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of the mud that has trapped the old universe for so long. There are alarms and
alarmists everywhere in our “smart” surroundings. It seems that every single
timely issue that has already troubled us for long may also be “upgraded”
with the advent of modern AI. A long but nonexhaustive list includes
human intelligence and civilization, economic instability, employment,
income inequality, dishonesty, discrimination, populism, polarization, social
exclusion, privacy and security, democracy, etc. Celebrities such as Elon
Musk (Tesla Motors), Bill Gates (Microsoft), Steve Wozniak (Apple), and
Stephen Hawking (1942–2018) have all voiced their alarms in one way
or another.
Given this conundrum, maybe Charles Dickens’ (1812–1870) magnum
opus, A Tale of Two Cities, and his leading message, as we quoted above at the
beginning of the chapter, stands as the most powerful illumination of what
the era of AI can mean for us. In this chapter, we shall embark on a research
project on the potential economic implications of IoE. As we shall argue,
this research project, if placed in the history of economic analysis is not
new (Section 10.2); however, IoE can be regarded as the advancement in
technology from ubiquitous computing to ubiquitous networking, and its impact
is unprecedented and overwhelming. Therefore the framework required to
address this issue will be more comprehensive and extensive than the ones
we have used before. This revisit will bring in new challenges associated
with new concepts for economists.
As the first attempt to address this issue, our strategy is twofold. At the
macro level, we shall examine the possibility of the unmanned markets as a
continuation of the earlier socialist calculation debate (Section 10.2),
whereas at the micro level we shall examine the rationality of individuals
in economic theory in light of the long-standing debate between homo eco-
nomicus and homo sapiens (Section 10.3). It may be worthwhile noticing
that the earlier socialist calculation debate did not explicitly involve the

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The web of smart things or the smart universe brings in a new idea that is very different from the
conventional “pride” pursued by economists under the title the Hayek Hypothesis. The Hayek
hypothesis is a statement of collective intelligence, which can emerge from a society made up of many
individuals whose intelligence is constrained (Hayek, 1945). This concept has been very powerful and
influential in the development of economics over the last two decades. The spirit of the Hayek
hypothesis has been manifested in the economic theory of zero-intelligence agents (entropy-
maximizing agents) and has been incorporated into part of the foundation for Econophysics (Chen,
2012). To economists, IoE evokes the following curiosity: would a web of smart agents outperform a
web of “dumb” agents? Would institutions, such as the market mechanism, play a less important role
than before?