Regulations will slow down Internet Economy Growth

adam smith like
Adam Smith would have “liked” the Internet Economy

Adam Smith published his famous book “The Wealth of Nations” (full title “An Inquiry into the Nature and Causes of the Wealth of Nations”) in 1776. Among others he observed what he called “The Invisible Hand” that helps society develop. Smith argued that even though economic players are pursuing their own interests they have to trade with others and thus balance and overall growth is achieved.

Smith believed those in power can’t be expected to treat public goods as their own. Overspending, bad management, corruption are bound to appear when governments achieve enough power. The author believed government power should be limited, markets should be free and self interest is the key to economic development. These requirements, however, have to work together. Otherwise the system can’t work. Self interest will drive those in the upper economic echelon into lobby groups, where they will ask and “purchase” favors from those that instill law and order. Such actions will hurt smaller economic players and increase wealth gap. In time the wealth gap will grow exponentially up to a moment society will have to restructure itself and as history taught us these kind of changes aren’t usually peaceful.

The global economy is far from free, government power is anything but limited and economic actions based on self interest are reserved for a select few.

Internet – the (almost) perfect market

Internet has proven that it is the closest thing we have to what Adam Smith described as a perfect market. It’s self regulated, markets are (mostly) free, governments can’t really control it and most of the economic players act in their self interest. Some people don’t like that.

In the Internet Economy consumers dictate the rise and fall of the economic agents. With the rise in Social Media the consumer influence increases ever more. However – it seems that recent events confirm Smith’s thoughts:

“People of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public or some contrivance to raise prices.”

Think about SOPA, ACTA, and other such. The Internet has to stay as deregulated as possible if we expect it to continue its growth.

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