The Economy

Change System

Live Change | Process Integration | Price Omniscience | Inner Loop

Live Change

a. flow of news

Part VI of Hayek's essay starts with a parallel:

We must look at the price system as such a mechanism for communicating information if we want to understand its real function — a function which, of course, it fulfills less perfectly as prices grow more rigid.

According to the author, the price system is an information mechanism.
We may extrapolate and even confuse the IT system with the price system.

A few lines later, Hayek adds:

It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications

He insists on the tangible representation of a price system.
It combines change and telecommunication in an associative purpose.
The very function of the news affecting a price is the news itself.
It is a differential, rather than a fact.
Facts are very convenient mental snapshots over the flow of news.
But time doesn't stop to think over continuous differentials.
A fact stays further away from the truth as information keeps flowing.
Dams installed after sources can give the illusion that nothing changed.
Schedules are such dams.
They look like a misunderstanding of the price mechanism.
Economic actors could ponder this when they drop news on the market.
Scheduled economic announcements are drawn from public and updated facts.
Prices are not adjusted yearly, monthly or every quarter.
They are continuously adjusted as information flows.
Information retention creates a large resulting differential.
And it must be digested by the market at once.
Information retention is a threat to financial stability.
It could be avoided if crucial indicators were continuously calculated.
Markets could sync news in live streams for smooth propagation.
Accounting, data collection and economic indicators are still batched.
Worries of a global market volatility dwarf automation of data streams.
Live data is not a nice-to-have but a prerequisite to robust markets.
Immediate feedback enables a far better enforcement of regulations.

Process Integration

b. priced news

The value extracting function of the IT system communicates information.
IT must be able to charge and pay for data to perform its purpose.
That is, it must interface with a price system or a market.
Receiving and paying accounts are tied to the instruction.
It carries information from A to B.

Where data is free, value is exploited;
where data is paid, value is created in the knowledge economy.

People tolerate clunky redirections to online payment gateways.
They would understandably better keep funds in a bank than at a retailer.
The underlying issue is a lack of direct access to the banking system.
Transacting code of an application cannot afford external banking.
Overheads cost seconds of manual work to a localized millisecond process.
They break the value chain.
Bits of data carrying unique information are simply wasted at the source.
They do not propagate unless exploited at scale by a third-party bank.
Such agreements are secured by offline contracts out of a developer reach.
Change data lacks an open microfinancial infrastructure for tiny news.
Transactions must be integrated within IT to reap its full benefits.
The knowledge of particular circumstances is clearly missing.
Funds scrape social networks to pick some of it with advanced techniques.
A remunerating interface would incentivize higher quality data for less.
Decentralized knowledge is lost.

Price Omniscience

c. all-encompassing past

Knowledge transmission is a socially beneficial purpose of price systems.
Live prices prioritize market exposure efficiently to reallocate funding.
Think of the amount of news changing prices create every day.
The questions they raise are very significant.
Some read the stars, some review fundamentals.
We all plan, together, as a society, through prices.
They make or break businesses.
Investing is the art of simultaneously guessing:
what is in the price;
what is not in the price;
and what will be in the price.
In other words, investing is anticipating data sources.
That's why insider trading is tagged as unfair.
Interests on information retention or conflicting data loss cannot cover.
More money is lost every day by not knowing:
what the price should have known, which insiders knew.
Delayed information aggregates rob prices.
We cannot imagine how much more beneficial omniscient markets would be.
Almost no crash.
Almost no bubble.
Almost no panic.
Omniscient markets progress slowly, bit by bit, one at a time.
AI bots trading financial markets partly attempt to predict the past.
At least, the day we will realize omniscience, we will know the past.
We will not know the future, but we will be pretty close.

Inner Loop

d. from data to actions

IT systems execute instructions in a process of information arbitrage.
Data carries a knowledge gap to be interpreted by instructions.
Instructions modify the state of knowledge creating a differential.
It departs from the numerical synthesis of previous knowledge.

Pseudocode illustrating continuous knowledge updates performed by IT:

while information in $data; do
    new knowledge = instruction($knowledge, $information)
done

The knowledge process creates or burns money when applied to the economy.

Pseudocode for time series of pricing differentials:

while transaction in $data; do
    new price = instruction($price, $transaction)
done

On this assembly line, knowledge and information are specific.
Price is the product and transactional data the commodity.
Instructions are dependent on the price system.
Each transaction expresses an agreement on a change moving a price.
Buyers and sellers agree to disagree on diametrically opposed actions.
Their exchange forms a consensus integrating a wider price consensus.
Trading systems cultivate powerful and wide multipartite agreements.
Goods and services carry with them a greater complexity of opinions.
What is actually exchanged can be seen as a token of beliefs.
The economy is an overlap of individual intents.
Resources with more subjective overlaps become more valuable.
Resources with less subjective overlaps become less valuable.
The economy is debating and adapting the right position for society.
Constant action of prices communicates up-to-date consensual knowledge.

The symbiosis of transaction and information is ignored by law and design.
The crossing between underlying systems is highly regulated.
It is partly responsible for scarcity in the knowledge economy desert.
Value creation faces a fortress around the oasis of currency.
Scarcity paralyzes the most vulnerable fringes of society.
They cannot afford to act on the unique knowledge available to them.
And most affluent fringes cannot buy it.
We are all losing.
Manipulations are exceptions to the rule.
The integration of IT and price systems synergizes any endeavor.
Control is one of them when the merge isn't distributed.
Knowledge is managed by information systems; to own them is to hold power.
Misinformation originates in a system that the people truth can't afford.
Hayek evokes malfunctioning rigidity in a fixed price.
It isn't fulfilling its primary balancing purpose against decision bias.
In turn, knowledge of synthesized information embeds a potency to act.
The right action to take is derived from dispersed insights:
as representative as they might be, as influential as they are.