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On understanding economic reality at the beginning of the twenty-first century: an essay in remembrance of Professor Laski

Josef Falkinger

Keywords: economic realism; smart economy; big data; market failure

Economic objects are objects which are produced by employing inputs and valued by applying a valuation procedure. In a market economy the valuation is performed by the price mechanism. Ideally market prices reflect the scarcity values corresponding to individual preferences. This article argues that new technologies and business models call the separation of production and valuation into question and thereby challenge the theoretical foundation of the market economy. In particular the finance and data industry turns beliefs and preferences from exogenous individual characteristics into produced objects. As a result, at the beginning of the twenty-first century economic activity shifts from the production of objects to the production of values and prices. The paper adopts a classical perspective and uses the production and reproduction scheme to outline a model of the smart economy. A smart economy is an Internet-based economy which employs (artificially intelligent) robots to produce sensor-enabled objects via which the behavior of consumers can be tracked and directed. The robots are owned by capital-owners who employ agents for developing the robots, designing data-based devices and business models, managing them, and financing them. The owners and their agents employ workers to complement robots and to provide personal services. The paper proposes investing more into the production and reproduction of consumer sovereignty, active citizenship, and the res publica, in order to avoid a dystopic brave new world. The author sketches an agenda for the maintenance and renewal of the institutions of a free and democratic society by confronting the smart economy with core concepts of European enlightenment: secularization, constitution and rule of law, separation of powers, nation state, education, and market order.

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