Transparency and Models of Power

The essence of the problem.

In any system where power exists, there will always be mechanisms that support the exclusivity of those in power in relation to the rest of the population. Essentially, this refers to certain additional powers that are delegated by voters to a representative for the purpose of realizing public interests, or to a monopoly on decision-making, and consequently a monopoly on the information that… existed Since ancient times, when only the shaman knew when it would rain, only the chief was aware of the outcomes of negotiations with other tribes, and only the military council knew the plans for waging war.

With the development of the population’s education, its growth, and the progress of technology, maintaining a monopoly on information required the allocation of separate resources. This resulted, on one hand, in the development of the propaganda institution, and on the other, in the legislative establishment of the concept of privacy, according to which no one should even attempt to learn anything about their neighbor. Meanwhile, the ruling elite is allowed to meddle in others’ affairs. In these conditions, where the authorities are putting more and more effort into erecting “one-way mirrors,” the real rulers are not those who are wealthier or smarter, but those who are on the right side of the mirror.

Recently, this process has been hindered by emerging information channels that allow for leaks of all kinds, as well as social networks and the internet as a whole. Essentially, information has become “super-fluid,” leaking through even the tiniest crack. A spy quietly trying to photograph secret blueprints on microfilm now seems almost comical. Of course, if the probability of any, even the smallest “micro-crack” in a massive information security system is greater than zero, a leak will still occur.

This process makes ideological or religious propaganda increasingly ineffective and reveals more and more the true mechanisms by which the ruling elite maintains power.

Against the backdrop of this process, people are asking themselves the question “what’s next” and developing various kinds of concepts such as Cloud democracy The text for translation: ,. Socialism 2.0. or other types of e-government projects, which unfortunately share a common feature of being utopian, as:

• A good model is proposed, in theory, but there is no suggested path for society to reach the state described in that model without resorting to violence.
• Social relations are described without any reference to the evolution of productive forces, which raises the question of the appropriateness of any other forms of power for the current social formation.
• Often, structures rely on the existence of certain centralized computer systems, which implies a continuation of the trend towards asymmetry in information rights. Now, however, the rights to information and, consequently, power are granted to the administrators of these centralized systems.
• One way or another, all these models require, according to the authors, either coercion for the greater good, the establishment of new entities, or rely on the development of a certain awareness (it seems that the unconscious will have to be dealt with harshly), through which people will become politically active altruists who understand the importance of achieving common goals.
• Moreover, the ideas of some authors that people can always reach a consensus through a reasoned discussion based purely on logic are also unconvincing. At the very least, they ignore cognitive distortions At most, it should be understood that information stops being noise and is born In the recipient’s mind, the information is already different from what was in the sender’s mind. For people to agree on something, they need to have a practically identical understanding of it and share similar experiences. In such a situation, there is really no room for discussion.

At the same time, all these models assume that the presence of a developed IT infrastructure will be the key to fostering new relationships and a prerequisite for the emergence of new, fairer, and more optimal forms of governance.

The aim of this text is to show that, regardless of the mechanism of power, it still…

a) will not be optimal,

b) provokes corruption,

b) does not involve people in making significant decisions.

On the other hand, it will be shown why the instinctively perceived advantages of a developed IT infrastructure can indeed help us, and in what specific ways they can assist.

Eternal problems of power

On Bounded Rationality

The asymmetry of information, supported by authority and societal conformity that defends the idea of privacy, along with the monopoly on it that has become an attribute of power, leads to a situation where those in power are unable to make rational decisions, at least due to the lack of complete information necessary for such actions.

• The authorities are forced to act under conditions of limited rationality, which means that their decisions are not always objective when regulating various social processes. We all know the standard issue faced by those in power — controlling migration and the conditions for issuing visas, which, as it turns out, are designed for honest individuals rather than for those who are determined to enter the country at any cost.
• Additionally, when regulating undesirable activity, authorities always work with the equation U = V * C, where U is the damage from the offense, the costs to the authorities or society from the crime; V is the probability of catching the criminal, which, in conditions of information asymmetry, is always much less than 1; and C is the sanctions, the costs to the criminal if caught. With limited resources to manage “V,” authorities begin to regulate “C,” which leads to an apparent overestimation of punishment for those who are caught, causing them to feel a sense of injustice—punished too harshly for something that others, equally culpable, were not caught for at all. Hence, the expected response from any criminal when asked, “What were you imprisoned for?” is, “For nothing.” The most important point is that in conditions of limited rationality, authorities are unable to prevent crime, and sanctions against criminals represent new costs for the authorities to implement, but do not eliminate the costs from crimes that have already been committed. From an economic perspective, the situation is a dead end.
• In conditions of limited rationality, the government is unable to regulate the circulation of “sensitive” goods, such as weapons or drugs, and prefers to impose a complete ban on them. This approach is suboptimal and leads to significant costs, including the flourishing of the black market and generally uncontrollable markets, expenses related to maintaining prohibitions and enforcing sanctions, and costs associated with the increasing asymmetry of the shadow market (it is well known that most problems associated with drugs are, in one way or another, caused by their prohibition).
• The government, operating under conditions of incomplete information, often struggles to organize a fair distribution of the costs borne by the population for acquiring various public goods. In many cases, these goods become public simply because it is too expensive for the authorities to organize individual tracking of their consumption by the population. Here and henceforth, a public good is understood as a good that, when made available to one member of a group or society, automatically becomes available to all members of that society.

  As an example of the irrationality of government actions, one can point to its activity in the construction and maintenance of roads. Funds for this are collected in the form of a transportation tax, and no method has yet been devised for the absolutely fair extraction and distribution of this money. The funds are spent on certain roads somewhere, and the taxpayer does not see the connection between the tax paid and the benefits received. Everyone can use the roads, and it is impossible to account for the degree of usage by each individual under the current conditions.

  In principle, as an illustration of an alternative that minimizes information incompleteness, can be imagined a society of total accounting, where both the contribution of each individual and the use of resources by each are taken into account, and the contributor not only bears costs but also receives income from investments. In practice, roads will remain free for “taxpayers,” now referred to as investors, but the amounts paid by investors for the creation and maintenance of fixed assets will equal the income they receive from their own use.

• One can provide numerous examples of the limited rationality embedded in existing management mechanisms, down to the simple understanding that power, as a purchaser of public goods, also acts as a buyer in an asymmetric market and is therefore unable to make a rational decision, instead resorting to heuristics: “like everyone else,” “like no one else,” “for cheaper,” or, conversely, “for more expensive.”

The simple conclusion from this section is as follows: power will be able to make rational decisions and optimally allocate resources only in conditions of transparency and minimal asymmetry of information for itself. It closely resembles “Big Brother,” which is essentially what power aims for. strives , establishing the appropriate institutions. (Conclusion #1)

On public goods, Mancur Olson in his… work “The Logic of Collective Action” (Mancur Olson, THE LOGIC OF COLLECTIVE ACTION Public Goods and the Theory of Groups, Harvard University Press Cambridge • Massachusetts London • England) provides a coherent argument that in large groups, the rational behavior of an individual optimizing their costs will be to refrain from participating in the creation of public goods. Indeed, if the public good will be obtained regardless of their participation, then the rational choice is to abstain, since, according to the definition provided above, if it is available to even one member of the group, it will be available to all. Olson demonstrates that a public good in a large group is likely to be achieved only if the costs of obtaining it are equal to or less than the benefits received by any member of the group.

The text for translation: «.This means that there are three separate but interrelated factors that hinder a large organization from operating in the common interest.

• Firstly, the larger the group, the smaller the share of each individual in the overall profit, and the less adequate the reward for any group action, which moves the group further away from ensuring itself an optimal amount of goods.
• Secondly, as the group size increases, the share of the total profit allocated to any individual or any subgroup within that large group decreases. This means that the likelihood of any subgroup, and even more so an individual, receiving enough collective benefit to cover the costs of providing even a small amount of that benefit diminishes. In other words, the larger the group, the lower the probability of oligopolistic interaction that could help ensure the collective good.
• Thirdly, the larger the number of participants in a group, the higher the organizational costs and the greater the obstacle that must be overcome before any collective good can be provided. As a result, the larger the group, the further it will drift from ensuring an optimal amount of public good for itself, and typically very large groups, in the absence of coercion or external influence, will be unable to provide it at all, even in minimal amounts…The text for translation: «.

M. Olson described the reasons why large groups, which he referred to as latent, can be mobilized to create public goods. He outlined two ways to mobilize groups: 1. Coercion and 2. The presence of selective incentives, meaning incentives that act not on the group as a whole, but on specific individuals, encouraging them to participate in such a group.

The text for translation: «.Coercion in this context is possible due to what is known as punishment, which can leave an individual on a lower indifference curve than the one they could be on if they had not refused to take on their necessary share of the costs for achieving the collective good and had not been “punished.” Encouragement is expressed in some form of “reward,” which places the individual on a higher indifference curve than the one they could be on if they had not acted in the interest of the group and had not received the “reward.” In other words, selective motives are valued by individuals more highly than their share of the costs..” (For a discussion on coercion and reward, see Alfred Kuhn, The Study of Society: A Unified Approach (Homewood, Ill.: Richard D. Irwin, Inc. and the Dorsey Press, Inc., 1963)

Coercion can function as mandatory participation for everyone in a group. This mechanism was how the labor movement in the United States was structured, and labor unions experienced their greatest growth after securing commitments from employers not to hire non-union members. Additionally, M. Olson demonstrates that certain public goods require unconditional collective funding. For example, national security, as a public good, will benefit everyone, and society is generally supportive of limiting the individual economic freedom of its members and enforcing such measures. ^{The text for translation: [1].} their tax payments, which go towards funding the country’s defense.

The presence of electoral motives is well illustrated by people’s membership in various professional associations. This provides them with recognition in their professional market, allows them to receive a range of benefits and privileges, and keeps them informed about the latest developments in the industry.

Voting motives drive shareholders to gather in joint-stock companies, as the income from the company’s activities is only available to members of the joint-stock company. At the same time, these same shareholders, in pursuit of another public good—the resolution of the shareholders’ meeting on a particular issue—act rationally by avoiding a thorough review of documents or even abstaining from voting or participating in the meeting altogether. They often ignore the notices calling them to the meeting or delegate their votes to management or other shareholders who seem to have a greater stake in the outcome. After all, the participation of a minority shareholder’s vote in a large joint-stock company has an infinitesimal impact on both the wealth of that shareholder and the overall affairs of the company.

The mechanism of selective motives can also explain the seemingly irrational behavior of participants in large latent groups, such as Wikipedia authors. These motives may include self-assertion, self-realization, the desire to be appreciated, or the wish to inspire others with their ideas. And even if one cannot find any rationality in the behavior of Wikipedia authors who incur costs to write articles, it can always be said that crowdsourcing is a search for and identification of irrational altruists within the crowd, the likelihood of whose existence is always greater than zero.

At the same time, when we label someone’s behavior as irrational, we are likely just unaware of the motives driving that “irrational” individual. The appearance of a particular article on Wikipedia can be explained by the fact that, for someone, the costs of writing it were outweighed by the benefits they gained from having such an article exist.

If we look at society’s behavior towards a particular authority figure from the perspective of group theory, the rational behavior of an individual would be to do nothing, even if the person in power is an outright thief or criminal. Regardless of how fashionable the methods of elevating someone to power may be—whether it is inherited or formed situationally through mechanisms of “instant delegation” and “electronic democracy,” as described in various models of cloud governance—in any case, the public good achieved by removing an odious leader will occur with or without the involvement of a specific individual. The contribution of that individual is imperceptible both to themselves and to society, and the benefits derived from the public good, or rather, the share of those benefits that accrues to the individual, is infinitesimally small. Moreover, the organizational and initial costs that the group must incur to mobilize for the attainment of the public good (the removal of a tyrant) are generally quite significant, and only with a critical reduction of these costs, perhaps due to the moral decay of the army, can one hope for the success of the endeavor.

Practice shows that the initiators of power changes in large organizations and states are often those who “need it the most,” meaning those with their own electoral motives, such as a personal desire for power, which is usually driven by an economically rational thirst for profit. This thirst arises from the monopolization of information by those in power.

But even in this case, the initiators acted and continue to act by creating a lobby—small, effective groups united by a common goal and ready to take on all the costs of a larger latent group as a collective. The mechanisms of interaction in small groups differ from those in larger ones, and this will be discussed further below.

M. Olson, in addition to large latent groups, examined the work of so-called “privileged” and “intermediate” groups. By “privileged,” he referred to groups that “…are small enough that each member, or at least one of them, has a motive to pursue the collective good, even if it means bearing all the costs themselves. In such groups, there is confidence that the collective good will be achieved; moreover, it can be secured without any organization or coordination among the members.The text for translation: «.

By “intermediate,” he meant groups in which “… none of the participants receives such a significant share of the overall benefit that they would be motivated to provide this good solely on their own. However, the number of participants in this group is not so large that no one would notice if one of them refused to take on some share of the costs. In such a group, the collective good may or may not be provided; however, it will definitely not be achieved without some form of coordination or organization within the group.The text for translation: «.

Transparency

Thus, if we ensure an increase through various technical means…noticeabilityWith the participation of a group member, one can also expect an increase in the allowable size of the group, which will still be able to act effectively and cohesively.

Interestingly, George C. Homans (The Human Group, New York: Harcourt, Brace, 1950) also argued that small groups exhibit much more consistency than large ones: “At the level of a small group, meaning at the level of a social unit (regardless of what we call it), where each member has firsthand information about all the other individuals in the group, human society has demonstrated the ability to act in concert for many thousands of years…The text for translation: «.

In modern terms, George Homans argued that the key to a group’s effectiveness should be its complete mutual transparency.

The scientific and technological progress, as expressed at this particular moment by the development of social networks and the erosion of privacy, provides the very mutual transparency in large groups that leads to an increase in their level of mobilization. Examples of this can be seen in flash mobs or modern protest actions. It is understood that the larger the group, the greater the degree of mutual transparency required for the group to remain effective in terms of obtaining public goods.

Minimization of organizational costs

Moreover, the informatization of the sphere of group actions significantly reduces the organizational costs that a group must incur before it can actually start producing public goods. While the classical approach involved identifying certain initiators of group actions, holding group meetings, and developing collective decisions—processes that required substantial investments of time and material resources—the modern method of organizing a group by engaging its participants through social networks and conducting remote discussions on the issue demands incomparably fewer costs.

Karma.

It is also worth noting that the introduction of a numerically expressed reputation for group members (karma) allows other members to assess the level of participation of a specific individual, as well as to motivate individuals to earn reputation by engaging in actions approved by the group. In other words, numerical reputation becomes a new selective incentive that influences group members and mobilizes the group. It is important, of course, that the level of karma somehow affects the opportunities available to a group member.

It turns out that any “e-government” projects could be more effective than existing models precisely due to the technically organized mutual transparency among the members of the groups that propose and oversee the activities of such a government, as well as due to the IT infrastructure that would be capable of minimizing organizational costs and assessing the reputation of each group member, thereby granting them privileges or, conversely, penalties, depending on the level of that reputation. (Conclusion No. 2). An example of such a system could be as follows: this article Текст для перевода: ..

The model of reputation-dependent situational elevation to power (granting an individual the authority to make decisions) already exists and has been tested in practice at several financial institutions, such as havalа or are closer to European values in the market Lloyds , about the mechanism of its functioning and the possibilities of using such a mechanism in politics, which I discussed in a separate… article Текст для перевода: ..

It is worth noting that existing practice shows that reputation-dependent situational power (that is, delegated not for a term but for the duration of one’s reputation) has so far only been implemented in decentralized organizations. This is understandable, as any centralization of the reputation assessment process grants unique powers to the administrator controlling that process.

Thus, that very… developed IT infrastructure It should be decentralized, down to the P2P level, or presented as independent and parallel services, just like the independent internet search engines that currently exist, each of which evaluates the relevance (in our terms, the reputational weight) of links in its own way and ranks search results accordingly.

Power and society

Jared Diamond in his book “Guns, Germs, and Steel” in the chapter titled “ from egalitarianism to kleptocracy “indicated: “It should have become obvious that under centralized leadership, a fundamental dilemma has crystallized for all centrally managed, non-egalitarian societies. At best, such societies do a good deed by providing expensive services that individuals simply cannot organize for themselves. At worst, they function as kleptocracies, shamelessly redistributing the collective wealth of society in favor of the upper classes. These two functions, noble and selfish, are inextricably linked, although one is often more pronounced than the other. The difference between a kleptocrat and a wise ruler, between a robber baron and a public benefactor, is merely quantitative — it is a question of what share of the tribute collected from producers the elite retains and whether the people are satisfied with how the remainder is allocated for public needs.The text for translation: «.

Thus, in one way or another, any power is kleptocratic to some extent. The level of kleptocracy that power can afford depends, as shown above, on the level of organizational costs that society must incur to displace that power, the presence of competitors capable of mobilizing small, covert groups, and, of course, the size of society. In small, transparent societies—tribes—the level of kleptocracy is minimal. In larger societies, governed by those who maintain a monopoly on information… officials It can reach disproportionately high values while simultaneously maintaining the relative loyalty of the masses to the ruler.

D. Diamond pointed out four obvious things that a kleptocrat must do to maintain power:

1. Disarm the population and arm the elite. Using the terminology described above, this means increasing both the organizational costs for the group (which requires, at a minimum, secrecy) and the costs associated with obtaining the public good—overthrowing the tyrant.
2. Redistribute the collected tribute in such a way as to produce a certain amount of public goods. Accordingly, reduce the costs to society from its existence. It is also worth noting that in conditions of a monopoly on information, the government may choose a certain segment of society that can be shamelessly… to rob and at the same time improve, to some extent, the welfare of another segment that has a larger population or greater power compared to the first. In other words, it is sufficient for the ruler to reduce the costs of their existence not for the entire society, but for a chosen majority (whether numerical or powerful).
3. To establish an ideology or religion that would justify kleptocracy and reduce “information entropy” among the population, transforming it into a community of like-minded individuals willing to sacrifice themselves for a common goal. Before the advent of social networks, there was no other alternative path for homogenizing the worldview of the population. was not available at all It’s important to note that kleptocrats spend a significant portion of the collected tribute on religious or ideological support.
4. To exercise the monopoly right to use force for the common good. Using the terminology described above, establish a system of coercion and selective incentives for the extraction of public goods for the chosen half of the population.

Having completed the first point in the initial stage, the kleptocrat is forced to pay attention to the remaining three. The stimulation of the kleptocrat’s activity in seeking new solutions is facilitated by the same informatization of group actions, which leads to a reduction in the group’s organizational costs. A group that has learned to write and maintain protocols for collective decision-making and to establish rules for such decisions is stronger than an illiterate group. A group that controls its own media is even stronger, and a group mobilized by social networks is stronger than all the previous ones. In other words, under modern conditions, an unarmed group incurs extremely minimal organizational costs and only deals with the costs associated with the production of public goods.

Then the kleptocrat regulates the second point. They regulate it until the robbed part of society has nothing left to lose except their chains, and the exploited part mobilizes to defend their rights, overcoming organizational costs or taking advantage of technological advancements that reduce those costs. This is what happened at the turn of the 19th and 20th centuries with the development of the labor movement and organizations like the Comintern and the Socialist International.

The kleptocrat is left with two final points that directly depend on the process of redistributing the collected tribute, now without the possibility of plundering part of the population. While in the previous stage the kleptocrat addressed issues by redistributing the burden of tribute among the population, at this stage, the kleptocrat begins to spend the collected tribute. If the kleptocrat opts for the third point, which is clearly cheaper, he will build a powerful ideological machine or a totalitarian regime. We observed this phenomenon in the early to mid-20th century. However, this practice has limitations related to the gradual erosion of the kleptocrat’s monopoly on information, the development of independent media or those owned by competing parties, social networks, and the increasing demands of society for transparency in the ruler’s actions, which is reflected in the emergence of the concept of a “public figure.”

Finally, the implementation of the fourth point is expressed in the creation of an increasing number of goods that are characterized as public (for example, free or conditional education and healthcare, non-monetized benefits for students and pensioners). We can observe this process since the end of the 20th century, when a number of countries reached near ideals of socialism in their development. Today, the level of development of countries is characterized precisely by the diversity of socialized goods.

In this context, under conditions of information asymmetry between the authorities and the population, people perceive public goods, such as good news, without considering that the more money is spent on these goods, the more ends up in the pockets of the kleptocrat, who has already lost all other means of maintaining power. Even the awareness of kleptocratic motives is rationalized by the population: “So what if the mayor’s son-in-law owns a factory that produces paving stones? At least he didn’t just steal; he did something for the people.”

Of course, the only visible way to combat kleptocracy at this stage is to initiate the reverse process — the process of individualizing public goods, so that kleptocrats cannot hide the unaccounted income that arises from the difference between the cost of a public good and its value to society. Essentially, this involves building a system. full mutual consideration The trend towards implementing such a system is particularly evident with the advancement of scientific and technological progress.

An example can be drawn from the pension reforms being implemented in all relatively developed societies. The essence of these reforms lies in the transition from a “common pot” system for pension fund formation—where everyone pays today to support current retirees (and, of course, the kleptocrats)—to personalized accounting systems: “I earned this, I want to see where my money is, and I want to spend it when I retire.” A personalized pension system, like advanced health insurance, has only become possible due to the computerization of the relevant sectors, ultimately leading to the same effect: people pay contributions and receive services “for free.”

Of course, the personalization of the acquisition and expenditure of public goods does not fully resolve the problem of kleptocracy at this stage. It merely “rolls the ball under the tablecloth” to another place. After all, the transparency of operations with personalized funds is limited, including by legislation (who would doubt that?), and this limitation on transparency arises from the centralization of their administration, which in turn grants administrators unjustified increased powers.

Thus, under the current circumstances, the ongoing struggle of the population to curb kleptocracy must and will involve demanding greater transparency (in the words of the authors of “Cloud Democracy” — compelling honesty) from those in power. This, once again, is becoming increasingly achievable thanks to social networks, a growing number of unprovoked information leaks, and the expanding reach of developing technologies that can ensure comprehensive accountability in more and more areas. (Conclusion #3)

Technically ensured transparency

Thus:

• According to Conclusion No. 1, the authorities demand transparency and will establish systems for total accounting.
• According to Conclusion No. 2, society requires mutual transparency among people for its further development.
• According to Conclusion No. 3, the population demands greater transparency from the authorities in their activities.

At the same time

• There is a trend emerging in social relations due to the informatization of society — the personalization of public goods and their transformation from collective to individual.
• A necessary condition for minimizing the privileges granted to administrators of various institutions is their decentralization.

This is the very state that is described as “the upper levels don’t want to, and the lower levels can’t,” and is, in fact, revolutionary situation Don’t think that someone will be climbing over the gates of the Winter Palace right after the shot from the cruiser Aurora. It wasn’t there. real revolutions that unfolded as swiftly as the October Revolution, which was labeled a revolution post facto for ideological purposes. It is worth considering that society stands on the threshold completely new social formation characterized by a higher, if not complete, mutual technical support, transparency Текст для перевода: ..

It is precisely the technically facilitated mutual transparency that is the essential condition for the implementation of any e-government projects. In practice, e-government will only be able to function effectively after a sufficient erosion of privacy and the development of technologically enabled mutual transparency. In fact, the state of transparency can be considered the very state of existence of e-government.

A transparent society, based on the above, will require minimal efforts to compel its members. The amount of tribute collected by the authorities will decrease as the personalization of contributions and the accounting of their expenditure develop. Ideally, the only public goods that will require enforcement for tax payment will be defense and the maintenance of the state apparatus itself.

A transparent society will fundamentally change the situation with crime It will be extremely difficult to commit a crime unnoticed, the results of the crime cannot be exploited, and the numerical reputation of a member of society who has committed a socially disapproved offense will be diminished to the point that, for example, an individual with negative karma may simply be denied entry to a store. Crime will shrink to the level of unmotivated offenses, and this will no longer be a problem for the police, which is funded by taxes as a public good, but rather for private security firms and medical services. institutions Additionally, given that the likelihood of a criminal being caught approaches 1, the level of sanctions promised to the criminal upon capture will decrease, which will also reduce, if not eliminate, such a public good that requires contributions from society as the penitentiary system.

The appropriateness of defense spending in a transparent society can also be considered. to question Текст для перевода: ..

All of this will lead to an erosion of the need for the state. This is what anarchists dream of, but on a qualitatively different level. While anarchists believe in spontaneous self-organization of society, which is impossible in large latent groups without coercion (which anarchists dislike) or the presence of selective incentives, in this case, we are talking about building a completely new model of self-organization based on advanced IT technologies. These technologies, in one way or another, compel or incentivize members of society to participate in the creation of public goods: from responsible (rather than just wanting things to be over quickly) collective decision-making to mobilizing resources for the implementation of large investment projects.

Production relations

After discussing political issues, it is, of course, important to pay attention to economic matters. It is essential to clearly understand why transparency is needed for productive forces and what kind of productive forces should exist to thrive in a transparent environment, as opposed to the current situation where information asymmetry allows companies to maximize their profits.

But here, too, the source of the transformation of productive forces is the same informatization of society, which, as shown in Conclusion No. 1, is stimulated by the existing power to achieve its own goals. Even now, productive forces and production relations… enter a phase of conflict Текст для перевода: ..

Asymmetry of information

In his 1970 work “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” George Akerlof developed a mathematical model of a market with imperfect information. He noted that in such a market, the average price of a product tends to decrease, even for goods of perfect quality. It is even possible that the market could collapse to the point of disappearing altogether.

Due to the imperfections in information, dishonest sellers may offer lower-quality (cheaper to produce) products, deceiving the buyer. As a result, many buyers, aware of the low average quality, will avoid making purchases or will only agree to buy at a lower price.

It turned out that the less customers knew the truth about a product, or rather, the more the reality differed from the propaganda, the greater the seller’s profit. The end of the 20th century was marked by an approach focused on maximizing information retention. The monopoly on information became the only tool of power for the ruling class throughout history, as the aforementioned Jared Diamond noted in his book “Guns, Germs, and Steel.” Meanwhile, all self-respecting companies expanded their staff with advanced security services, which ultimately ended up protecting the companies from themselves.

The theoretically valid solutions to the problem of information asymmetry, such as mandatory product certification, licensing of activities, and the establishment of government oversight bodies for consumer protection, have not eliminated the problem but merely shifted the resource of information asymmetry from the hands of capitalists to those of officials. These officials, along with corporate bureaucrats, have formed the current ruling class – a bureaucratic elite – ultimately confirming that capitalists no longer rule the world and that it is extremely difficult to label the existing social order as capitalism.

A striking example of the desperate struggle of the ruling class for information resources, given its obvious futility, is the modern war against “piracy” and the establishment of a copyright cult.

What is happening in the market? F. Kotler referred to it as “Turbulence” or Chaotica, writing a book by the same name, thus expressing his cautious attitude towards what is happening. Don Tapscott and Anthony D. Williams called it “Wikinomics.”

Recent authors have shown how mass collaboration is changing the world, and Kotler pointed out, I quote: “THE WORLD has entered a new stage of the economy. National economies are deeply interconnected and interdependent. Commercial activities are conducted through streams of information moving at the speed of light via the Internet and mobile phones. This new stage brings remarkable benefits in the form of reduced costs and accelerated production and delivery of goods and services. But every coin has its flip side. There is a significant increase in the level of risk and uncertainty faced by both producers and consumers.” He also highlighted, among other risks: *Technological advancements and the information revolution.

• Disruptive technologies and innovations (disruptive in the sense that a new technology undermines and destroys the market for products made using the old technology)
• Hypercompetition
• Empowering clients (those very social networks)

It is important to understand that F. Kotler, the founder of marketing, understood better than anyone else that added value is created by the difference between the true properties of a product and its “legend.” If we try to summarize Kotler’s concerns in two words, it would be this: No matter what technologies or production know-how a manufacturer has, they will always…

• They will become outdated very quickly.
• They will be replaced by technologies that completely change the market.
• They will be instantly copied by competitors, who…
• Just the sea and endless darkness and
• Propaganda will compete with consumer reviews.

From the Life of Dinosaurs

Look at what happened to the know-how of Kodak or Agfa in the field of film production. Was it worth it to keep these “secrets”? But who knew that digital would catch up to film quality in just five years? Look at the history of the personal computer market, at the struggle between Macs and PCs. Apple was lagging behind simply because it kept information sealed and didn’t share it.

Look at the fate of DRM protection on DVD discs. Ultimately, the protection in the form of regional locking became a problem for honest users, rather than for those who were copying movies.

Twenty years ago, the closed nature of software code was considered normal and taken for granted. Now, companies are criticized for this lack of openness, and the very closedness of software code has become a critical characteristic that hinders its development in several markets.

These were all examples of how technologies that completely transform the market prevented large companies, which keep their secrets, from even having time to maneuver. While large companies may still have a reason to maintain asymmetry, for smaller producers who cannot allocate significant resources to security, it loses all meaning.

Wikinomics

Where did the problem of a large number of small consumers come from? What happened to the existing trend towards centralization and globalization, and why has it shifted to a trend of outsourcing and the separation of company divisions into independent structures?

NTP.

We are witnessing an acceleration of scientific and technological progress, which leads to two factors: *

• Firstly, the frequent changes in technology deprive large corporations of their flexibility and
• Secondly, it enhances the capabilities of small producers compared to large ones.

A simple example: photo printing technology has led to people gradually forgetting what a “photo studio” is in the sense that it existed just 5 years ago. Now, anyone can print their own photos at home using relatively inexpensive equipment.

And this example is not an isolated case. Everyone can see how quickly the number of car manufacturers has increased. What’s the reason for this? It’s because if you have the money for a couple of robots and contracts for supplying components, you can already start small-scale production. This phenomenon often goes unnoticed, even though the manufacturers themselves are gradually dispersing their production capacities across an increasing number of small assembly plants located closer to the consumer.

You can already brew beer at home. You can also, if you want, smelt metal without searching for three-phase power and without dragging around a welding transformer that causes voltage drops throughout the house. And so on. This is all part of the wikification of the economy. In an increasing number of areas, independent and thriving businesses are emerging.

• a) does not depend on the effect of scale; rather, the effect of scale provides smaller advantages compared to the flexibility of the business and its focus on specific niches.
• b) can be serviced without hiring labor – using household labor.

Of course, if we compare, say, the production of spoons using mass stamping and using, for example, a 3D printer, the former seems cheaper at first glance. But upon closer inspection, when we factor in administration, distribution, and logistics costs, it turns out that it’s more cost-effective to buy a spoon at a local “spoon shop” or even print one at home when the previous one gets lost, rather than purchasing it at a supermarket or as part of a set.

Finance

The second factor is that the development of the financial system has made it possible to overlook a common issue for any business: the need for startup capital. Now, the concept of “market entry threshold” has become quite virtual. For markets dominated by large players, such as the airline industry or automotive manufacturing, there will always be major investors, such as state stabilization funds. For smaller markets, there are banks and private investors.

Let’s add the factor of labor migration from company to company into this mix, and we will create a wonderful picture of the world where there is simply no room for secrets, and any successful innovation is instantly copied by everyone around.

The only way to survive will be constant movement. Just as a cyclist doesn’t seek stability in stopping, companies should not get stuck in preserving the status quo; they must keep pushing forward with innovations to be the leaders that others look to for inspiration, rather than the ones who follow.

In other words, productive forces enter market conditions where having certain business ideas or technological secrets gives companies a relatively small temporary advantage, which quickly disappears once the first product hits the market. The patent system no longer functions as it did in the past, especially for small manufacturers who simply cannot afford lengthy legal battles.

It is important to note that a large number of small suppliers leads to consumers losing sight of the differences between two products, causing them to rely solely on one clear criterion – price.

Here we realize that in a competitive market, and we’re even talking about hypercompetition, as mentioned earlier, information asymmetry works in favor of unscrupulous producers. The acceleration of scientific and technological progress, along with hypercompetition, makes traditional methods of reducing asymmetry—such as signaling quality to consumers through branding, building reputation, and having licenses and certificates—less effective.

What brands, licenses, and certifications can we talk about if the technology used to produce the product may only be relevant for a couple of years, or if the company itself might not last long without various mergers and acquisitions? Who can guarantee that by revealing our technology to an official, we won’t end up with a powerful competitor the next day, especially one backed by government support? If not a predator looking to crush our business and then buy it out from under us, allowing us to remain as managers under a “kind” uncle?

It turns out that businesses need a reduction in information asymmetry, which is currently supported by the government. This is necessary in order to safely disclose information about themselves for their own purposes. After all, in many economies today, the government is seen as the main agent to whom information should be disclosed only as a last resort and often under duress.

So, the old methods of reducing asymmetry are no longer effective, consumers are confused and don’t know where to buy a product or service, and the market is becoming increasingly competitive. The asymmetry supported by know-how and patents is no longer effective. What should businesses do in such conditions?

Presumption of disclosure of information

Of course, it is revealed. If we do not control the process, we need to take the lead. If you have a secret, you should already behave as if your competitors have discovered it and as if there is an even newer secret that you do not have. Any stamp that says “for internal use only” already implies “for competitors’ review.” And even if there is still some undisclosed confidential document, such as a business plan, in any case, the sensitive part of its content can be assessed through indirect signs, thanks to the development of information technology, or… modeled with the help of game theory and modern computing resources. Competitors or simply “borrowed” just because the costs of obtaining confidential information are minimized every day. So why should companies incur additional costs to ensure confidentiality?

An example from world politics is WikiLeaks. It’s the same principle – if the information is sensitive to disclosure, you should act as if it has already been revealed. If it’s truly necessary to maintain confidentiality, you need to mask the leak rather than fight against its potential occurrence.

What to do?

We are living in an age of new technologies. We are experiencing a truly catastrophic information revolution. Who watched the launch of Atlantis live? Just think about it. Could anyone have imagined that I could watch a live video feed of the fuel tank of a launching spacecraft from my own home, and even rewind it to see what I missed?

In the past, companies had to carefully devise marketing communication strategies to showcase the benefits of their products or services to consumers. Now, they can simply set up a webcam in the place where the product is made, and they will likely start doing this, similar to how meat processing areas in supermarkets operate. These areas are separated from customers by transparent walls, allowing shoppers to observe the process of making minced meat.

Thanks to the development of IT, businesses now have a tool that allows them to reduce asymmetry, specifically to increase profits rather than the other way around. Today, right now, we are on the brink of a paradigm shift in business – instead of hiding important information from consumers, we should be showing it to them.

Dinosaur Marketing

A simple question: Do you like it when something like “100% orange” is written on the juice, and then in green on green it adds the word “nectar”? Are there really people who think that this should appeal to someone and that consumers want to be deceived? How much easier would it be to just be honest? Consider this as a consumer before placing a product like milk in 980 ml bottles on the shelf.

What is really happening? In reality, there is a product and there is a price. By removing the unnecessary, one can use the formula:

Money + Transaction costs = Product cost + advertising.

The seller, wanting to get money from you, may play with the second part of the formula and complicate the solution to the problem from the first part of the formula (calculating the price per unit of milk is more difficult when the packaging contains a non-round number of weight or volume units). Meanwhile, it has been much easier to invest money in advertising rather than in the product itself.

The consumer had no voice. And where they still have no voice, it continues. The seller is restricted by law, for example, the requirement to indicate the weight of the product on the milk packaging. But the seller resists with all their might, writing this weight in small letters and even packaging, say, milk in three cartons, prominently displaying “3 for the price of 2” in large letters, so that the insert in the overall packaging with this inscription covers the note that the carton contains not 1000 ml, but 950. They have been shortchanging customers and will continue to do so. The seller’s smile is still cheaper, and not many people go to the market with their own scales. Why?

Because you pay for a product not just its price, but also for the effort involved in gathering information about it. This is part of the transaction costs. It’s not obvious, but it’s quite significant. The more a person values their time, the less they will spend standing and choosing a product on the shelf.

Or worse, calculating which market has the best price for which product and where it’s more cost-effective to go, taking transportation costs into account, and also, when buying carrots, bringing not only a scale but also a mass spectrometer. A person strives to minimize their expenses, assuming a more or less uniform quality of goods; they focus on price, not by running around to all the sellers, but by taking a “market sample,” visiting 2-3 vendors and understanding what they perceive as the average price for the product. The deeper the true information about the product is hidden, the less effort a person is willing to expend to obtain it. This means that, while maintaining the overall value of the left side of the equation, they will be ready to pay more if they completely forgo the costs of searching for a rational solution. They will choose something out of nothing, guided by emotions rather than analysis. They might pick the smile of the “Cheerful Milkman” on the packaging, or what others have bought, or something that is… more expensive (like perceived quality or prestige), or something that, on the contrary, no one else has chosen. In any case, they will have a method of irrational choice, as rational choice is simply too costly.

This is what businesses from the last century take advantage of. Simple math and nothing personal. “We’re not fooling you. We add propaganda to the product on one side and increase transaction costs on the other.”

Mass spectrometer at the market

At the same time, if the consumer is provided with complete information about the product, they will practically buy carrots not only with a scale but also with on-site mass spectrometry analysis. In this case, the carrots will be purchased specifically from that seller. The comparative price with other offers will matter little, as what the buyer sees will no longer be just carrots, but a set of fertilizers and pesticides. From the perspective of the formula described above, the consumer will be willing to pay a higher price for the same product, as it reduces their transaction costs.

Is a mass spectrometer expensive? What if it were free? Or cheap? Would you buy carrots at the market from a vendor without scales? Even if they told you a specific price for a specific bag of carrots, but you didn’t know the weight? Of course not. The same goes for a market where everyone had mass spectrometers; no one would buy anything without on-site analysis.

Again, why aren’t there things like mass spectrometers? Because it has been cheaper to keep information hidden and to amplify propaganda than to fully disclose it. Besides the costs associated with trade secrets (obvious in the form of espionage and hidden in the form of… phobias of openness ), openness required costs for its technical support.

• But today, propaganda is becoming increasingly expensive and less effective. In the mass market, propaganda no longer means anything, and to exaggerate, you can’t sell more than one copy of a failed product. Everyone will immediately know about the poor quality and the discrepancy between the product and its advertising. You can hide information and play spy games as much as you want, like Nokia does with Eldar Murtazin, but that won’t boost sales anymore.
• Today, the material efforts to ensure transparency are becoming increasingly accessible. Anyone can install web cameras in a workshop and put their accounting system online. However, not everyone even considers such possibilities, and unfortunately, in our environment of constant struggle for information between businesses and the ruling elite, it is not always safe. This is yet another sign of the contradiction between productive forces and production relations.

Businesses no longer have, and will never have, the time to develop PR strategies and reputation management policies. Reputation must be impeccable from day one. And it can only be impeccable when a business fundamentally has nothing to hide and when there is no ground for speculation or conjecture. Transparency becomes the foundation of safety not only for individuals but also for businesses.

Conclusion

Thus, the changes currently occurring in information technology are prompting not only the authorities and society but also production relations to increase transparency, which aligns with the conclusion about the presence or imminent emergence of a revolutionary situation.

The key role that information technology will play in building new social systems, including e-government, lies in ensuring mutual transparency within society.

1. Coercion can be organized not only through the parasites in power but also in a manner similar to what occurs among neighbors in a dacha cooperative. When an initiative group starts to gently demand contributions from each member for a shared asphalt road instead of the broken dirt path, the demands become increasingly harsh as more members pay up. The community, in one way or another, pressures all or the overwhelming majority of participants to join the project. These demands are primarily backed by references to reputational relationships. No one will later “extend a hand” to someone who has rationally evaded participation or to someone who has chosen the role of a blackmailer: “I will pay only if my participation also gets me an asphalted garage.” In the cooperative, reputation is remembered, and it matters. There are things that cannot be done without a neighbor. In other words, reputation in small groups, where people know each other, serves as that selective motive. After the road is built, the initiative group, having earned a reputation, begins to devise new projects, where they (rationally) start to foresee their income, at least to cover the costs incurred while organizing the group. Thus, in the quiet and peaceful dacha cooperative, a power elite is born.