Since the birth of economics as a discipline, our approach to it has often been dominated by a top-down model. Macroeconomics, with its systems view, has defined the contexts in which microeconomics, the science of individual decisions, has taken shape. However, this method, although effective in a context of limited access to information and restricted computing power, is now outdated in the digital age. John Maynard Keynes, economist and founder of Keynesian macroeconomics, is credited with the following quote: "The difficulty is not in understanding new ideas, but in escaping old ones." This quote perfectly illustrates the current transformation in our understanding of the economy and the use of the new tools at our disposal.
Technological change and its impact on the economy
The traditional economic paradigm and its limits
In the traditional world of economics, macroeconomic models have often served as a foundation. These models, based on sometimes fragmentary information, offered a perspective from which to decipher individual behaviour or microeconomic decisions. Historically, technological limitations imposed constraints on our analytical capabilities. Moore's Law, which postulates that the computing power of a processor doubles every 18 months, has long guided expectations of technological progress. However, even this impressive law is now being put to the test by even more revolutionary advances. With the potential emergence of quantum computers, the exponential growth in computing power that we have experienced could be largely surpassed, opening up almost limitless horizons for data analysis and economic understanding.
Exponential increase in computing power
Technological advances have endowed today's computers with capabilities that were unimaginable just a few decades ago. The ability to compile, process and analyse billions of pieces of data is now within the reach of almost all modern computers. This exponential increase in computing power has opened the door to a deeper and more precise exploration of economic data, fundamentally changing the way we see and interact with economic systems. We can now imagine watching every company in Malta from our computer to understand trends.
The impact of the INSPIRE Directive and the Economy as a Code (EaaC)
The European INSPIRE Directive and its influence
With the European INSPIRE Directive of 2007, we saw the opening up of a new way of accessing data, promoting transparency and interoperability across Europe. In this technologically advanced context, analysts, researchers and even ordinary citizens can delve into granular detail, assessing specific aspects of the economy at an almost individual level. This transition to a 'coded' view of the economy, where data becomes the primary language of understanding, has profound implications. Not only does it promise a better understanding of economic systems, but it also offers opportunities to improve decision-making, strengthen economic sovereignty and create more effective public policies on the basis of more up-to-date data.
Economy as a Code (EaaC): providing a technical solution to an economic problem
The advent of Economy as a Code (EaaC) represents a crucial step in the evolution of economic analysis, fundamentally transforming the way economic data is interpreted and exploited. This new approach, based on the innovative use of technology and the vast data sets available, is revolutionising the understanding of economic dynamics at all levels. EaaC is a response to the limitations of traditional economic models. With increasing computing power and access to huge amounts of data in real time, EaaC overcomes the challenges posed by top-down methods. This approach rethinks the way economic data is collected, analysed and interpreted, offering unprecedented flexibility and accuracy in economic analysis.
Unlike the traditional top-down approach, EaaC adopts a bottom-up methodology. It focuses on the detailed analysis of microeconomic data - from individual company behaviour to explain trends in a consolidated sector - to build a more accurate understanding of macroeconomic trends. This granular approach allows us to identify patterns and trends that might be invisible in a macroeconomic analysis based on a sampled model.
Towards more reliable economic analysis in Malta
EaaC is ushering in a new era of data-driven economic analysis. By taking advantage of technological advances and the availability of open data, EaaC offers the opportunity to develop more responsive and informed economic strategies. This leads to a better allocation of resources, more effective public policies and enhanced economic sovereignty. In Malta, where the economy is influenced by unique factors such as its size, geographical location and openness to international trade, EaaC can provide valuable insights for navigating a complex economic landscape.
Economy as a Code marks a fundamental transition in the way we approach economic issues. By integrating technology and data analysis at the heart of the economy, EaaC promises to unlock previously inaccessible insights, opening up new perspectives for policymakers, researchers and citizens. With EaaC, we are at the dawn of an era where economic understanding is more dynamic, accurate and responsive to the challenges of an ever-changing world. For Malta, adopting this approach could be the key to overcoming the island's specific economic obstacles and paving the way to sustainable prosperity.
