A book by Alexander Dolgin

Manifesto of the New Economy

Institutions and Business Models of the Digital Society

Time Accountance

"AST" has published "Manifesto of the New Economy. The Second Invisible Hand of the Market" by Alexander Dolgin, Director of Imhonet recommender portal, HSE Professor. The author believes that the new economy is, above all, the economy of personal time. The most significant tool for its optimization is clubs: communities of different interests. Quality of life of a particular person depends on people around him and the nature of their interaction.

The author does not confine himself to a theory and considers practical questions in the book: what the second hand of the market is and how it operates, how talent, success and "stardom" are interconnected, how to make money in social networks, what the business model for the development of entertainment and media is, how to measure cultural values, etc.

Exclusively for Alexander Dolgin has answered some of the most frequently discussed issues raised in his book. We also offer comments by Alexander Auzan, the President of the Institute of National Project "Social Contract" and Lev Yakobson, First Vice-Chancellor of HSE.

Alexander Dolgin: "What does happiness economics keep back about happiness?"

It keeps back the most important thing:

1. Happiness does not totally relate to indicators of quality of life, as it is commonly believed. Hampshire, US city is the worst city by all indicators, including over-the-top percentage of overweight people, but it turns out that people of Hampshire are quite happy. In contrast, in the most prosperous countries percentage of suicides is the highest.

2. Happiness has less to do with absolute performance, but with the speed of improvements. It is bad if progress is too slow, however and oddly enough, it is even worse when dynamic is too fast. In this case personal resources are over-consumed, plus the potential for future achievements both yours and future generations’ is demolished.

3. Effect of emotional hysteresis or, in other words, of emotional asymmetry in the perception of success and failure is not considered. Hysteresis loop is a curve that resembles a tilted lobe - climbing up on it is slow and moving down is accelerated.

The linkage between happiness and material improvements is like this curve. Simplifying a bit, further acquisition of goods brings less pleasure than the previous ones. However, it is extremely unpleasant to part with this not very noticeable addition! Therefore, with the positive/negative changes of prosperity, emotional swings sway unevenly: losses bring much pain, while similar-scale acquisitions bring less pleasure. This explains why smooth and gradual rise is preferable - then it will be long and pleasant. Otherwise you cannot escape emotional losses.

4. Usually available statistical reporting, which is used by media, operates rates for the whole country, averaging the capital and province. However, geographical distribution of wealth and, in general, magnitude of economic inequality in the society is far more important.

Of course, all of the above relates more to successful social strata. As for the people living on the breadline, their behavior and life satisfaction economy models quite well.

How are talent, success and "stardom" interconnected?

Not as strong as it is commonly believed. A theory of stars explains how a star appears from a great number of talented (or not) people – a figure, which attracts maximum of social attention. The main formula of this theory is that the issue is neither about "stars" nor their talent, but about the strictly limited number of public figures people need to discuss. If there will be too many stars and everyone will choose one little star, there will be no discussion. The mechanism of coming up of a star is called a snowball. The one who comes up first will get all the snow (people’s attention) and deprive of it the others. This model works for social networks too. Some of them grow faster not because they are better/more useful/more functional, but they managed to get the critical mass of users. Those who lag will have to wait for the new "snow".

How to measure cultural values?

The only one mean is to provide exchange conditions to them so participants and observers could clearly see what and how changes. Internet makes it possible to solve this task. I mean all the forms of users’ responds in social networks: grades, comments, reviews… And if cultural (symbolic) sharing will be more transparent, it will be oriented more to a person than pure commerce.

The main currency of cultural and interpersonal exchange is the time people spend to various communications with texts, pieces of arts or talkers. The result and goal of these expenditures is the subjective time which can be of various quality. When evaluating his time, the person decides how good, informative, intensive the time he spent for a communication (including loneliness) was. Internet social networks are the market place for the symbolic exchange, sort of an exchange house. Here one can see what people spend there time on and how they estimate the results. Indicators are their grades to one or another post. Nowadays these are scores on Imhonet, or sort of the same but simplified "likes" on Facebook, and "thanks" or "+/-" on other sites. It is important that these data, these grades were given in large, then put in statistics and were available to users. Then it will be easier for them to meditate their behavior and optimize it. In short, to choose those communications, which bring more quality time.

Thus, the measure of cultural values (as well as of any communication, not necessarily artistic) is the number of good (quality) time, brought by listening / watching / reading / communication. The more people liked the value, the stronger it is. Internet allows you to collect and summarize these data. In the future when planning our time we will deal with a sort of accounting - as it is in real economics or family budget. Similar stats and records will be kept in a symbolic field; they will be used as an instrument of rational choice.

This is inevitable, as only 10, maximum 20 per cent of human resources is required to simply feed and warm the world's population. The rest goes for communicative, non-material, symbolic activities. This means that information, symbolic, media markets are becoming major: they hold the controlling stake in the industries and practices of human self-awareness and happiness. And if so, then quantitative outlines of symbolic exchange will show through the fixation and measurement of the myriad of acts of exchange happening in these markets. With all the lion's share of human activity, communication and personal resources will necessarily require a more rigorous, prudent, effective treatment. Mastering these new practices is for the good of the man and society.

Lev Jakobson: "The Dolgin’s book is exactly about the economics, where the key factor is the possibility of one person to reach out to another one"

It is safe to say that in the near future communications to a wide extent (not only transport, but, above all, information, ability to generate, select, and perceive it) will be crucial. If we focus, today, a nation with advanced industry and few natural resources can live high, but a country that has a lot under its soil, can live poorer. And tomorrow, for example, a situation exists when there is no production in the traditional sense, but the country is a leader in communications. This is where the new economics comes from. The Dolgin’s book is just about this economics, where the key factor is the possibility of one person to reach out to another one". Of course, figuratively. Information is of key importance here. There are works on this, but there is a feature in the book by Alexander Dolgin which is represented in the title – "Manifesto". It is some holistic message. The book is easy to read, it is convincing, traditional economics links would overload it.

The message of emphasis, which is extremely valuable to me, - the role of cooperation. It is assumed that economists observe people conflicts only. Suppose I have a piece of bread, and if I eat it, you will not get it. Even the microphone, which I now use, can be approached only by turns. A different story is the communication: a lot of people involved into one are the basis for the augmentation of value for anyone. In this situation, the role of cooperation changes, it is not necessary even to speak of altruism, being together is simply more profitable. This situation is the opposite to conflicts.

If for the traditional economics scarcity was the main problem (lack of bread and microphones – not available to anyone), then in the new economics the lack of the ability to perceive (there’s so much on Internet) will dominate. Internet offers direct communication (chat with a blogger) or implied communication (films, texts, music – this is communication too). As a result, the main limitation (and the economics is always around restrictions) is not scarcity but the perception threshold. Not that there are few pies, but that a huge amount of pies is on a person, so much information is brought down that there is a feeling that you either be a patient of loony-bin or perish.. There appears a particular problem of reasonable use of scarce resources of perception, which I have. And here it turns out that competent use of communication can only be based on other communications.

Alexander Dolgin is not only researcher, but practitioner too. And this is really good, especially when it relates to new phenomena. Do you know when an owl comes out? In twilight, when phenomena is dying. This is the time when a researcher starts to think over, he would do this in quite libraries, now he is sitting at a computer, but a researcher himself has nothing to do with the phenomena when it is created. And many can be comprehended only when you are in the process. Dolgin is in the process: he created Imhonet, and empirical data in the book are the real experience. I shall repeat: this book, from one side, is the economics work, and from another side this is the message to usual people, which can be read with interest and no tense. Dolgin endenizens those changes we suffer now, which are indeed important for the future.

Alexander Auzan: "I would name the book – "Law of the Conservation of Happiness".

"I would read the book by Dolgin from the end, rather than from the beginning - started with a paradox Alexander Auzan, Head of Chair of Applied Institutional Economics of Moscow State University, President of National Project Institute-Social Contract, - you open Appendices and, my God! How interesting! I'm not talking about they are titled the way I would title the whole book - "The law of conservation of happiness. Empirical Data".  I'm trying to persuade Alexander Dolgin to describe in detail the experiments he run at the Imhonet portal of recommendations, because even first results are intriguing. Why, for example, in distribution of ratings of different cultural products on Imhonet maximum satisfaction is always in the area of 8 points of 10-point scale? No matter what people estimate - literature, music, movies ... It appears that a certain proportion of positive and negative is supported in the individual and society, and it is quite difficult to be moved with respect to a certain level. And Dolgin half-jokingly, half-seriously hypothesizes the law of conservation of happiness – on the analogy with the law of conservation of energy. Such experiments lead to a huge amount of theoretical questions and ideas.

There are more cases when manufacturers cannot protect their products and get money for them. But they need to go on living somehow. Here come two brilliant solutions. First – "let them steal" logic: we let you use on the condition that you take, finish and get a product everyone will use. But this is the solution for only a part of the problem – no one hides the product, a more complex system may be created from it. But how to cover expenses? Then post-factum payments arise: one pays the amount he considers right. And here Dolgin finds a very right mechanism and explains why post-factum payment works. A person evaluates himself the value of the product not by costs but by other parameters.

Yet, why does a person pay? Well, it works if people are united in groups, communities. And these communities make people behave right. Criminal Code does not prohibit a person to spit upon the floor, neither does Administrative Code, it is governed by something else. I suspect that this person will no longer be invited to the room. The same is for post-payment. You said you were in the game, so don’t cheat, pay as much money as you consider suitable. And Mr. Dolgin proves it by an experiment. If people get together on the Internet not just to chat, but by common values, this form clubs.

A strong passage of the book explains that completely new institutions may grow out of internet clubs, just like monasteries and institutions of church developed from settlements of hermits. It is convincing because people grouped not by chance but because they have common tastes, they share information about what books worth reading and not. And this is really important because it allows not wasting our unique and invaluable lives on reading nonsense. It is significant to have someone, whom you trust, said, "Don’t read it, take this one". And all of this goes with figures and graphs in the annexes.