Fixing asymmetry in data governance and Adam Smith's invisible hand

Jan 19 2018
Pekka Nikander

Fixing asymmetry in data governance was a topic mentioned in the Wednesday webinar. Perhaps I misunderstand what this means, but in our current economic system large corporations, such as Google, benefit from hoarding the information they are collecting from us and other companies, and only selectively releasing it back to the rest of us. To me it looks like that fixing this problem would require fixing the economic system itself.

As discussed by e.g. Juliet Schor [1] and Alex Pazaitis et al [2] and indirectly by Jeremy Rifkin [3], our current economic system, including the very structure of money (see e.g. [4]), is not up to date in aligning the public societal interests and private interests. In general, information is an anti-rival good while the tangible things that our life depends on, like food, are rival goods. That is, if I ate a cake, you cannot eat it too, but if I utilise a piece of information, you can do that as well. As Schor, Pazaitis and the others argue, money — as we know it — evolved to serve the exchange of rival goods, leading to what Adam Smith called the "invisible hand" aligning the interests of the society in the large with the interests of private actors.  That is the very reason why our capitalistic system works in the first place.

What comes to information, this alignment no longer works. From the societal point of view, the more efficiently we distribute information, the more efficiently the real economy can work. However, we do not have proper structures to motivate companies to share their information.  Of course, the original idea of the patent and copyright systems were to incentivise companies to share their information through giving them exclusive rights for a limited time. However, that has been later watered down and shown not to work as originally intended.

So, returning to the asymmetry in data governance, could it perhaps make sense to create new incentive structures — somewhat similar to what money and rival goods exchange is — that are specifically designed to incentivise efficient sharing of information.  That is, to create structures that make it more beneficial to share all of your information than to keep it as a "trade secret"?  

That may come about as completely utopian and impossible, but as Pazaitis et al argue [2], there are already attempts to do this within the community and crypto currencies movement.

Now, I am wondering

  1. if such a radical approach to information asymmetries and decentralisation is too far fetched for the ICT-24 call, and if not
  2. if there are any others here who possibly might want to collaborate with us in this area?

In the case someone is interested in more direct discussion, I can be reached at pekka dot nikander at aalto dot fi.

[1] Juliet Schor, Plenitude, 2010

[2] Pazaitis, de Filippi, Kostakis, Blockchain and value systems in the sharing economy, 2017

[3] Rifkin, The zero marginal cost society, 2014.

[4] McLeay, Radia, and Thomas, Money creation in the modern economy, 2014.



3 comments on "Fixing asymmetry in data governance and Adam Smith's invisible hand"

  • alphapapaactual's picture

    In terms of control and information, knowledge is power or how was it?

    We need to agree on the terms that gives us back some of that control and question ourself if we like a determistic world or a place where free will and opportunity is not categorized or boxed in. The protocols developed with blockchain technology surface these problems and shows us how vertical, proprietary silos operate and a organizational singularity has always been there just like Adam Smith invisible hand. As a power that opens up and as the world of information technology showed us how open stack or open source by time, is superior the closed systems. But the idea of comparing to Adam Smith perhaps can be valued based on how fragmentation of new innovations emerge or how coordination can be incentivised. I have so far not read or grasped theories from any classical or neo economist or social scientist. The only ones succeded in putting words to this is the cryptocommuity. Which has showed its behaviours. Please use your academic knowledge to help and guide me develop my thuoghts further on!

    answered 02 Mar 2018 14:15
  • hbiering's picture

    One particular classic example of the incentive to share what you do as an enterprise, is to prevent others from claiming patents or other IPR covering what you and probably others already do and consider established practices. This type of sharing could probably be made more efficient and the shared ledgers could contain freely accessible as well as encrypted information.

    Another practical model already being used is the sharing of open source software, where the reward is feedback or active collaboration with others, resulting in a better product than the originator could have produced by himself. and still with the option of seeking donations and/or sell premium services. Currently this model already works reasonably well, so it would probably require substantial improvements to justify dealing with it under this call.

    A contrasting case is that today companies are not even able to effectively broadcast the information they _really_ want to share, namely information about the products and services that they offer. They have to bring their data to one or (most often) more infomediaries that are wellknown to many potential customers. This means that vendors typically have to spend 10-30% of their turnover to pay middlemen rather than to invest and compete on innovative features in a transparent market. This distribution is really in direct contrast to "the invisible hand" that you mention. For more detail please se my blogpost here:

    My perception (please correct me if I am wrong) is that there are no firm limits to the proposals under ICT-24 as long as they contribute to the overall democratization vision of the NGI and relate well to the specific call topics such as discovery, decentralization and privacy.

    answered 09 Mar 2018 14:23
  • Pekka Nikander's picture
    Pekka Nikander

    One of the more interesting papers (in addition to the Backfeed paper by Pazaitis et al which I mentioned before) is this paper draft by Bruno Carballa Smichowski: Data as a common in sharing economy


    I'm still reading it myself.


    answered 09 Mar 2018 14:50