INFORMATION ECONOMICS: How much ideas are worth?

IMAGEN: MIL CLICKS (unesco.org)

Over the past two decades the popularization of the use of the internet, computers and smartphones have substantially modified every aspect of our lives. From the economic and social to the cultural and the productive. At present, it is almost impossible to carry out any of these activities without that digital component that facilitates and accelerates communication and the exchange of ideas, and where the protagonist agent of this new stage of the economy is information.

This monograph aims to approach the concepts encompassed by the information economy and how it has become the economic sector with the greatest potential for disruption and growth of this century, how it works and what are some of the opportunities and risks that open up for developing countries.

What is information?

Information is an abstract term, the origin of many philosophical debates between different areas of knowledge such as cybernetics, librarianship, biology and physics (Capurro, 2007). Each has models that aim to explain it, but until last year it had never been discussed in an interdisciplinary way (Closer To Truth, 2020). And there will hardly be a consensus anytime soon. However, for the purposes of this document it is suggested to see it as follows: Information is the set of propositions that govern the permutations of stable order that can arise spontaneously in a physical system and that manifest as defined signals[1].

Permutations, are the valid combinations that can occur within a defined system, even with the same components each permutation can have different properties, above, different permutations of a rubik's cube.

Perhaps the most direct way to explain this is by imagining the throwing of a 6-sided die (one body): The proposition is: if we throw a die at a table, it will lose energy until it stops, its stable position will be on one of its 6 faces, the upper face will show an integer number greater than zero, but less than seven. All these parameters preexist in the die and in the system surrounding it before the launch (event) occurs due to its properties [information]: its geometry, gravity, friction and other forces present in the physical world. This means that the possibilities will collapse into a single event, one of the 6 stable permutations, which emits a signal (the upper face of the die). In that sense the opposite of the signal is noise,the absence of a stable and defined configuration, following the example, the state of uncertainty when the die has not finished rotating. Information allows us to distinguish the properties of an event, its similarities and differences with respect to others and therefore we can give it identity.

The cause of the main conflicts that exist when trying to study and define information, is that the three approaches have studied it from three different dimensions and have given them different names, in the following table you can see their relationship.

Physics studies information from the apothetic dimension,that is, from the perspective of systems formed by physical bodies:conglomerates of energy and structured matter susceptible to events[2] when they are in space-time. These events can be varied, from changes in position, changes in physical state, to chemical changes, etc. Events can manifest themselves by different means, for example, a lightning has several manifestations, the best known are light and sound, they represent the means by which the event has spread, on the other hand, the magnitude speaks of the intensity with which the event happens with respect to a sensor[3]. In physics, the sensor is a body that functions as a reference point with respect to signals and manifests some change when receiving these signals. For example, a stone that is exposed to an intense sun on the street absorbs part of its radiation and manifests it as heat.

The parathetic dimension belongs to two branches of knowledge that have recently converged in their studies on information: cybernetics and biology. While physics assumes only the interaction relationship between a sender and a receiver. These two areas assume that the receiver is an entity (biological or synthetic) that processes and transforms the signals by filtering them within a sensory spectrum,that is, the range between the minimum and maximum intensity that can excite the material, this allows to measure and symbolize the signal with reference to the sensitivity of the sensor(Goldstein, 2010) lo that makes it a data[4]. Usually a transduction to electricity [5] that when associated with an order and a code becomes a Message/stimulus, which can be deciphered by a subject,an entity that can change its behavior based on external stimuli, it can be a robot or an animal that changes its position when exposed to the sun, For example.

The last dimension has belonged more to psychology, psychiatry, and philosophy [focused on biological entities], because it concentrates on the changes that occur within the biological subject when it receives a message/stimulus. This last dimension is divided into two areas:
the objective dimension,which we can measure of the subject's nervous system, although we do not understand all the factors that intervene and that manifests itself as an experience. These allow to form judgments (cold-hot; sweet-bitter; pleasant-painful) and generate impressions,that is, the interpretations of the phenomena that occur externally, and that can be recorded in memory as comparative references.
On the other hand, there is the subjective dimension of the brain, what happens when experiences come to a mind. This is a phenomenon that we have only observed in humans, the ability to generate knowledge: the set of Qualias that allow total changes in behavior and even opposite to instinctive (learning) and forecasts,the ability to visualize the causality of fictitious events (Margolin, 2005) (Antroporama, 2018). Two of the innate characteristics of the human brain from which we can create interpretations of reality and generate new information.

With these examples, you can get to understand various qualities of information, this is Tangible, Regressive and Predictable.
Tangible: it is composed of measurable propositions that manifest themselves in a physical system, and communicate the identity of physical objects.
Regressive: from the signals emitted by that physical system we can reconstruct and know the information of a series of events.
Predictable: If enough parameters of those propositions are known, the outcomes of an event can be calculated or predicted before it occurs.

INFORMATION ECONOMY

When talking about the information economy, several misunderstandings arise. In particular because it is often confused with other areas such as the orange economy, knowledge-basedeconomy, creative industries or cultural industries. That they have been used as indistinct synonyms for several decades but that have been acquiring identity by themselves and whose relationship will be explored later.

Information economics is the area of economics that studies quaternary economic activities(Salgado & Raña, 2019),that is, all those related to the production, development, distribution, storage, dissemination and sale of intangible resources[6] made up of information through communication, intellectual capital and culture (Zallo, 1988).

The use of these intangible resources depends on 4 factors that favor the creation of wealth and social welfare (UNESCO, 2016):

•  Structural capital:composed ofinfrastructural, scientific and/or technological aspects available in a given region that facilitate the development of an intellectual activity, whether creative or productive.
•  Financial capital:institutions that provide monetary resources of private or public origin that support intellectual activities.
• Organizational capital: composed of the social aspects of a region, which promote cooperation, creativity and communication between people in a horizontal way. In addition to laws that protect the protection of exclusivities.
• Human capital:individuals and all their competences, qualities, capacities, knowledge, attitudes, skills and training experiences that have the potential to add value to companies. (Contreras-Armenta et al., 2012, p. 14)   

If there is no synergy between these four factors, it will not be possible to have a scenario that favors creativity. perhaps one of the most notable examples of this synergy is the story of Richard Montañez, who was a janitor at Frito-lay, a subsidiary of PepsiCo dedicated to the production of fried snacks. He was the creator of the recipe for the flavor of Cheetos Flaming Hot,who experimented in imbuing flavors into rejected company products. After successful tests among his acquaintances he made an appointment with the president of the company, Roger Enrico, who accepted the project and promoted Richard to the position of vice president of multicultural sales and promotions. It is to date one of the best-selling flavors of the company. An anecdote that speaks of an absence of classism within frito-lay and flexibility on the part of the company to adapt a new idea to its productive system.

Perhaps the factor that most negatively affects the use of intellectual resources is toxic management,a set of practices that damage the organizational fabric of a company such as toxic leadership, information asymmetry, institutional coercion(Fedorova, 2016; Koropets et al., 2020). These practices are the result of forgetting that people are the most important capital of a company, and that it is individuals and their groups that generate competitive advantages and true solutions.

Another factor that has had a negative impact is the lack of communications infrastructure, which is observed above in developing countries, which generates an asymmetrical environment with respect to education in developed countries, even between regions of the same country. This asymmetry prevents the emergence of competitive businesses that can favor the enrichment of countries. After all the quaternary sector is closely linked to the technological progress of computing, recording and communication technologies (Dusollier, 2010, p. 77). That has accelerated in all due to the drop in communication costs (Jewell, 2018) something that generates new business opportunities that we have just begun to study and understand(IDB et al., 2013, p. 56).

Quaternary economic activities are usually divided into 4 broad categories as can be seen in the following diagram (Zallo, 1988, p. 14):

:

Perceptions market,is the set of practices that are based on getting the attention of people for propaganda and market positioning purposes to change their opinion about a product or brand. Perceptions have great value for the political and financial area, as they are the raw material of human decisions and other behavioral changes (Schewe & Smith, 1982, p. 215). Here we find reputation assets such as recognitions, awards or support for humanitarian causes that help loyalty[7] of customers, moral presence in the community and other factors that can hardly be put into numbers (WIPO, 2018, p. 38),but that have a significant impact on consumer behavior (Contreras-Armenta et al., 2012, p. 10).

Data market:are businesses based on the management of data confidentiality, there are three modalities (Baeza & Sabater, 2018):

• Data mining:obtaining statistical information on the behavior and tastes of an audience through the survey of the signals and messages they exchange.
• Storage:the disposal of space to store data, is closely related to the installation of infrastructures, servers, safes among others.
• Diffusion/distribution:businesses based on the emission of data to consumers or customers on demand (streaming).

This is an area of significant growth, due to a new movement known as big dataprocessing, which involves the systematic mining and processing of huge amounts of data to make predictive models about the behavior of audiences and consumers (Orlowski, 2020).

Creative industries[8]: are the businesses that are dedicated to developing new products, content or knowledge susceptible to be protected by intellectual property laws(IDB et al., 2013; INEGI, 2014; WIPO, 2017). On which authors and companies have privileges of monopolistic exploitation for a limited period of time. It is usually divided into sections: on the one hand, the orange economy that includes, but is not limited to the writing of scientific texts, literature, filming, sound recording, computer programming among other creative activities that become the fixation of an intellectual content on a physical support. And on the other hand the area of project management,the parallel activity that is responsible for organizing, planning and coordinating cooperation between talents who participate in a creative project and whose output: strategies, dynamics or games, are not susceptible to protection.

Cultural industries:are all economic activities that derive from the use of existing knowledge[9] or in the public domain[10], inspired by the customs, techniques, traditions and cultural legacies of a region. Benefiting from its uniqueness, authenticity or historical relevance (UNESCO, 2007, 2017; WIPO, 2017). It is usually divided into 3 areas that tend to overlap constantly: market of experiences and intellectual reserves.

•  The experience market is the business that subsists from selling education or entertainment activities to people, travel, training, entertainment or relaxation, which have an ephemeral component, authenticity and / or uniqueness.
• Intellectual reservations refer to the ability to exclusively but limitedly tap into intangible legacies in the public domain for profit, such as words, phrases, or symbols. A classic example is business brands, which can use words and ask for their exclusive use to prevent counterfeiting.
• Material legacies are all those artifacts or buildings that were left by our ancestors and whose cultural wealth can be used without the need to pay rights, an example is postcards, which sometimes have photos of monuments or buildings.

Despite this classification, these activities usually cooperate and link in complex ways, you just have to look at the efforts of advertising campaigns focused on tourism in a region, virtual museums, entertainment pages.

Importance of quaternary activities

As can be seen, quaternary activities are very heterogeneous, and in some cases, very old and although they have always been valued, as evidenced by the construction of stadiums and theaters throughout history, at the macroeconomic level they did not generate wealth[11] or social development to the same extent as activities such as the extraction of natural resources or industrial manufacturing, so they were considered peripheral to "formal work".

This has led to its economic study being very recent. It was not until the early twentieth century, when the technologies of recording and dissemination in mass media (telephone, radio, film and television) began to become popular. That culture and communication became self-financing businesses,that is, they can generate their own surpluses for investment. That the sector began to be studied by academics such as Theodor Adorno (1903-1969), who called them cultural industries (Zapett, 2002) their ideas about the importance of intangible values on the company were quickly verified and today it is estimated that 1/3 of the perceived financial value of companies falls on their intangible assets and that from that derives a good part of the final price that consumers pay for products. (WIPO, 2018, p. 10).

The quaternary sector has been the fastest growing during the first decades of the twenty-first century and this growth has not been affected by financial crises or political factors (IDB et al., 2013, p. 19; UNESCO, 2007). In addition, they already represent one of the most important competitive advantages of post-industrial societies (WIPO, 2018, p. 27; Zallo, 1988, p. 9).

"Evidence shows that the creative economy is an increasingly powerful engine for development. Figures published by UNCTAD in May 2013 indicate that world trade in creative goods and services totalled US$624 billion in 2011 and more than doubled between 2002 and 2011; the average annual growth rate during this period was 8.8%. Export growth of creative goods in developing countries was even higher, averaging 12.1% per year over the same period." (UNESCO, 2014, p. 10)

It is considered that the exploitation of intellectual activities could contribute to sustainability by making developing countries less dependent on the extraction of natural resources and by offering more symmetrical business opportunities in less established markets. (IDB et al., 2013, p. 17,131; UNESCO, 2014, 2016, p. 26).

One of the great challenges that developing countries face in the face of the new paradigm is that their quaternary sector is made up of small, disjointed and in many cases informalcompanies [12]. And this prevents governments from being able to visualize their impact on the economy, in these countries the little relevance that the issue has in the absence of public policies and support programs is observed (UNESCO, 2007).

"In developing countries, many creative workers, including musicians, artisans, performers and even professional designers and technicians, are outside the scope of official measurement and regulation. Many cultural enterprises operate in the underground economy. The set of governmental, commercial and citizen institutions is essential to cultural life in advanced economies (e.g. public broadcasters, museums, art schools, film studios, etc.) and is often miniscule, if not non-existent. Informality determines the political economy of creative industries in developing countries, especially to the extent that, in these countries, the capacity of governments in subsidies and regulation is limited." (UNESCO, 2014, p. 26)

This disdain is also present in the private sector, Mexico is one of the OECD countries that invests the least in innovation, in contrast it is observed how some of the most competitive companies are those that invest in innovation and create more jobs (Campos et al., 2016, p. 10; Forbes, 2015). There is little confidence in these investments and they are seen as expenses, and in many cases, even when creative activities are carried out in a region, it is the industrialized economies that reap the returns (WIPO, 2018, p. 27).

One of the main aspects that must be highlighted is that the wealth experienced by developed countries derived from the quaternary sector is not free, it is the conjunction of various cultural and historical factors that favored the development of certain activities through incentives, awards and policies that brought together companies, investors and talents in kreatopolis, specialized clusters[13] that brought together people with the most synergistic profiles(UNESCO, 2016; WIPO, 2018, p. (9). Some examples are silicon valley or Hollywood,for example.

The main challenge experienced by developing countries is the brain drain,as long as they fail to create the minimum conditions for experimental and creative work, these countries will see how their best trained individuals move to countries where their activities are profitable and where their innovations are appreciated and protected.

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 NOTES

[1] This is a very reductionist proposition resulting from reading various works from an intellectual field far removed from my area of expertise. But I think it's the most didactic and practical approach that could help people understand this concept. For more information I suggest consulting : (Bates, 2010; Buckland, 1991; Capurro, 2007; Closer to Truth, 2020)

[2] The term Event is used in physics to describe a series of causal events that occur in a given space of time, which involve a distinguishable change between the previous and the new state. (Fock, 1964)

[3] A material or subsystem that is a means of converting one type of energy to another on a regular basis.

[4] In computer theory, the term data is often used to describe the experience of a receiver when receiving a signal, and implies its translation into some type of language by symbolizing it and adjusting it to a logical model(Baeza & Sabater, 2018)

[5] The transformation of one type of energy into another form of energy when it crosses a material or substance. (Goldstein, 2010, p. 7)  

[6] Intangible resources are those sources of wealth that are not associated with any substance or physical magnitude. That are contained in the minds of people and are manifested in their organizations as skills, knowledge, attitudes and collections of content that communicate information in a coordinated, explicit and practical way. (Contreras-Armenta et al., 2012, p. 13)

[7] Loyalty: "business strategy that consists of satisfying the customer in such a way that they do not consult the competition"(Pérez & Pérez-Martinez, 2006)

[8] "Creativity is the attitude or ability of people and groups to form combinations, to relate or restructure elements of their reality, achieving products, ideas or results that are both original and relevant. Innovation, on the other hand, is an effective realization that produces a change in a system, with the purpose of improving and perfecting some aspect of its structure, content or operation." (Rojas, 2007, p. 41)

[9] "Knowledge is a fluid mix of structured experience, values, contextual information [...] that provides a frame of reference to evaluate and incorporate new experiences and information this originates and is applied in the minds of those who possess the knowledge, that is, of those who know." (Contreras-Armenta et al., 2012, p. 13)

[10] "The public domain is generally defined as content that encompasses intellectual property that is not protected by copyright or whose protection has expired after the expiration of the term of protection." (Dusollier, 2010, p. 6)

[11] For this text, the word wealth will be used to describe the benefits that a society receives or perceives from the productive activities it performs, whether these material or intellectual that affect its well-being in the short or long term. (Molina Berro, n.d.)

[12] "According to the International Labour Organization (ILO), the informal economy refers to all economic activities carried out by workers and economic units that are not fully or partially covered by formal agreements. [...] Private companies that are not constituted as financial entities of their owners"(INEGI, 2014; Galindo & Rios, 2015)

[13] "Clusters encompass a number of related industries and other entities important to competition, including, for example, suppliers of specialized inputs, such as components, machinery and services, and suppliers of specialized infrastructure. Clusters also often extend downwards to channels and customers and laterally to manufacturers of complementary products and companies in industries related by common skills, technologies or inputs. Finally, many groups include government institutions and others – such as Standards Bodies, think tanks, vocational training providers and trade associations." (Porter, 1999)