NOTE: This is a slightly revised version of the paper “The role of IT in moving towards a socially-beneficial economy” by Antonio Maña, published in the 2017 IIER 139th International Conference on Social Science and Economics (ICSSE), Los Angeles, USA, 20th -21st January, 2017.
“Many scholars and economists have raised the issue of the degradation of the principles of the theory of capitalism and their lack of validity in today’s world . Among the many principles that do not hold today, the so-called “sanctity of the market” and the “invisible hand”  are two of the most clearly wrong. Behind these principles, there are many assumptions that were quite established and permanent at the time when these principles were proposed. For instance, the relatively small scale of the economies, the complexity of the system which made it impossible in practice for malicious actors to pervert the system in their benefit, or the locality of the market, were assumptions underlying those principles, but now, these assumptions are not real anymore. Furthermore, these principles have been extended to develop additional unquestionable facts as the “right” of companies to operate in opaque forms, for instance, with regards to their stakeholders and the relations among companies. These principles have guided the world economy for a long time and did reasonably well. However, the introduction of IT systems, their evolution in processing power, memory and connectivity and the capabilities that these advances bring, have resulted in the capability to practice “unenlightened self-interest” in the large scale. That is, to control the evolution of the markets in the interest of a selected elite, that is already having catastrophic consequences (commonly referred as the tragedy of the commons). In this article we present the first IT system capable of reverting the situation, bringing us back in the direction of enlightened self-interest and promoting a more socially-beneficial economic activity.”
In essence, the economic theory of capitalism relies on the “self-regulation” of the economy on the basis that a balance is supposed to exist between different forces (buyers and sellers, workers and companies) that prevents the system to become pervert. Self-regulation was also assumed in relation to competition, as the theory is that business that perfection manufacturing processes to increase the quality or reduce the cost of the products, that offer new improved products or services (in the remainder of the paper we will use the term product to refer to both as this has no effect on the discussion), or that offer any other advantage for the consumer would be rewarded by the system with success.
Today it is clear to most experts, and even to many citizens, that this alleged self-regulatory mechanism does not work. In the current socio-economic situation, the balance between economic agents (which we will refer as “markets”) and society in general (which we will refer as “citizens”) has deteriorated in favor of the former. The result is that markets have become far more influential than they had traditionally been; to the extent that they not only have a capacity to influence labor conditions but also all aspects of society. Among the instruments that have deteriorated the most are labor standards and the power of trade unions, both reduced or almost eliminated in the name of economic competitiveness. The overvaluation of economic results as the single measure of progress has led to classify countries as if they were companies. In the particular case of Spain, the labor conditions have been unilaterally degraded by the pressure of the markets, which our leaders have not known or wanted to counteract. In addition, this overvaluation of the criteria of economic profitability has opened the door to numerous behaviors detrimental to citizens, society and the Earth, in terms mainly economic, but also social, ecological, and ethical among others. The Transparent Info project has been designed to restore this balance, giving citizens access to information and tools that will allow them to influence the way companies behave.
The basis of this project is the observation that one of the main reasons for the imbalance is that while economic agents have large systems of information and data analysis, citizens do not have the necessary information to react to the imbalances of the system. Currently, when you buy something, you are led by marketing and branding strategies that result in customers not buying the best product or service for them, but the one that was more convincing. In the decision of the specific one to buy, you do not know who will ultimately receive the benefits of that sale, whether the manufacturer exploits the workers, if staff is fired to maximize profits, if the company uses tax havens to avoid paying taxes in your country, if they respect the environmental norms, etc. etc. Imagine now that this information is available to everyone and that, knowing that our well-being depends on it, we begin to use that information to choose how we spend our money instead of just being guided by economic criteria …
This is just what Transparent Info can do: Provide users with the information they need so they can consume benefiting companies that act well and penalizing those who do not. And there is precisely the closing of the circle of the new mechanism of equilibrium: Businesses depend on workers to buy their products and services to make money. Therefore, if companies / countries are guided only by the criterion of maximizing economic results, lets make sure that those who act badly lose money. If Transparent Info or any similar system succeds, we honestly believe that:
Companies that act unethically (in any sense) would lose money while those that act ethically would increase their profits!
Local businesses will be favoured, resulting in social, ecological, etc. benefits.
Speculation can be limited and punished.
Countries that use their economic power to subjugate others would be vulnerable to the victims penalizing the companies of the “aggressors.”
Countries would cease to be judged for their ability to produce economic benefits and would be judged for their ability to improve the lives of their citizens …
Acording to John Iker  “Conventional wisdom in the U.S. seems to be that only the market is capable of doing things right. Anything that interferes with the market; the government, public attitudes, or cultural values, for example; by definition creates economic inefficiency and is bad for society. Few people are aware of the origin of this belief, and even fewer seem willing to challenge it. In fact, the few who dare to question the market’s sanctity are quickly attacked and degraded by people in powerful places with obvious self-interest in perpetuating the belief, including an army of economists.” On the other hand Gregory Mankiw, states that governmental intervention can improve on market outcomes under conditions of “market failure,” or situations in which the market on its own does not allocate resources efficiently.
In his seminal trilogy Karl Marx tries (in a way, as we are now) to link the value of a product with something related to the value for society. In his case, the amount of work required for its production. The main idea is to define a value-generating substance, the essential of which is quantitative: the magnitude of its value. And this magnitude is determined by the amount of work, which in turn is measured by the duration or working time, in the usual units of time (day, hour, year, etc.). However, it is not any particular person’s work that is measured, but the work “of the same human labor force,” the labor required by each product (commodity in his terminology) as part of the “whole of the labor force of society,” so that each individual labor force is taken only with the character of a “social work force”, operating exclusively with “socially necessary working time” in each case.
These ideas have strong implications and are at the heart of the Transparent Info proposal. The main conclusions are that we must rule out any solution based on regulations or intervention, and that we must keep the current way of evaluating business by their economic success. That is, we must not try to impose alternative ways to measure success. Consequently, our strategy is to design a system is capable of creating a direct relation between the production of benefits for the society and the economic success of businesses.
In this way we transform Marx’s idea of linking the value of a product with the amount of work required for its production, which is a specific form of measuring benefit for society, into something more general and we link the value of a product with all the benefits it produces for society. For instance, a product made by a company that distributes the profit more homogeneously between all workers will produce more benefits to society than another that pays low wages to most employees and huge amounts of money to executives. Likewise, a product made by a company that protects the environment will produce more benefits to society than another that contaminates and degrades the environment. This is precisely the core of our vision: That the value of a product must be linked to the benefits it produces for society, and that customers should have access to the relevant information they need to evaluate such benefits according to their own balance among the different pieces of information.
3. TRANSPARENT INFO
3.1 Socially-beneficial applications
The term “Socially-beneficial applications” was coined by the author to describe systems that protect or benefit the society by avoiding unfair situations, providing new services, tools, and information to give reactive power to the society to counteract a given misuse or abuse situation back in 2012. Since then, this concept has been named in different ways and it is now recognized as an important IT problem. The concept is also related with the more general concept of Ethical IT, which is featured in the latest special issue of the prestigious ERCIM NEWS magazine entitled “Ethical Software Engineering and Ethically Aligned Design” .
Civil society is continually being threatened by external forces that do not hesitate to create problems that affect society to achieve its own benefit. Normally, citizens have insufficient means or have no ways to react to situations of abuse. The main idea of this type of systems is to restore the balance by offering computer applications that allow society to react to counteract the abuse of external forces previously described in section. These systems must evolve continuously responding to the needs of users, offering a high level of security and confidence, and a scalable computing platform that allows secure and quick access, at any time, from anywhere, to information through mobile devices.
3.2 Transparent Info
Transparent Info is a Socially-beneficial application designed to counteract the unethical behavior of companies, in order to avoid them to practice “unenlightened self-interest”, and oblige them to act in the benefit of society at large.
Achieving such ambitious goals does not require extremely advanced technology. In fact, the technology is already available and well established. A key aspect is to get a system that allows all consumers to access this information when they need it and this can be easily achieved through a web application, connected to a mobile application. Another essential aspect is to achieve a critical mass of information. We are currently working on strategies to achieve this critical mass, but the idea is to allow the “good” companies to join the system easily and free of charge, so that after some time citizens can assume that if a company is not listed, there is something they have to hide.
In part, such information is already available; e.g. through protected designation of origin (PDO), protected geographical indication (PGI), and traditional specialities guaranteed (TSG). Consequently, agreements with the entities that manage them can allow us to use that information. Other information will be obtained directly from the “good” companies because they’ll have an interest in the success of Transparent Info as that will reward their ethical behaviour. Once many good companies have provided their information, the rest will have to follow as otherwise people will interpret the fact that they are not listed in the system as having something to hide.
Transparent Info will provide information on different aspects (ethical behavior in business, with workers, locality, benefits to society, ecology, etc.) organized by categories of companies and products and divided into four levels of reliability of information : (I) information provided by users, (ii) information provided and self-certified by the company, (iii) evaluation by the Transparent Info team based on documentation provided by the company, and (iv) evaluation by the Transparent Info team based on audits. In the two later cases, we will also appoint external trusted evaluators to perform the evaluations.
The mobile application will allow users to predefine their own balance among the different criteria in a way that maximizes their own interests and by simply scanning the bar code of a product with their mobile phones, have access to those evaluations in order to make a conscious informed purchase.
The Transparent Info system is realized as a web-based application that stores information about items (products and companies). Items are associated to categories in order to establish a relevant set of evaluation criteria (which we call aspects) for them. For each item the application stores a set of evaluations values (called ratings) for the different criteria (aspects). Products are linked to barcodes so that the users of the mobile app can simply scan a barcode to access the information about a product. A simplified entity diagram is presented in Figure 1 below.
Figure 1. Entity diagram for Transparent Info
In this paper we have presented an economic model based on assigning value to products and services based on how they benefit society. We have introduced the concept of Socially-beneficial applications, to refer to IT systems that are designed to restore balance in situations where there is some threat or attack to society. We have also presented a specific application called Transparent Info designed to promote the ethical and socially beneficial behavior of businesses by linking their profits with such behavior. Transparent Info has been implemented and is being tested with a closed set of users to evaluate and improve its performance; usability and to refine the criteria used based on the feedback provided by those users.
Ikerd, John. 1999. Rethinking the Economics of Self-Interests. University of Missouri. Organization for Competitive Markets, Omaha, NE, USA.
Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations. Fifth Edition, Edinburgh: Adam and Charles Black, London, UK.
Mankiw, N. Gregory. 1997. Principles of Economics. Harvard University Press.
Marx, Karl. 1983. Capital: A Critique of Political Economy; Volume I, Lawrence & Wishart, London.
Marx, Karl. 1984. Capital: A Critique of Political Economy; Volume II. Lawrence & Wishart, London.
Marx, Karl. 1984. Capital: A Critique of Political Economy; Volume III. Lawrence & Wishart, London.
- ERCIM NEWS 131 Special Theme on “Ethical Software Engineering and Ethically Aligned Design”. Guest editors Georgia Kapitsaki (University of Cyprus) and Erwin Schoitsch (Austrian Institute of Technology AIT). Published by ERCIM EEIG. October 2022. Available online at: https://ercim-news.ercim.eu/images/stories/EN131/EN131-web.pdf