Towards a General Theory of Data or a Social Theory of Money – Reconciling Information Science and Economics

In this essay it is argued that every monetary failure is essentially a problem of imperfect information. A thought experiment is conducted in which a future “information grid,” an all-knowing supercomputer and powerful algorithms (it may also be called the Walrasian auctioneer or deus ex machina), takes on the function fiat money and the price system had during the last centuries. It is explained that prices are only an approximation for “fundamental value” and that the “normative function” of fiat money is entirely subsumed by its informational character. This suggests an equivalence between aggregate fiat money, collective information, and collective historical information, that is, “memory” of the respective social group. This can be called a “social theory of money” in the sense of a higher-order logic with respect to status quo monetary economics. If information becomes a public (or even anti-rival) good and the world becomes deeply “networked,” tremendous welfare increases could be realized through positive feedbacks. Even if a qualitative rich information ecology is far from being a reality, Big Data applications and technological progress are radically transforming the economy by decreasing uncertainty. A rethinking of our understanding of fiat money will eventually become imperative as a more complex view of economics is emerging – not because the economic model of perfect information is moving closer to reality, but because reality is (to some extent) moving closer to the model. A healthier information ecology could improve the efficient allocation of scarce resources and help to avoid the drifting off of complex – into chaotic systems. The social theory of money plays an important role in providing the ontological context to unmask camouflaged financial crisis as true informational crisis