to use the capabilities of information technologies (IT) to improve the effectiveness of management decision making. In this regard, the statement of the G20 group on the need to move to a digital economy (DE), using IT in management, is topical.

There are two fundamentally different approaches to the construction of DE.

One of them is basedon eclectic representations of DE as a set of directions: "Big Data", artificial intelligence (AI or "smart" technique), "smart" industries and cities, digital (electronic) finance (FinTech), design technologies (BIM) public services (E-Gov), "Internet of things", etc. This approach mixes the technical tasks of engineers and IT professionals with the tasks of statisticians dealing with "Big Data". The spontaneous introduction of the technical directions of the DE may be effective from the point of view of reducing the costs of individual entrepreneurs, but not be effective from the point of view of public expenditures, and, more so, automatically solve the problem of the crisis-free or proportional development of the world economy. Here Big Data cannot be the assistant.It needs a scientifically grounded economic and mathematical model (EMM), which will be the base for the formation IT platform, determining the interaction of the sectoral and regional platforms for collecting the initial information ("Big Data") for reaching the path of sustainable growth.

 Since the United Nations does not have a scientifically based EMM in its arsenal, the "Big Data", set by its international standard of national accounts, contains statistical indicators containing a repeated account andhidden imbalances of the accounts[1]. Further this misleading information is used by the World Bank and the Governments of countries to forecast the development of the economy on the basis of "dead" econometric models, which ignore the feedback from information sources in real time for the organization of interaction of business, state and society in real time using IT to get out of the crisis. Given that, the first international UN standardintroduced in 1953 and its data used for some econometric calculations, and all subsequent standards only expanded the "data economy" and econometric models, there is no revolution to a new economic paradigm.

The result of the use of eclectic or spontaneously formed DE will be the continuation of the crisis development of globalization with the lobbying of technocratic interests and the transition to digital slavery, in which the chipped people will live and work online, be replacing by productive robots and receive UBI (unconditional basic income)[2]. In practice, this turns into an organization of unnecessary (except for lobbyists) additional flows of "large data" requested from enterprises, repeatedly duplicated in forms, filled by enterprises for different instances. In fact, the "manual", routine, labor-intensive work of enterprises repeatedly increases the unreliability of "large data", reduces the productivity of labor. Such DE becomes a catalyst for the global crisis, which increases information chaos in the economy.

People displaced by robots should not remain without work. They need to be involved in work and for this the DE is required as an economic cyber system with feedback in real time, based on a scientifically grounded EMM to ensure the proportional development of the economy with full employment towards the well-being of nations. However, in the era of the global crisis, everyone is engaged in monetary methods of distributing and redistributing the incomes to the richest families due to the bankruptcy of small and medium-sized businesses, growing poverty and international terrorism, and environmental worsening. These primitive methods of regulating the chaotically organized economy, which redistribute the produced incomes in favor of the richest families, introduced on the eve of the First World War.They are not able to coordinate production interconnections for the output of the final product needed by people, and the crisis will continue.For this reason, the main agency of the UN General Assembly in the field of trade and development called upon in its report to create a new model for the development of the world economy and to abandon neoliberalism and "hyper-globalization"[3]. Today, experts from different countries conclude that the introduction of the DE will lead to an ever-expanding application of economic planning at the state level[4].

The scientific approach to DE base on the development of the experience of the USSR, which created a mechanism for iterative coordinationof planned calculations of the indicators«output-cost» of all economic agents in order to achieve the country's development goals. Despite the mistakes of the planned economy the country gained experience in building a "live" plan that takes into account feedback, that was, in essence, the experience of creating an economic cybersystem that coordinates the orders of end users with the capabilities of producers in real time[5]. Behind the scenes, the idea of economic cybersystem present in UK DE strategy, which aims to become a world leader in the construction of cyberspace to ensurethe idea of economic cybersystems present in DE UK strategy, which aims to become a world leader in the construction of cyberspace to ensure the prosperity of the nation.[6].

Cyberspace refers to the virtual space created by computer systems, in particular, the Internet, in which "live" cybersystems simulate the behavior of real objects reacting to administrative influences and events of the external environment in real time. In order for cybersystems to behave similarly to material systems, their developers must take into account the objective laws of the development of material systems. Then users of cybersystems will be able to influence material objects in accordance with objective laws (for example, in physics - the law of universal gravitation, reflection, etc.). Therefore, DE working in cyberspace should be an economic cybersystem based on a scientifically based EMM that takes into account the effect of objective economic laws to overcome the crisis.

The construction of an economic cybersystem baseson the dynamic model of theinterbranch-intersectoral balance (MIISB)[7], which represents a system of algorithms with direct feedback, iteratively agreeing planned "output-input" calculations at all levels of the economy for the effective fulfillment of orders by end-users in real time. The principles of the model are to achieve proportionality and efficiency of the development of national production, optimization of the structure of the final product in terms of growth in utility (quality of life), which involves the inclusion in the model of information on the dynamics of equilibrium prices of the consumer market as feedback.

"Economic epochs differs not in what is produced, but in the way they are produced, with what tools of labor". Like any other global crisis, the current crisis leads to the renewal of production on a new material and technical basis. The scientific and technological revolution that began in the second half of the 20th century marked by the emergence of cybernetic systems(cybersystems) in which all technological processes of managementand monitoring overcoming the limited capacity of a person in a unit of time. Behind the person remains the performance of such functions as making decisions and increasing their knowledge. The highest level of modern scientific and technological progress is the introduction of an economic cybersystem that directly coordinates production interconnections in the direction determined by end-users. The era of the "smart" plan, used by the "smart" Government to form a new economic order in which the economy works in the interests of the people, harmonious development of the individual, comes.

 Russia has a difficult period in its history. Having experience in planning the economy, Russia has the chance to be first to launch the DE as an economic cybersystem, which will be useful for all countries of the world - the United States, Britain, China and others, since without an economic cybersystem, no country will ever get out of the global crisis. Considering the need of an economic cybersystem to change the globalization vector, it is necessary to organize open discussion of the dynamic model of MIIB as a scientifically grounded EMM that organizes the construction of national and global DE.

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This note is an answer on open letter from http://openletteronthedigitaleconomy.org/

[1]Elena Veduta. Interbranch-Intersectoral Balance: Mechanism of Strategic Economic Planning. Moscow: Academic Project, 2016.

[2]GuyStanding. "The Prekariat. The New Dangerous class." Electronic version, 2014.http://fictionbook.ru/static/trials/09/00/36/09003651.a4.pdf

[3]Trade and Development Report 2017http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1852

[4]In the article, John Thornhill "The Big Data revolution can revive the planned economy" (Financial Times, 04.09.2017) notes the possibility of using state digital platforms for production planning, distribution and consumption of goods. He quotes the words of Jack Ma, the founder of Alibaba (the largest Chinese trading Internet platform) that Big Data will allow planning and forecasting market forces, which will allow us to reach the planned economy.

[5]Nikolai Veduta. Economic cybernetics. Minsk: Science and Technology, 1971.

[7]The dynamic model MIIB developed by the cybernetist Nikolay Veduta. Her description is contained in the books by Nikolay Veduta "Socially Efficient Economy" (Moscow, Plekhanov Academy of Economics, 1999) and Elena Veduta " Interbranch-Intersectoral Balance: Mechanism of Strategic Economic Planning. Moscow: Academic Project, 2016.


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