From Money to Data

Author:Michael D. Schrage
Pages:58-58
 
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58 FINANCE & DEVELOPMENT | March 2018
BOOK REVIEWS
From Money
to Data
SMOOTHLY WRITTEN and provocative, Reinventing
Capitalism in the Age of Big Data is one of those rare
pop future books that takes fundamental economics
seriously. Nobel laureates from Friedrich Hayek to
Alvin Roth don’t just make cameo appearances:
their insights drive the book’s arguments. Authors
Viktor Mayer-Schönberger and omas Ramge
argue that the data’s rise means money’s decline,
that meaningful economic growth overwhelmingly
depends on data innovation, and that regulating
market competition requires rethinking data access.
Data are not the new oil but a form of capital
much like human, social, and intellectual capi-
tal. e authors see data becoming the dominant
organizing principle for wealth c reation. Markets
evolve into platforms enabling valuable new genre s
of data-rich products, services, a nd experiences.
Fintech supersedes traditional nance. Classica l
market signals l ike price descend into anachronism.
“In data-rich markets,” they write, “participants
no longer use price as the primary conveyor of infor-
mation...one of the central tasks that money has
played in the economy will be gone.” Money’s role
will erode to the point where “(r)ather than equating
markets with money and the economy with nance
capitalism in which money rules supreme, markets
will be understood to surge because of rich data
ows (not money). Finance capitalism will be as
old-fashioned as Flower Power.”
Big data accelerates the creative destruction of
capitalism as we now know it. As data assume
petabyte proportions and processing powers con-
tinue their exponential rise, Nobel Prize–winning
research inspires disruptions. For example, reduced
transaction and coordination costs—Ronald Coase’s
essential insight into enterprise economics—will
inexorably lead to new organizational forms.
Machine-learned matching and recommendation
algorithms embedding Alvin Roth’s intuitions about
market design will deliver superior investment and
consumption outcomes. And the human limitations
of Herbert Simon’s “bounded rationality” and Daniel
Kahneman’s behavioral economics will be algorith-
mically managed by bots nudging people’s actions.
In other words, rich data should lead to richer—
and more ecient—societies. e authors’ vision
is more upbeat than cautionary: this book was not
written to depress.
To be sure, Mayer-Schönberger and Ramge aren’t
Pollyannas. eir proposals for regulating data-
dominant oligopolies are thoughtful. How should
data be shared to stimulate greater competition, inno-
vation, and entrepreneurship? Can greater transpar-
ency be structured to facilitate greater accountability?
e world’s Amazons and Googles will increasingly
nd themselves struggling to answer. If they can’t,
regulators and legislators surely will.
at said, the book champions governance over
government. Indeed, the authors celebrate mar-
kets. “Eliminate the decentralized market and the
empowering quality of data vanishes,” they declare.
“at is why we call the shift from money to data a
revival of the market instead of the rise of articial
intelligence or the advent of Big Data.”
e book’s singular weakness is an overweening
Western bias. e Chinese, Indian, and African
ontologies receive only perfunctory review. Possible—
even probable—global clashes of big data’s economic
and commercial culture are unexplored. ese omis-
sions undermine the authors’ optimism and cheat the
serious reader. If future wealth, growth, and living
standards depend on data-ism, then it will surely
be as much a source of rivalry and competition as
collaboration and trade.
MICHAEL D. SCHRAGE, research fellow, MIT Sloan School
Initiative on the Digital Economy
Viktor Mayer-Schönberger
and Thomas Ramge
Reinventing Capitalism
in the Age of Big Data
Basic Books,
New York, 2018, 288 pp., $28

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