Second Life's virtual banking crisis (2008). Image Source: Second Life via Digital Alchemy.
We are making a transition from the New Economy to a newer kind of economy. The origins of that newer type of economy lie in the Knowledge Economy. The names for the rising system vary: the Digital Economy, the Information Economy, the Global Economy, the Internet Economy, the Network Economy, the Virtual Economy, the Learning Economy, and one of my favourites: the Cognitive-Cultural Economy.
I would argue that these new economies are all types of a 'Chronal Economy.' Digital, knowledge-based and virtual economies depend on a changing experience with time brought about by our interaction with technology. Perhaps the growing relationship between the virtual and the real, understood via new ways we experience time, will reveal what is happening to the global economy. It is that transformed relationship with time, so poorly understood now, that lies at the heart of constant financial concerns.
Second Life banking crisis (2008). Image Source: Second Life via Massively.
At first, the digital boom seemed to show the virtual economy growing as the real economy shrank. But from 2008 onward, the virtual reality suite Second Life has been mirroring real world economic woes with a virtual double-dip recession. In 2007 and 2008, it had runs on its virtual banks.
Here are a few intuitive, non-economic musings on the notion that the recession arose from a radical alteration in the way the temporal connects the virtual and the real.
First, money doesn't exist. It's just an idea. Even when money was made of gold and silver, it was always a concept more than an object of value. As money has evolved, it has become ever more virtual. The development of banknotes represented a further transition toward virtual reality. Paper money originally represented a promise to exchange a note at a bank for gold. The symbolic note soon became more important than the real gold it represented.
Second, the economy is a function of communications. If money is just an idea, then economics should be partly a study of why and how an idea can proliferate. This means going way beyond Adam Smith's view of rational decision-making around wants and desires. The economy is more than a mathematical abstract. It's more than an assessment of collective psychology. Unpacking Smith's economic rationality should do more than new-fangled neuroeconomic analyses. Economics should be a study of communications, belief and understanding.
Consider a report like this one from Machines Like Us on the tipping point for the spread of ideas:
This is the kind of communications phenomenon that might apply to our understanding of the economy.Scientists at Rensselaer Polytechnic Institute have found that when just 10 percent of the population holds an unshakable belief, their belief will always be adopted by the majority of the society. The scientists, who are members of the Social Cognitive Networks Academic Research Center (SCNARC) at Rensselaer, used computational and analytical methods to discover the tipping point where a minority belief becomes the majority opinion. The finding has implications for the study and influence of societal interactions ranging from the spread of innovations to the movement of political ideals.
Third, time has changed due to the Tech Boom. Communications innovations revamp the chronal experience. We mimic computers. We need to go faster and faster, to do business and communicate 24-7; machines never sleep.
Fourth, the meaning of ideas partly derives from how they are communicated. If timing of communication changes, the ideas that are communicated will evolve too. The medium is the message. When the way we communicate ideas is revolutionized, then we should assume that the manipulation and use of money as an idea will drastically transform as well.
Radical changes in communciation can alter not just the content of the idea, but how it is apprehended and perceived. A recession arises as the monetary idea becomes less credible. Not only are our materialist hearts no longer in it; we can easily lose faith in the virtual idea of money as well.
Ending the recession involves a series of actions to make people believe in the economy again. But in an aporia-riddled age of crumbling values, when people face spiritual crises, it is hard to restore credibility for many ideas, including economic ones.
Finally, Benjamin Franklin's observation, "time is money," still holds. Christians are still celebrating the twelve days of Christmas. Observance of dozens, even hundreds, of religious feasts in many faiths used to mark the measure of the year. Most have disappeared. But we still use the remaining, bigger feasts to measure time, mainly by spending money. The commercialization of certain points in religious and civic calendars reveals that the very idea of money has become associated with how we celebrate the passage of time.
To restore confidence in the economic concept, we need first to understand as well how our perception of time has changed. And as anyone who has experienced the Internet timebleed knows (see my post on the jet stream procrastination before the apocalypse here), time has never been more precious, while being simultaneously totally devalued.
The tipping point toward development of a Chronal Economy will likely emerge when these factors combine together to produce a general understanding regarding what time is worth, online and offline. As our lives become more integrated in tech-driven realities, the time spent on virtual-real immersion may inform the standard of global currency. It would mark a consensus reached on the value of the new chronal experience.