Radmilo V. Pešić University of Belgrade Serbia Evolution of Economy Radmilo V. Pešić University of Belgrade Serbia

Why do Economies Evolve? Demography created a strong rationale for technological progress. Advances in agriculture and manufacturing enabled further population growth. Technological progress created institutional changes. Diverse institution settings and institutional changes enabled evolution of economies.

Institutional differences No matter how small institutional differences between various groups of people initially are, during the course of history and economic development those differences are becoming more and more significant. They are responsible for appearance of various economic systems. (Acemoglu and Robinson, Why Nations Fail).

Three stages of evolution - Agriculture Agricultural revolution (sequence of harvests) some 12000 years ago enabled first surpluses in human history. Creation of property (private goods vs. collective goods), market exchanges (commodities) and money. Societies with markets Markets - fragmented. Money - commodity money

Three stages of evolution - Industry Industrial revolution (steam engine) 3 cent. ago enabled dynamic profit creation and transportation Markets become interrelated and interconnected Market society Paper money - growth of financial systems International finance Societies with networks, formal, informal…etc.

Three stages of evolution - Information Information revolution (Internet) some 40 years ago enabled Information society Information society as Post-market society Knowledge Based Service Economy Integrated global market unified with information links – hyper-market Virtual money - money as an information

Intrinsic nature of money Money as an information about contribution to the general social welfare, created at the market. Market is an information transformer (as a computer) it needs information and it generates information. Money serves as a medium of exchange and it enables the market to be efficient. Money should not be confused with information carriers (gold, paper, card, e-money). Money is a pure information, but there is no information without information carrier. For a proper functioning of money the Carrier must be properly defined, otherwise monetary disturbances may occur. Interest is a price of money, price of information utilization.

Market as a Computer Market function is to transform information in order to create or to increase welfare of the societies and individuals. However, the market, as any other computer, can be malfunctioned! It needs repair. The art of Economics is not to harm the market- computer, but to improve its performance. Welfare decrease (monopolies, unemployment, underperformance of economy) are the signs of market malfunction.

What are the problems of KBE? Contemporary markets are malfunctioned. Inefficient markets are producing inefficient economies and troubled societies. Current mainstream Economics serves as an obstacle for a market repair and upgrade. Economies do evolve, owing to technical progress and institutional variety and institutional competition, but outdated theory creates obstacles for further evolution of KBE.

Transition from material economy to KBE Decoupling, economic development from pure growth Decoupling growth from increased consumption Decoupling consumption from natural resource use Dematerialization of economy The point is not to have more but to use more and better End of mass production, end of short-living products. Post-market society characterized by production for known, highly individualized production.

Knowledge Based Economy Distribution based on information endowment. The amount of profit will depend on available information. Even now it is related to the available and utilized information about consumers life-styles, aspirations, preferences. (Google, Facebook, Twitter…..are gathering information tools). Consumption individualized, optimized (end of the more, the better axiom). End of the standard Microeconomic consumer preference theory. The dominance of information availability and asymmetry.

Post-Market Society NETWORKISM (Mason, P: Post-Capitalism=network socialism) Digital goods, free public goods, zero cost multiplying (Wikipedia, Linux, Bookzz, Open Office, Napster…) Types of Networks: Voluntary, Compulsory; free entrance, paid fee; Permanent, Occasional, Temporary; Active member requirement, Passive member networks. Advantages: minimal bureaucracy, no permanent authority, changing leadership, flexibility, quick formation and permanent change. New political structures (Gillies, D).

References Acemoglu D. and Robinson J. A. (2012) Why Nations Fail, The Origins of Power, Prosperity, and Poverty. Gillies, D. (2015) Paul Mason`s PostCapitalism. Real-World Economics Review, 73. Mason, P (2015) PostCapitalism. A Guide to Our Future, Allen Lane. Tyfield, D. (2015) On Paul Mason`s PostCapitalism- An Extended review.