From Money to Data

• Author: Michael D. Schrage
• Pages: 58-58

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