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Trust as a determinant of social welfare in the digital economy
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Trust as a determinant of social welfare in the digital economy
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Journal Article
Trust as a determinant of social welfare in the digital economy
2024
Overview
Trust plays a critical role in determining social welfare in the digital economy and has significant socioeconomic implications. To investigate the relationship between trust and social welfare in this context, we developed a social welfare function that accurately quantifies the positive impact of the digital economy. Employing a Markov analysis framework, we modelled trust as a variable that evolves based on the agent's interactions with the system, characterizing the system's dynamic behavior as a series of probabilistic transitions between states. We ran multiple simulations to gather a significant sample of possible outcomes and analyzed the statistical correlation between trust and social welfare. We used the time it takes for the digital economy to converge towards the non-digital economy as a metric to compare the performance of the separate economies. We controlled for other factors influencing social welfare, such as the number of transactions and market competition levels. We compared the actual outcomes of the simulation study with our theoretical predictions. Results indicate a significant impact of trust in maximizing social welfare by achieving a steady state in fewer iterations for a developed digital economy. The socioeconomic benefits of trust are more visible in a digital than in a non-digital economy. Technological progress or innovation is crucial to attaining responsible consumption and production patterns. The digital economy's sustainability hinges on trust, which policymakers must prioritize in light of trust erosion. An effective and inclusive approach, taking into consideration cultural and socioeconomic factors, is imperative to foster increased public trust in institutions and government. Policymakers should strategically prioritize measures such as bolstering data privacy, promoting digital literacy, and formulating robust legal frameworks that facilitate trust-building. The cultivation of mutual trust among all stakeholders, including the state, corporations, government, and individuals, is essential for the creation of a more sustainable and equitable digital economy that maximizes social welfare.
