The digital revolution - II: Crowds & machines

While the digital revolution has provided many benefits, there are many threats as well, such as from the possible advent of killer robots

In my last column I had taken a rather dyspeptic view of platforms such as Google and Facebook. In this, I examine crowdfunding and robots based on artificial intelligence (AI).

A recent paper by Roland Strausz ('A Theory of Crowdfunding', American Economic Review, June 2017) shows that crowdfunding sites such as Kickstarter increase economic efficiency when there is demand uncertainty, by allowing entrepreneurs to contract with consumers before the development of a product. This allows them to screen for valuable products even if there is moral hazard from the possibility of the entrepreneur embezzling rather than investing the contracted funds.