The Relationship Between Material Economy and Digital Economy

In the material economy, tangible, discrete, and limited goods are produced. The price mechanism can determine the optimal allocation of these goods because they are measured through price-quantity standards. In the digital economy, the products are ideas, incentives, and infrastructure. Price is not a sufficient measure for these goods, as they are not purely tangible, discrete, or limited, and thus cannot be quantified in a purely measurable way. Price is just one of many competing forms of coordination in the digital economy, and it is not necessarily the most decisive.

The economic goods produced in the material economy are physical goods, while the economic goods produced in the digital economy are focal goods. Without direct communication, contact points provide the best solution to increasingly fewer coordination problems. This means communication must be largely implicit or inferred. The optimality of a focal point is measured by the standards most relevant to the specific problem it aims to solve. However, all specific coordination problems and their standards are aspects of the overall, objective coordination problems in human affairs.

We can view the digital economy as a focal market. This is almost the opposite of meme markets (markets based on mimetic behavior or viral spread). Memes are defined by imitation—their effectiveness through replication and simulation. In contrast, a focal point is defined by originality—how it establishes an absolute, unique shared organization in the absence of direct communication. A focal point is the origin of memes; the latter is a temporal derivative of the former.

The digital economy is connected to the material economy because it generates the distributed autonomy layer for the latter. Without self-regulation in the internal market, it would be impossible to achieve an efficient material economy with optimal distribution of goods. Without effective corporate governance, a company cannot function. This can only be achieved through distributed negotiation of objective social norms as focal points.