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About this book

This book takes an in-depth look at the economics of digital transformation. Presenting a variety of perspectives from experts, it deals with the socioeconomic changes associated with the digital transformation of production systems. The chapters also address the impacts of digital transformation on the sustainable functioning of socioeconomic and environmental systems. Select chapters also investigate the consequences of adopting intelligent learning systems, both in terms of replacing the human labor force. and their effects on the smart digital management and security of cities, places, and people. Lastly, chapters discuss important questions regarding innovations leading to sustainable change.

Table of Contents


The Economics of Digital Transformation: Approaching Non-stable and Uncertain Digitalized Production Systems

The recent economic crisis that lasted between 2007 and 2009 was predetermined not only by the presence of “bubbles” in the financial sector, but also by the allometric character of the sectorial development. This structural imbalance, which accumulated over the years, was the result of a lack of conjugation between the new technological platform, forms and methods of management and practices of social development. It can be expected that a new technological breakthrough will bring with it not only “roses of prosperity” but also “prickly thorns” of disappointment. The key problem will not only be to ensure a new character of economic growth, but also to solve the unemployment problem and to ensure conjugation of the new technology platform and the information and social infrastructure of society.
Tessaleno Devezas, João Leitão, Askar Sarygulov

Social and Economic Consequences of Large-scale Digitization and Robotization of the Modern Economy

The authors analyze the trends in the development of modern capitalist economies such as the growth of capital share in the national income (GDP) and corresponding decrease in the share of labor; lower wages and the reduction of employment; steady growth of income inequality and polarization of labor.
The models for the dynamics of employment and income are developed considering the acceleration of technological replacement of jobs. Models for the distribution of the household annual income in the USA based on the exponential law, Rayleigh distribution law, and power-law distribution are discussed in the work. The forecasted distribution curves of the annual household income of the middle class, including the poor, and of the rich families in the USA are built for 2030 and 2050 and compared with the corresponding data for 2017. They reflect the forecasted growth of income polarization: there are practically no families with income ranging from 300 thousand dollars to 600 thousand dollars per year. This indicates the gradual disappearance of the middle class which is the basis of democracy and stability.
Askar Akaev, Andrey Rudskoy, Tessaleno Devezas

Revisited Economic Theory or How to Describe the Processes of Disequilibrium and Instability of Modern Economic Systems

The world financial and economic crisis of 2008–2009 convincingly showed that the modern market economy is unstable, unbalanced, and it develops cyclically. The article discusses the dynamics of the digital economy, generated by the innovations of the NBIC technological and fourth industrial revolutions and forming the basis of the sixth Kondratiev Big Cycle (2018–2050). The digital economy solves the epochal task of moving from the mass production of standard goods to original goods that meet individual needs and preferences, which reflects current trends in demand. The article also examines the relationship between synergetics and the digital economy, since synergetics deals with unstable and nonequilibrium systems and focuses on nonlinear phenomena in economic evolution, such as structural changes, bifurcations, and chaos that will accompany the process of digital economy formation. In the era of the digital economy, capital markets are neither stable nor self-optimizing, and they need supervision and management. In this regard, the rethinking and new reading of the ideas of J. Keynes and H. Minsky on the role of the state in ensuring effective governance are extremely relevant.
А. А. Akaev, V. A. Sadovnichiy

Technological Development: Models of Economic Growth and Distribution of Income

The economic development of vanguard countries during the last 40 years contributed to a large disturbance of the two key empirical regularities that underlie neoclassical economic theory: the effect of the “Bowley Law” or one of the “stylized facts” of Kaldor, is becoming increasingly less apparent; there is more and more empirical evidence that the famous Kuznets curve is no longer valid. Income inequality is growing in all developed countries, particularly in those like the USA, Great Britain, and Canada. Hence, it should be expected that a new stage of technological development, in the form of digital technologies, will contribute to the reinforcement of these trends. We propose modified neoclassical models of income growth and distribution, which take into account the new empirical regularities. Our results clearly show that if state institutions do not interfere with existing trends in the increase of inequality, then its growth will continue as there are no endogenous economic mechanisms that could restrict this process.
Askar Akaev, Askar Sarygulov, Valentin Sokolov

Breakthrough Technologies and Labor Market Transformation: How It Works and Some Evidence from the Economies of Developed Countries

The proliferation of digital technology and growing economic inequality have exacerbated the question of the boundaries of using breakthrough technologies. Economic practice shows that under the influence of new technologies there is a constant transformation of the labor market and these changes are usually associated with job cuts in the manufacturing industry. An analysis of empirical data of the US economy shows that job cuts in the industry sector and growth in the services sector are a long-term and sustainable trend. Such a process of structural transformation cannot be provided only by market mechanisms. The wide involvement of the state as an institution in the formation and financing of retraining and retraining programs for personnel is required to mitigate the consequences of profound structural changes in the labor market.
Elena Gorbashko, Irina Golovtsova, Dmitry Desyatko, Viktorya Rapgof

Technological Substitution of Jobs in the Digital Economy and Shift in Labor Demand Towards Advanced Qualifications

This chapter addresses three key labor market challenges that occur as a result of the digital transformation of the economy: shift in labor demand towards advanced qualifications; the continuous growth of structural technological unemployment; and the polarization of labor into high- and low-skilled positions, while middle-skilled jobs are being eroded.
The authors propose mathematical models that allow to observe the distribution of labor by skill level, as well as the distribution of the probability curve of technological substitution of labor dependent on the skill level, and calculate the effective share of low-, medium-, and high-skilled workers before and after the digital transformation of the economy.
A solution to the differential equation describing the increase in productivity of a worker in the digital economy, where they interact in symbiosis with intelligent machines, is also presented in this chapter. This solution allows us to make forecasts of optimal wage growth for workers in the digital age, assuming that it is proportional to productivity growth. It is shown that the optimal increase in the salary of a high-skilled worker should occur at a rate of 7% per year and double in 10 years.
А. А. Akaev, A. I. Rudskoy, Tessaleno Devezas

Oil Shocks and Stock Market Performance: Evidence from the Eurozone and the USA

Recent oil price developments contribute to renewed interest in the subject of oil shocks regarding international stock market performance. In this connection, this study uses a structural VAR (SVAR) model to evaluate the impact of BRENT and WTI crude oil price effects on the Dow Jones, DAX, CAC, ATHENS Composite, and PSI20 performance. The dynamic analysis gives support to the nonsignificant effects of oil prices on the US and Eurozone markets. Nevertheless, in the context of stock markets, the findings suggest that Dow Jones becomes the prevailing market-driver of Eurozone market performance. Furthermore, there is only a unidirectional, significant relationship in Eurozone stock markets, from the CAC to the PSI20. The outstanding role of the US stock market reflects the fact of this being the world’s largest economy in addition to being closely linked to other economies worldwide. The impact of the French stock market on the Portuguese stock market is justified by the integration of both stock markets in the Euronext Stock Exchange.
João Leitão, Joaquim Ferreira

Reinforcement Learning Approach for Dynamic Pricing

With the introduction of digital technologies, it becomes easier for customers to compare prices and choose the product that is most profitable for them, this leads to instability of demand, which means that there is a need for market players to review pricing policies in favor of one that could take into account the characteristics of producer’s resources and current demand status.
Dynamic pricing seems to be an adequate solution to the problem, as it is adaptive to customer expectations. In addition, with the digitalization of the economy, unique opportunities arise for using this apparatus.
The purpose of this study is to evaluate the possibility of applying the concept of dynamic pricing to traditional retail.
The goal of solving the dynamic pricing problem in the framework of this study is to maximize profits from the sale of a specific associated product at an automatic gas station.
To solve this problem, the authors propose using machine learning approaches that adapt to the external environment, one of which is reinforcement learning (RL). At the same time, an approach is proposed to restore the demand surface for subsequent training of the agent.
Maksim Balashov, Anton Kiselev, Alena Kuryleva

Convergent Evolution of IT Security Paradigm: From Access Control to Cyber-Defense

The information technology revolution (Industry 4.0) has led to the creation of the concept of cyber-physical systems. Digitalization has brought all the urgency of information security problems, which depend on the efficiency of modern production on targeted and random destructive impact, which lead to hidden, remote, and difficult to detect effects that can cause catastrophic consequences. The information security problems of cyber-physical systems require the development of a new security methodology. In this paper, it is proposed to interpret the security of cyber-physical systems as the preservation of the sustainable functioning of the cyber-physical system in the context of a targeted destructive impact on its information components. Cybersecurity methodology extends the objects of protection from data or key information to control systems as telecommunications equipment and actuators in the energy and manufacturing. This paper describes the process of transition from access control to cyber-defense for securing cyber-physical systems.
Dmitry P. Zegzhda

AI Methods for Neutralizing Cyber Threats at Unmanned Vehicular Ecosystem of Smart City

Due to the increased mobility of the infrastructural topology and the growing amount of data being processed, traditional protection methods become ineffective. Security weaknesses cause disruption of control, malfunction of transportation, the occurrence of smart building equipment failures, traffic jams, etc. New methods to ensure cyber security for new digital platforms are required. The article analyzes the existing approaches to ensuring cyber security in modern dynamic networks and revealed their main advantages and disadvantages. The authors propose the application of new AI methods (swarm algorithms and neural networks) to ensure the security of the network in the infrastructure of the intelligent transport system (ITS) a sample of new digital platforms. The paper assesses the possibility of their use for preventing cyber threats in the digital infrastructures of V2X. The results of experiments to assess the effectiveness of the proposed approach, obtained using supercomputer modeling are given. The achievements are ready for application in other smart environments: IoT, IIoT, WSN, mesh networks, and m2m-networks.
Maxim Kalinin, Vasiliy Krundyshev, Dmitry Zegzhda

Cybersecurity and Control Sustainability in Digital Economy and Advanced Production

This paper describes the challenge of ensuring the cybersecurity of modern digital systems. The development of intelligent information technologies has allowed to create systems that are able to implement physical and economic processes through information exchange between the components of the system. The integration of such systems with critical industries and their accessibility from the Internet provides ample opportunities for the implementation of cyber attacks. The authors showed the need to expand the concept of information security for the systems under consideration by the concept of sustainability, as the ability to function in the conditions of computer attacks. It is proved that an important feature of modern digital systems is the priority to ensure the correct operation of the entire system, before ensuring the safety of individual components. The proposed approach to ensuring cybersecurity and control of cyber sustainability, based on the self-adaptation of the system to the conditions of operation, is described.
Dmitry P. Zegzhda, Evgeny Pavlenko, Anna Shtyrkina

Blockchain for Cybersecurity of Government E-Services: Decentralized Architecture Benefits and Challenges

Traditional government e-services are based on centralized data stores, processing, and management systems and solutions, which have several constraints, for example, single point of failure, trust concentration, absence of transparency, tracking, and verifiability. The paper discusses the applicability of a decentralized approach to building government e-services. Financial, operational, and security benefits of the decentralized approach comparing to the centralized one are outlined. The main cybersecurity challenges are identified. Authors present how Blockchain technology utilization could solve the identified issues.
Alexey Busygin, Artem Konoplev

Green Energy Markets: Current Gaps and Development Perspectives in the Russian Federation

The article is devoted to the analysis of the current state and prospects for the development of the renewable (green) energy market. The achieved level of technologies and equipment for the production of renewable energy and the main trends in the development of these issues are analyzed. The demand for green energy is analyzed from the point of view of free-market niches for this type of energy. The accessibility of energy systems is considered as a key factor for the development of the green energy market. The technical, organizational, and economic problems of ensuring the accessibility of energy systems are analyzed. Existing barriers that prevent the level of grids accessibility, which is necessary for the formation of an effective market for green energy, are also analyzed. Getting the electricity index as a component of the Doing Business rating is used for comparative analysis of the availability of electricity grids in the world economies and Russia. The Smart Grid concept is analyzed from the point of view of development the grid’s availability.
Yury Nurulin, Inga Skvortsova, Elena Vinogradova

Energy Efficiency in Urban Districts: Case from Polytechnic University

The article presents the results of a case study of Peter the Great St. Petersburg Polytechnic University (SPbPU) campus in the frame of INTERREG BSR project AREA21. SPbPU is considered as an Energy Improvement District (EID)—an object where energy efficiency measures are applied for real estate objects in private, state, and regional ownership that is typical for a large number of territorial entities of St. Petersburg. Using the stakeholder identification method, the article analyzes the behavior of the EID stakeholders at SPbPU. The special features of the EID which prevent motivating the end users to save resources are highlighted. In combination with the SWOT analysis, this allows us to identify gaps and problems in creating a resource-saving motivation system for the main users in EID. The results of the study form the basis for the development of an EID strategic plan with the close collaboration of key stakeholders. The invariant components of a case study are of interest to other EIDs.
Yury Nurulin, Vitaliy Sergeev, Inga Skvortsova, Olga Kaltchenko

An Architectural Approach to Managing the Digital Transformation of a Medical Organization

The modern medical management system is influenced by modern medical concepts (value medicine, predictive medicine), on the one hand, and technologies that provide digital transformation (IoT, Big Data, blockchain, etc.), on the other hand. Digital transformation involves the implementation of fundamental changes in the activities of the organization using digital technology. At the same time, business models, medical organization development strategies, business process systems, IT architecture, services architecture, data architecture, etc., change. The object of the research is medical organizations, being the subject of research the digital transformation process of a medical organization. The hypothesis of research: the application of the architectural approach to managing the digital transformation of a medical organization will allow the formation of a reference architectural model of the upper level, as well as the upper level of the digital transformation roadmap of the medical organization. The main result of the research is the formation of the architectural model of the upper level, as well as the formation of the upper level of the transition plan during the digital transformation of the medical organization.
Igor Ilin, Oksana Iliashenko, Victoriia Iliashenko

Aluminum Production and Aviation: An Interesting Case of an Interwoven Rebound Effect in a Digital Transforming World

In this chapter, it is presented an extensive prospective analysis of the worldwide aluminum production. It is discussed in detail the six major reasons why aluminum is not only one of the fundamental materials of modern civilization, but it could still immensely expand its range of applications and volume of production globally. The high demand for aluminum from all industry sectors can still endure for a couple of decades from now, but probably at a lower growth rate, following probably the path of a logistic curve. Today’s high per capita consumption presented by highly industrialized countries (between 15 kg and 30 kg per capita) will probably persist for the next two decades from now, considering that these countries have also significative automobile and aircraft production plants. But a very important aspect to consider regarding aluminum production/consumption is the fact that it is highly probable that recycling of scrap aluminum will gain a renewed momentum as environmental concerns worsen; still regarding this point it is important to take in account that today’s existing aluminum in circulation is almost enough to satisfy global demand through recycling.
Tessaleno Devezas, Hugo Ruão
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