Digitalisation – Catching Up with Social Change

Economics is a social science and this was reflected in the many talks and discussions during #LINOecon. How can we better allocate resources for the benefit of society? What role will digitalisation play in the future of work? Should there be stricter rules regarding social media?

For the last several decades, the fact that companies exist only to increase their profit was common knowledge. If the company owners or shareholders were socially-minded, they could use any extra wealth to help society. “But in some cases companies have a comparative advantage in doing good, or avoiding harm, and socially-minded shareholders may be willing to sacrifice some profit to have them do this,” explained Oliver Hart.

The way most shareholders increase the company’s social responsibility is by using their voting power, or “voice”. There are signs that “voice” is becoming louder, and Hart provided examples where the majority of company shareholders approved disclosures on pollution policies, climate change, contributions to political organisations and the protection of human rights of workers. There is also a marked increase in support for environmental and social shareholder proposals as compared to just five years ago.

Laureates Joseph E. Stiglitz and Richard H. Thaler were joined by young economists Giovanni Andreottola and Katharina Hartinger for a lively discussion on the problems generated by social media and what solutions could “protect us from the pollution of bad information”.

The panellists agreed that there was always misinformation and disinformation in the media, but the advent of social media has made it much easier to disseminate this kind of information. “It’s free speech on the one hand, and social harm on the other,” said Stiglitz. Creating regulation that protects society from fake news is one option, but who would decide on what the truth is? Hartinger noted that social media literacy is still in its infancy; there should be more education on how to use social media.

Another aspect of social media is its monopolisation, the fact that several companies dominate the social media market. Thaler proposed that a form of anti-trust laws should be considered and would lead to more transparency and perhaps competition in this area.

In its concluding remarks, the panel briefly touched on the equally far-reaching effects of social media− privacy issues, and behavioural problems and mental health of users, particularly teenagers.

“Good technical innovation is one that yields socially and environmentally sustainable and inclusive growth,” said Sir Christopher A. Pissarides during his lecture. So far, new digital technologies haven’t safeguarded society from many adverse social issues, such as labour shortages, a decrease in real wages or inequality. The pandemic has only accelerated the opinion that income is not the only measure of success; health, social support and equality are becoming more important, particularly in high-income countries. Pissarides suggested reducing poverty and inequality, not through handouts, but better labour outcomes, the creation of jobs that enable people to develop their talents, the provision of training support and career progression, and social support in the form of pensions.

Digital technology can be harnessed to improve the quality of work and wellbeing, but it needs to be managed well, and that includes necessary regulation and a higher level of transparency.

Sir Christopher A. Pissarides is the co-chair of the Pissarides Review into the Future of Work and Wellbeing. The Review is a 3-year collaboration between the Institute for the Future of Work, Imperial College London and Warwick Business School, and was launched in March, 2022. Three years from now, it will be interesting to see the results of the Review, and the impact automation technologies have on transforming work, society and the economy.