Understanding the iconomy

(Translated from: Pour comprendre l'iconomie)  

Notice to the Reader: This text is well suited for those who accept the austerity of abstraction. Others will deem it probably poor and too assertive.

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To understand today's economy, which is obviously complex, one must define a few simple concepts that will allow to build an argument (see What is a "concept"?).

To generate these simple concepts requires a complex meditation fed by experience, conversations and readings. The long journey of this meditation leaving no trace in the dryness of the concepts, only the comment can provide them a little heat.

We will therefore proceed more geometrico. We first present six concepts that provide a theoretical framework for modeling today's economy, then nine concepts that give a content to this framework. Then we cite each concept followed by the comment that explicit it.

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Six economic concepts

1. the purpose of economy is the material well-being of the population;
2. any action deemed necessary or advisable by society is carried out by an institution of which it is the mission;
3. the mission of the enterprise, economical and industrial institution, is to effectively produce useful things; it ensures in the biosphere the interface between society and nature;
4. the fulfillment of the mission of an institution requires an organization that has a dialectical relationship with the mission;
5. the State, institution of the institutions, define their missions, instigates their creation and regulates the dialectic of the mission and the organization;
6. an industrial revolution transforms the nature, and therefore the mission of the institutions and the practical conditions for their organization.

Nine concepts for understanding the contemporary economy

1. the production system is based on the contemporary technical system (CTS), whose fundamental techniques are microelectronics, software and the Internet; the CTS succeeded in 1975 to the modern technical developed system (MTDS);
2. the emergence of the CTS sparks a cascade of anthropological consequences;
3. repetitive work is automated;
4. the bulk of the effort required by the production is achieved during the initial investment;
5. market obeys the regime of monopolistic competition;
6. products are packages of goods and services, each developed by a network of partners;
7. the material well-being of the consumer depends on the quality of its consumption;
8. predators are skilled users of CTS;
9. the crisis is due to the inadequacy of the behavior of economic agents to the productive system that the CTS brings out.

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Six economic concepts

1) the purpose of economy is the material well-being of the population

This goal is limited: the material well-being is neither happiness nor equity, nor the power of the nation, whose research requires other concerns and approaches.

This limitation makes sense: no intellectual discipline, no kind of action can embrace neither the totality of human destiny nor all the needs of a society. Those who think that the economy should encompass happiness and fairness slip into the ditch of economism, which claims that the economy can or should meet all the needs of humankind.  

Nota Bene: (1) the material well-being has grown so rapidly during the "thirty glorious years" that it has been confused with happiness. This confusion is renewed today, symmetrically, in attempts to evaluate a "gross national happiness" (2) economic efficiency does not guarantee equity, whose research must refer to other criteria: a slave-holding society may indeed be Pareto-optimal (see John Rawls, A Theory of Justice).

Societies that pay little attention to the material well-being have reached a high degree of civilization: their values culminated in military courage, in the worship of the gods, in a frugal wisdom. The effort that our society devotes to the economy results from an arbitration between different values and it may happen that it considers legitimate to sacrifice a portion of material well-being in order to strengthen the mental well-being called "happiness", approaching equity or protect the nation, as stated by the creator of the science of economics itself: "defense is of much more importance than opulence" (Adam Smith, The Wealth of Nations, Book IV, Chapter 2).

The material well-being of the population is the welfare of the consumer to whom the interests of the producer - that is to say, of the enterprises, their owners, their leaders and their employees - must be subordinated. The axiom of Smith is more important to economics as the infamous text on the "invisible hand":

"Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. This maxim is so perfectly self-evident that it would be absurd to attempt to prove it"(Adam Smith, op. cit., Book IV, Chapter 8).

The material well-being is the subject of an intertemporal arbitrage: investment, being subtracted from the consumption share of the production, reduces the immediate well-being in order to increase the future well-being.

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2) any action deemed necessary or advisable by society is carried out by an institution of which it is the mission

The human being is in a dialectical relationship with physical and biological, but also human and social nature in which he is inserted, which he manages and which appears before him both as a resource and as an obstacle. This dialectical relationship is action.

An action can be individually: hand washing or even breathing is already acting and transforms nature at a very small scale. But the effects of individual action are confined to a narrow sphere. All historical action, that is to say an action that could have consequences in the whole society, requires the intervention of a collective structure that has been instituted for this purpose: an institution. For example the text of a writer, a most highly individual creation, is inconsequential in terms of society as long as it has not been published by an editor or on the Web, which are institutions, in order to be made available to readers.

The individual brain is the natural place of birth of any new idea, even though it may happen that the same idea is born simultaneously in several brains. An idea, however, remains purely verbal if no institution incarnates it in the world of facts and things. Here appears a dramatic dialectic because - we'll see why later – the institution refuses at first the new idea, then sometimes appropriates it suddenly, most often deforming it. Woe to thNota Benee inventor who lack farm lucidity and humor!

Hence the historical deployment of human destiny implies an institutional overtaking of individual thinking and action. It is a fact that some, like Sartre, refuse or ignore: "Sartre was never resigned to the social life as he saw it, that he felt unworthy of his idea of human destiny. He never abandoned the hope of some sort of conversion of all men together. But he never thought in his integrated system the in-between, the institutions between the individual and humanity,” (Raymond Aron, Mémoires, p. 954).

Family, enterprises, public services, the large systems of a nation (education, justice, health, defense), the State etc. are institutions. Language itself, that each generation inherits from the previous and transmits to the next after having improved or deteriorated it, is an institution. Sometimes an institution works without anyone having a clear idea of a mission whose origin is lost in the mists of time: then it is healthy to make an effort to recover the mission.

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3) the mission of the enterprise, economical and industrial institution, is to effectively produce useful things; it ensures in the biosphere the interface between society and nature

The enterprise is the economic institution: its purpose is that of the economy. It is also an industrial institution, taking “industrial” according to its etymology which is "ingenious productive action." Hence its mission contains two objectives: (1) it must produce useful things, that is to say things capable of contributing to the material well-being of the consumer, (2) it must produce effectively, that is to say using at best the resources that nature provides.

Alternative definitions of the mission of the enterprise are often proposed. The most common is "to maximize the profit" or, equivalently, "to produce money." But as money is not consumed, it is not a product: it is a tool to invest and ensure the sustainability of the enterprise, those intermediate goals contributing to the goal of economy. We hear also that the enterprise's mission is to "create jobs," but the goal of the enterprise is not to be a nursery of employees.

It may happen that the profit is appropriated by the owners or managers of the enterprise, or by networks of allegiance formed among the employees. The axiom of Smith being violated, this action leaves the regime of the economy into that of predation, which consists in consuming products or appropriating a patrimony which the predator seizes by force. In any society balanced exchange and predation are intertwined but the reasoning must distinguish them, although at certain times predation has been closely associated with the evolution of the economy.

The enterprise is interposed between the world of nature, where it draws its resources, and the society to which it provides its products : it plays in the biosphere the role of an interface between these two worlds. For this interface to be effective it is necessary that the institution "enterprise" be multiplied in a multitude of enterprises in the plural, because it is in confrontation with the practical needs of consumers and the complexity of nature, so on the spot, that it is possible to define useful products and effective solutions for their production.

It is also necessary that the enterprise takes into account the disutility of the waste it injects in nature (greenhouse gas emissions, toxic waste) for their control, and recycles its products at the end of their life, which is as important as the production itself (more precisely: they are part of the production of utility). To neglect that is a predation against the natural patrimony.

While immersed in the business market, where it buys its inputs and sells its products, the interior of the enterprise is not a market. Thus the enterprise is analogous to a living cell bathed in its environment and whose membrane acts as a selective filter. The membrane of the enterprise is on the one hand the first line that manages its relationship with customers, suppliers and partners, and fulfills a function of translation assuming the dialectic of the market and the organization, and on the other hand the R & D that explores the world of nature for designing products and the techniques necessary for their production.

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4) the fulfillment of the mission of an institution requires an organization that has a dialectical relationship with the mission

In order to effectively realize and embody the mission of an institution, it is necessary that this institution has an organization that defines procedures for collective action and allocate responsibilities between people. While the mission indicates what to do, the organization indicates how to do it: it considers the concrete practice and specifies vocabulary and rules of action, defines the sequence of tasks that make up its process and assigns them to different people.

The implementation of an organization is a significant investment. Once set it will inevitably tend to emancipate itself from the mission, because humans are always tempted to substitute to the mission the formalism of procedures and the perspective of career. It can happen that a public service is the prey of a corporation: an army whose mission is to defend the nation turns against her to establish a military dictatorship, an education system whose mission is to instruct minds, to educate citizens and train people skills, turns into a nursery for adolescents, etc.

The same phenomenon occurs in enterprises: internal procedures are often considered more important than customer satisfaction as agents comply with the criteria by which they feel or believe they are considered. It also happens that the procedures fossilize in practices contrary to the mission: the general direction will be the scene of a power struggle between networks of allegiance, waste treatment or recycling of products will be neglected, priority will be given to display a profit, cost accounting sparks between services a rivalry that destroys their cooperation, etc.

Thus mission and organization are in a dialectical relationship: if the organization is necessary to achieve the mission, its tendency to emancipation must be compensated by a permanent reminder to the mission. The daily life of any institution is the dramatic conflict that arise from this dialectic: beside examples of clear dedication to the mission which are still too uncommon, we often find abuse of power, sterile formalism, shocking hypocrisy and the stubborn refusal of the innovative idea - which sometimes becomes sudden, erratically, a new fashion.

These vexations are the inevitable price one must accept to pay for the incarnation of the mission into reality. Some people, being overly sensitive to these vexations, hate everything that is institutional. They always prefer new institutions which, while they remain at the level of ideas, can maintain their purity. An organization will however be necessary if the project is carried out, and the idea will be forced to painful compromise. Their desire for purity will push them to abandon this idea and to develop other projects: this often irrelevant idealism is for the best and the worst one of the engines of history.

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5) the State, institution of the institutions, define their missions, instigates their creation and regulates the dialectic of the mission and the organization

The State is often defined by the legislative, executive and judiciary powers whose society must require separation according to Montesquieu. These powers overlap with the sovereign functions: external and internal security, issuance of currency.

But what is the mission of the State? It is to be, said Maurice Hauriou, "the institution of institutions": the State is responsible for identifying the missions that a society deems useful or necessary, to ensure that institutions are created and organized to accomplish them, then to continually remind these institutions to their mission by a regulation that compensates for the tendency of the organization to empower and limits the temptations of the predators.

As it is also an institution, however, the State possess necessarily an organization that tends to emancipate itself from the mission. Among the men who run the State one must distinguish the politician, who is satisfied by the power that the organization confers, of the statesman who maintains and directs the organization in the service of the mission. Statesmen are rare, as rare are true entrepreneurs in the enterprises and real strategists at the head of the armies, but they are the ones who make history.

Being the agent of the whole society, the State attaches importance to material well-being of the population but he must arbitrate between this issue and others that we have discussed: mental well-being (and hence culture) equity, national defense etc.

Thus it is not appropriate, as the most dogmatic Liberals do, to reject any intervention of the State in the economy, or to refuse that the State submit the economy to non-economic imperatives. One should nevertheless not grant the State the monopoly of economic decision, because the economic institution par excellence is the enterprise, materialized by the multiplicity of enterprises that can accomplish their mission freely on the spot.

Regulation must preserve freedom of enterprise, punish the predation and unravel the rigidities of the organization. Its definition being difficult it may actually be tempted to encroach on the freedom of enterprise: some States felt obliged to organize the whole economy as if it formed a single enterprise, the Plan having the monopoly of decision. If such an approach may be appropriate to conduct a few large projects, it involves a distance to the opportunities and risks that arise on the spot that is not compatible with efficiency.

Like any institution the State can be ignored and hated. Many people refuse to take the hassle that causes the dialectic between its mission and organization, the defects of its operation and the behavior of politicians. Statesmen themselves are rarely appreciated in their lifetime: Richelieu and Mazarin were hated and it took a long time for France to recognize what they had brought.

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6) an industrial revolution transforms the nature, and therefore the mission of the institutions and the practical conditions for their organization

Each period of history is based, according to Bertrand Gille (Histoire des techniques, Gallimard, La Pléiade, 1978), the synergy of a few basic techniques that form a "technical system". An "industrial revolution" is the passage from a technical system to another and then from one period to another.

There were three of these revolutions in the last centuries: the first, circa 1775, gave rise to the modern technical system based on the mechanics and chemistry, succeeding the classical technical system which was primarily agricultural. The second, circa 1875, gave rise to the developed modern technical system (DMTS) that combines mechanics and chemistry which an energy more convenient than steam (electricity, oil). The third, circa 1975, gave rise to the contemporary technical system (CTS) that we examine below.

In an industrial revolution the relationship between society and nature is changed because new opportunities and new risks appear before the initiative of action. We can say that nature itself is transformed: it is like a new continent whose flora, fauna and geography do not resemble what we knew before.

The missions of institutions must then be redefined and give way to new institutions. The rule of law and democracy are born with the first industrial revolution, which led to the emergence of new sectors (such as the production of capital goods). The large modern enterprise was born with the second industrial revolution. After the army and navy he military had to create an air force and, recently, an army of the cyberspace.

Being purely practical the organization undergoes more important changes because of the changing conditions of the action: the new technical possibilities require skills able to exploit them, the product catalog is transformed as well as the process of production.

Hence the transition from a technical system to another is a time of turmoil and confusion. The first entrepreneurs who know how seize the new opportunities make impressive gains while most enterprises remain prisoners of the organization to which they are accustomed. Social classes, facing a new horizon, lose their familiar landmarks. The legislative and judicial systems being slow to take into account the emerging realities, predators take advantage of their weaknesses. The education system continues to train skills which economy does not need.

An economic crisis being caused by he inadequate behavior of economic agents (government, business, consumers) to the reality of the production system, it is inevitable that transition periods are also periods of crisis and not only economic crisis: years 1770-1780, 1830-1840 and 1870-1880 were in France periods of despair, even if their prepared a boom that nobody saw coming.

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Nine concepts for understanding the contemporary economy

1) the production system is based on the contemporary technical system (CTS), whose fundamental techniques are microelectronics, software and the Internet; the CTS succeeded in 1975 to the developed modern technical system (DMTS)

The DMTS relied on mechanics, chemistry and energy whose synergy formed the basis of the productive system until 1975. Around this date the production system began to computerize and then basic techniques became those, physical and logical, of microelectronics and network (soon called Internet) and those, semantic and logical, of software.

The emergence of new technical system can be explained, as always, by several contributing factors. The oil shock caused by the aftermath of the Yom Kippur War in October 1973 caused an increase in the level and volatility of energy prices, and introduced in expectations an uncertainty which affected the credibility of the DMTS. Unrest of the late 1960s had forced enterprises to grant wage increases they wanted to compensate for an increase in productivity.

Yet the computer, which had been gradually introduced into the enterprises from the late 1950s, gave finally way in the 1970s with clusters of terminals to a convenient decentralized access for the users. The notion of "information system" was proposed in the early 1970s and it seemed reasonable to link this system with those of decision and production.

The CTS, which thus offered to take over, did not remove the DMTS techniques, no more than mechanization had removed agriculture in the nineteenth century. But just as agriculture was gradually mechanized while its share in the labor force decreased, mechanics, chemistry and energy would gradually computerize while their share in the labor force would decrease.

Computerization has provided the enterprise with a ubiquitous programmable automaton (UPA). The set of processors, memory and software that the Internet provides any user forms in fact an automaton (admittedly gigantic and possibly partitioned, but still unique). It is essentially programmable, that is to say capable of doing everything that can be programmed. As it is accessible from any place on Earth the service is ubiquitous and this ubiquity, which does not depend on the proximity of a terminal since the mobile phone became a computer, is absolute.

Computerization, deployment of the possibilities of the computer, is based on the alloy of the human brain and the automaton or, more precisely, of the organized human being (OHB) and the UPA. The OHB is the human being who contributes to the action of an institution whose knowledge is mobilized by an organization (the organization does not mobilize, fortunately, the emotional and spiritual dimensions of the entire human being).

Nota Bene: the worker's dignity lies in his awareness of the usefulness of his work, his fun at work depends on the lever that the quality of the organization provides to the effectiveness of its knowledge. These are deep psychic phenomena but which are neither spiritual nor emotional: even if one is naturally attached to an institution where skill can flourish, the word "emotional" applies to relationships (romantic or family) that arouse emotions in the body.

This alloy occurs even in embedded computing where the computer is supposed to act without human intervention: it is indeed necessary that a human being designs and programs the UPA, whose operation must also be supervised because every automaton is subject to automatic random failures, and also any software whose size exceeds a few tens of thousands of lines of source code contains defects that escaped testing and cause unexpected incidents during the confrontation between the automaton and the nature.

The emergence of an alloy introduces a new being in nature: the alloy of copper and tin introduced the bronze, the alloy of iron and carbon introduced steel; computerization extends gradually the potential of the alloy of the UPA and the OHB. Like any emergence, this one has partly unpredictable consequences.

Between computers, which condenses in the UPA, and computerization which combines it with the OHB, the relationship is similar to that between shipbuilding and navigation: computers are or course necessary for computerization, whose success it allows and which expresses its requirements.

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2) the emergence of the CTS sparks a cascade of anthropological consequences

The computerization transforms the enterprises and therefore the economy : we will examine this in detail below. But its effects go beyond the economy: it is the emergence of an ultra-modern society that goes beyond modernity and post-modernity. They cover all aspects of anthropology: psychology of individuals, sociology of organizations and social classes, philosophy of the methods and processes of thought, finally metaphysics of values, orientations and fundamental choices.

It could not be otherwise since computerization has changed the nature to which individuals and institutions are confronted. Biotechnology, nanotechnology and materials science are based on the computer; the Internet has removed many of the effects of geographical distance; the human brain is associated with the automaton in productive activity; everyone can enrich on the Internet an information resource to which access has virtually no limits; the human body is computerized with prostheses building a network around the mobile phone; things computerize themselves with the Internet of Things; 3D printing decentralizes the production of goods which it provides a lightness and a solidity previously impossible.

This transformation continues apace. Evolution is explosive, a volcanic cataclysm shattering the crust of institutions and habits. What we have seen so far is almost nothing compared to what awaits us, because as say McAfee and Brynjolfsson, "we're only at the half of the chessboard" at the 32nd box the inventor of chess received the annual harvest of a paddy field of 100 acres, but in the 64th he would have received 600 billion tonnes of rice, a thousand times the annual world production. This is the ratio between what we know today, with iPhones and iPads who impress us so much, and what we can expect in the twenty-first century. It is natural that this causes a painful loss in individuals benchmarks.

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3) repetitive work is automated

Each component of the alloy formed by the EHO and the APU has its own qualities: the success of the alloy requires their sound articulation.

The automaton performs tirelessly repetitive tasks so tireless 7 days/7 and 24 hours/24, with the only exception of interruptions for maintenance, but it is unable to interpret an unexpected situation and take initiatives for which it has not been programmed. By cons repetitive tasks quickly tire the human being, but he is able to improvise in order to cope with the unexpected.

Computerization implies to automatize all those repetitive tasks that occur so frequently that the effort required by automation be reasonable. Automation of repetitive physical work is manifested by the generalization of robots in factories; repetitive mental tasks (documentation retrieval, visual quality control, etc..) are also automated.

 As a result, manpower is replaced in enterprises with a "brain power", only the mental faculties of the human being being in principle mobilized: judgment, initiative, judgment, understanding of situations and people, decisiveness and responsibility, etc.

This has consequences in the structure of employment. In a automatized factory are only involved supervisors and maintenance crews. Employees, in their majority, work at the interface between the enterprise and the outside world: in the R & D that conceives the design of products and the tools necessary for their production, and in the first line that handles the relations with customers, suppliers and partners.

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4) the bulk of the effort required by the production is achieved during the initial investment

The physical production being automated, most of the effort that the production of a good requires is in the design of the product and in the programming and implementation of the automaton: hence the effort is concentrated in the investment phase that precedes the actual production.

It follows that the marginal cost of producing a good is negligible compared with the initial sunk cost - unless of course the raw material used for the production is very expensive, which is not generally the case.

The cost of services provided by the first line is also a cost of dimensioning: it is dimensioned as a network, depending on the volume of work anticipated.

It results that the cost function of a typical computerized enterprise is characterized by increasing returns to scale because the average cost decreases as the number of units produced increases. This fact is upsetting for the economists: John Hicks, who was probably the best of them in the twentieth century, believed that to renounce the assumption of diminishing returns amounted to "the wreckage of the greater part of general equilibrium theory "(Value and Capital, Oxford University Press, 1939, p. 84). We will see that we may avoid this wreckage.

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5) the market obeys the regime of monopolistic competition

When returns to scale are increasing, and if the cost of factors and the production techniques are the same for all enterprises, the one which produces the largest quantity of a product may foreclose its competitors by selling cheaper than their cost production. We then say that the market for this product is subject to the regime of natural monopoly: ultimately it will be fully served by one enterprise alone, others will disappear.

These other enterprises may, however, survive by differentiating the product in varieties characterized by their attributes in order to respond to different needs. Among other consequences this differentiation is manifested by cross-exchanges of the same product between two countries: if the automobile, for example, did not include different varieties, the French would not buy German cars and the Germans would not buy French cars.

Quality can take two forms: "vertical" differentiation class varieties according to their degree of finish and thus their cost of production, "horizontal" differentiation distinguish varieties that have the same cost of production but differ in attributes (eg : blue shirts and pink shirts).

 If every enterprise offers the variety which suits a customer segment, it enjoys on this segment a niche monopoly. In the space of needs some customers are at the boundary between two segments: the enterprises that this border separates are there in price competition. Then we say that the market is subject to the regime of monopolistic competition.

With the exception of a few very simple products like a pig iron, most of the products are suitable for differentiation to meet diverse needs. When returns to scale are increasing, economic equilibrium is thus established in most sectors under the regime of monopolistic competition.

The model which schematize this equilibrium is no more complicated than the model of pure competition: in the case of horizontal diversification, for example, its endogenous are the cost function of the product and the consumer's budget and utility function, the latter showing the distribution of preferences in the space of needs; the exogenous are the number of varieties and the price.

This mathematical model illuminates the reasoning but does not fully reflect the contemporary computerized economy, where innovation is alive. In fact the market obeys a dynamic of monopolistic competition rather than a equilibrium. If we represent the space of needs by drawing in a plan the areas of monopoly do not take the form of a peaceful honeycomb cutting, but rather resembles bubbles that arise on the surface of a boiling liquid and struggle to expand, then explode to give way to others: this is for example what we are witnessing on the market of smart phones with the competition between Apple, Samsung, Nokia etc.

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6) products are packages of goods and services, each developed by a network of partners

Almost all of the cost of production of a variety is spent during the initial investment phase. This investment is a bet based on anticipating the needs of the consumers and initiatives of the competition. Quality competition also pushes up the cost (the cost of a video game increased by several orders of magnitude). The production of a new microprocessor costs ten billion dollars, the cost of a new operating system is of the same order of magnitude.

As a result, the economy of CTS is the economy of maximum risk. The enterprise that has spent most of the cost of production before receiving the first response from the market may lose its bet if the consumer does not like the product or if a competitor wins its market.

The need to share the risk is therefore imperative: most products are developed by a network of partners. The installation of such a network requires a business engineering which states the division of responsibilities, costs and revenues between the partners.

Computerization has also enabled a strong growth in services, temporary disposal of a good or of a skill, to the point that some believed that the economy which emerges would be essentially servicial. In fact the production of goods continues but now they are accompanied by services: automobile, which was the flagship product of DMTS, surrounds itself with counseling, financing, lease, warranty parts and labor, troubleshooting, maintenance, replacement etc., the quality of which is a differentiating factor as decisive or even more than are the attributes of the car itself.

Products are now packages of goods and services or pure services. Cohesion of the package, as well as interoperability and transparency of the partnership, are provided by an information system that is central to the strategy.

The Internet of Things finally associates to each good an identifier that allows to follow it during its life cycle: this has implications for logistics, maintenance, traceability, replacement and recycling at end of life.

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7) the material well-being of the consumer depends on the quality of its consumption

Economists are used to represent the well-being of the consumer through an increasing ordinal "utility function" U = f (x₁, x₂,...), depending on the quantities consumed x₁, x₂,... of the products 1, 2...

Consumer satisfaction, however, depends also on the quality of the product: a farm raised chicken is tastier than a battery chicken, hence you can not say "a chicken equals a chicken."

Consumer satisfaction is measured not by the only quantity consumed but by something like the product quantity * quality: if the quality is higher the consumer can be satisfied with a lesser quantity. Sometimes he even does not give importance to quality: it is not necessary for him to have multiple copies of the same book or the same disc, but he wants that those he acquires are interesting.

When each product is diversified in varieties the satisfaction of the consumer will be all things being equal higher if the number of varieties that it can access is greater: the division of the market being thinner, he may find a variety closer to its needs.

Therefore in an economy where products are diversified in varieties wealth is not defined by the quantities that the customer can consume, but by the diversity of varieties that he can access. This results in a redefinition of well-being and, consequently, of the value itself. This is for economic theory a radical challenge because it affects its very root.

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8) predators are skilled users of CTS

Predators, being vigilant, alert and on the lookout, are the first to take advantage of CTS. The computerization and the Internet offered the finance powerful automata, able to play simultaneously on all the financial centers of the world. The sensation of risk being diminished temptations were irresistible and good professionals, those who remained attentive to the risk / return tradeoff, were ousted of the market. Computerization and the Internet are at the origin of the financial crisis.

Organized crime took the opacity of the computer and complicity interested banks to launder profits and seize entire sectors of the legal economy and even, in some regions, seize political power itself. Corruption, which is endemic in the economy of maximum risk, could also take advantage of the discretion afforded by computerized laundering. The rule of law and democracy are thus faced with a resurgence of feudalism: the ultra-modern economy is paradoxically attempted to revive the values of feudalism and even those more archaic of the tribe (see Entrepreneurs et prédateurs, conflit frontal).

The appropriate model to represent the contemporary economy is no longer that of the balanced exchange, where nobody can be forced to accept a transaction without compensation, but another more complex which reflects the dialectics of balanced exchange and predation.

To contain the predation supposes to establish by law and in the judicial system safeguards which reduce temptation by increasing the likelihood of a sanction. This issue is important for society because the rule of law is a necessary condition for economic efficiency: "commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice, in which the people do not feel themselves secure in the possession of their property, in which the faith of contracts is not supported by law" ( Adam Smith, Wealth of Nations, Book V, Chapter 3).

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9) the crisis is due to the inadequacy of the behavior of economic agents to the productive system that the CTS brings out

One must distinguish the economic crises that are cyclical, similar to accordion shots of traffic on a busy road, and those that are structural. When structural crises begin, one can believe that this is the beginning of a cycle and that business will soon resume as before: this is what we thought in 1975. Years must pass for the structural nature of the crisis to become clear: the economic measures have no effect while the production capacities are underutilized, investment slows and unemployment rises.

A structural crisis is explained (1) by a change in the productive system, (2) by the inadequacy of the behavior of economic actors (enterprises, consumers, State) to the productive system which emerges and which they do not understand.

 This is what happened in the 30s: the production system DMTS had been brought to a high degree of efficiency by Taylorism and by the innovations demanded by the war, but enterprises and consumers had returned after a short period of hubris in the 1920s to the habits of caution and saving which are appropriate to an agricultural economy subject to the vagaries of climate. Lack of opportunities stifled the economy: Keynes solved this problem by creating the theory of expectations.

A similar diagnosis can be done on the contemporary economy. It stifles because neither enterprises nor consumers, nor the State behave so that it can deliver its full effectiveness. Effective behaviors, although informative, are exceptional.

An economy in crisis it is in desequilibrium. The economic equilibrium is like that of a vault: its different parts must meet and support each other in the keystone. If the behavior of firms is one that meets the CTS, but not the behavior of consumer, efficiency can not be achieved and it is even more so if several players are faulty.

We call iconomy an economy that, by hypothesis, has reached an equilibrium in the CTS. Consider the economic actors in contemporary France one after another to see what separates them from iconomy:

 The enterprise 

The organization of most large enterprises congeals around habits which are difficult to shake off and that keep them away from the iconomy:

• whereas in the iconomy repetitive tasks are automated, many enterprises have refused organizational effort that it requires and relocated production to low-wage countries in order to continue as before;
• whereas in the iconomy the key challenge lies in the quality of the product and the relationship with customers, business effort is often focused on lowering the cost of production;
• whereas in the iconomy products are packages of goods and services, many enterprises refuse to deploy services that contribute to the quality of their product. Supreme absurdity, some entrust to subcontractors the relationship with their clients;
• whereas in the iconomy product development is carried out by a network of partners many enterprises, being imperial, prefer subcontracting rather than a partnership of equals;
• whereas in the iconomy the information system is central to the strategy, many enterprises consider IT as a cost center that should be compressed;
• whereas in the iconomy the enterprise must practice an exchange of consideration with the “brain power”, most managers behave in an authoritarian manner towards people who work in the field.

There are even among the larger enterprises any whose strategy and methods are already those of iconomy, but they are a tiny minority. It has always been so after the industrial revolution: in the early nineteenth century the enterprises which were effectively mechanized were rare.  

The State

The organization of government as the same defaults that in the enterprises. Moreover the State struggles to carry out its mission of “institution of institutions” on a field that the emergence of CTS has transformed:

• while the productive system of the iconomy should be the priority to the statesman, "society problems" which are not negligible but of second order monopolize the parliament;
• while iconomy relies on computer politicians consider it as a technique without strategic importance and focus on the most superficial aspects of computerization ("digital sector," effects on media, individual usages etc.);
• while full employment can be achieved in the iconomy only by increasing the number and development of enterprises, the State runs out to "save jobs" in obsolete activities;
• while iconomy would restore the balance of accounts of the State, the measures taken to limit the deficit of the budget counteract its emergence;
• while the quality of large systems (education, health, justice, etc.) is a necessary condition for the iconomy, they remain prisoners of bureaucracies and corporations whose inertia opposes computerization;
• whereas in the iconomy the regime of the market is monopolistic competition, regulators believe that only pure competition can lead to efficiency and they prohibit the creation of monopolies;
• while iconomy claims that the legislative, executive and judicial powers act to contain predation, the State is slow to define the laws and deploy the judiciary skills which are necessary.

The consumer 

The consumer bears its share of responsibility in the crisis, but one must recognize that advertising and distribution play an important role in its behavior:

• whereas in the iconomy his discernment orients him to the variety of a product that suits him best, he is fooled by misleading denominations and presentations;
• whereas in the iconomy the choice of a variety results from a price / quality ratio, he is seduced by an advertisement that focuses its attention on the price alone;
• whereas in the iconomy consumption is selective and sober because quality oriented, the utility function still gives a great place to quantity.

*     *

This certainly incomplete list of mistakes indicates the effort that is necessary to achieve the iconomy. Like any economy in equilibrium, this one will experience full employment, balance of trade and balance of the accounts of the State. It will also experience strong growth through innovation. However this growth will not be measured by GDP - which is quantitative - but by an indicator of the material well-being of the population.

The strategic priority for enterprises today is not to cut costs, to generate profit nor to satisfy the shareholders, but to take advantage of CTS to efficiently produce useful things, to carve on the world market a niche monopoly protected by the secrecy and renewed by innovation.

Strategic priority for the government is not to respond in a hurry to the symptoms of the crisis, but to take it from its root and favor the emergence of the iconomy. This implies that the whole society shares a clear vision of the third industrial revolution, that is of the opportunities and risks brought by computerization.

Some say that the future of the economy lies in renewable energy. It is true that oil, which is a convenient fossil energy at low cost, has been instrumental in the economic growth until 1975, and it is also true that the price is now high, volatile, and that this will be worse with the rise of a shortage.

But the new form that the CTS procured for the production function and, correspondingly, for the cost function is a more radical change than that of the price of a factor of production, even if it is brutal. Deeper still, the transformation of nature brings by the CTS changed the conditions of economic equilibrium: issues that the price of energy and global warming raise should be asked in the context of this new equilibrium and not by ignoring it.

These questions should not mask the risks that the CTS confronts society: risk of a return to the feudal system; risk of a long human sacrifice by extension of the crisis; finally risk of an assimilation of the human being to the computer, implicit in some attempts of the "artificial intelligence" and similar in principle to that of totalitarian regimes that have aspired to create a monstrous "new man " by equating the human being to the machine.