Sometimes, truth is in the strangest places (and times).

Let me summarize, very briefly, a somehow eye-opening analysis of the digital economy that I found. Then, I will point you to the full story.

The problem: the current economy sucks…

And it sucked big time well before COVID-19. A plausible explanation is that today’s mainstream economists have been just extrapolating established dogmas, I mean: trends, without affecting the changes in these trends on the common wealth (“econometric method”). They are not solving the problem of economic management. They “make calculations only to evaluate the results”.

This brings to the top plenty of money easily and to have no responsibility. Because a model, even a primitive econometric model, makes both the economists and the decision makers who employ them, feel good, as in “if there is maths in this game, everything is serious”.

Serious economics, however, should aim to improve people’s lives: a complex task that has nothing to do with the direct management of equipment.

A few decades ago, some people without a deep knowledge of economics made our country spend a lot of money for the introduction of computers, which occupied huge areas in enterprises.

But, in fact, these computers were not used to improve the efficiency of production management in the country, in the economy. They merely carried on low-level tasks like payroll, inventory accounting, etc. This resulted in the economic failures of our age.

Unfortunately, today this mistake is made again: people with technical or mathematical background, thinking that they understand the most complex issues of economics, are introducing a digital economy that has nothing to do with solving the country’s most complicated economic problems, and the country spends huge financial resources on the allowance of these people.

The solution

First of all, there should be understanding of tasks of management of the particular economic system, country, industry, enterprise, etc.

Only after that understanding, and the consequent definition of goals and rules, one could use mathematics to describe the algorithm which solves the problem.

IT specialist are the “last people on the list” of executors of the task, the ones who translate the mathematical algorithms into programming languages. When that happens, computers and digital technologies do become valid allies. Not otherwise.

Says who?

So says Nikolai Ivanovich Veduta, a late economist who, in the later years of the USSR, who understood the errors of the planned socialist economy, and studied ways to fix it. Everything you have read above is my summary of a 2018 interview to his daughter, Elena Nikolaevna Veduta, who is continuing his father’s work on “economic cybernetics”, defined as

“a [much better] science of information management in the economy, that allowed Veduta senior to create an advanced system of algorithms for [organizing the economy] using modern digital technologies”.

Adopting this economic cybernetics, says Elena Veduta, could give Russia “a real chance, relying on the colossal Soviet experience of planned economy, to stay in the vanguard of the whole world”.

Hey, don’t get me wrong here!

I am not advocating communism or socialism here. Even if I did, I would need much more expertise and time to decide whether I would support or not the Veduta’s complete solutions for building a better economy.

My only point here is how much the errors, limits and narrow horizons of the Soviet economy of the 1980s, as narrated in that interview, resemble those of the digital, so-innovative “economy” pushed by the current Silicon Valley, and its predecessors and enablers. That’s hardly progress, isn’t it?

Final reason to harvest more food for thought in that interview, this quote: “The West already wants changes in capitalism, but does not know the ways and means”.