The Social Costs of Social Media

Mariano Torras Education, Future, General, Politics, Public policy/Wellbeing Leave a Comment

March 28, 2021

In economics, “social cost” is really a euphemism for the destructive consequences of capitalism. Milton Friedman famously referred to them as “neighborhood effects,” and today it is more common to call them “market failures” or “externalities.” Regardless of what we label them, they are the secondary or indirect effects of some market transaction or transactions. And because I am convinced of their urgency, today I want to call attention to the social costs of social media and the internet in general. 

First a bit more in the way of explanation. We economists are trained (not to say indoctrinated) to believe that free markets are the solution to society’s ills. The less regulation or government distortion through tax or subsidy policy, the more “efficient” or better the market outcome. Market failures are considered to be exceptional cases when all the relevant information is not transmitted into either supply or demand. Such failures produce social costs. Probably the most popular example is environmental pollution.

Typically, pollution is a byproduct of some economic activity. The social costs of the pollution are often adverse health effects or aesthetic damages. But absent corrective measures by government, such costs are borne by society at large, not just the polluters. So, these days there is a branch of economics that is concerned with what types of policies could incentivize fewer market failures of this type.

Now let’s turn to the internet and social media. At first blush, it is not clear how social costs even apply here. The internet is a technology with revolutionary potential in many areas, both theoretical and practical. Although it’s only been about a quarter century that it is with us, it would be difficult to imagine life without it. And there are many ways in which its increasingly sophisticated data processing makes our lives and our work, quite simply, easier.

Whenever I get on the subject with my students, our conversation invariably drifts to the unavoidable tradeoff between privacy and convenience. Many are perfectly happy to surrender access to their private information, data, or what have you. They might declare that they are “not paranoid” or “have nothing to hide.” To be clear, my students are never crazy about losing some freedoms or relinquishing some privacy. But most see it as a relatively small price to pay for the benefits they obtain.

Economics is all about benefits and costs. And the benefits of the internet are undeniable. Today we almost seamlessly navigate the information “superhighway,” while being “connected” facilitates communication, research, and even shopping. So, what’s the problem? Who are we harming by partaking in the information exchange?

If you have not seen it, watching the documentary titled The Social Dilemma (directed and co-written by Jeff Orlowski) sheds much light. It lays bare how the problem is not even so much our loss of privacy, though it certainly does matter. The greater concern, rather, is our addiction to the internet, fostered by companies like Facebook, YouTube, Google, WhatsApp and Instagram.

Understanding why social media companies keep us addicted to our screens does not require too deep an understanding of capitalism. Facebook, Google, and Instagram are “in it” to make money, and they do so by placing ads. Keeping us on the screen longer ensures that we will view more ads. Consequently, the social media platforms will be able to place more of these ads and make people like Mark Zuckerberg into multi-billionaires.

And even this much, well, many of us probably already know. What, to me, was truly eye-opening about the movie was learning about the methods the companies use. Keep in mind: their single goal is to make money. Translation: Nothing else matters. Whatever it takes to keep you on the screen. What does it take?

You don’t need to formally understand how algorithms work to get the idea. Nor does the Social Dilemma do more than skim the surface on this. But it is important to understand the essence of it. Algorithms are complex programs that instruct computers to recognize patterns and perform repeated calculations. The social media companies utilize them in order to home in on your unique profile. You help them do so every time you click on an internet link!

So what? This just makes shopping easier, right? It does, but we never consider the social cost, which is huge. Elucidating this point is the movie’s biggest strength. Every time you click on someone’s post on Facebook, a news item on Bloomberg – whatever – the “algorithm” is getting to know better what will keep you hooked to your screen.

Ever wonder why, as studies appear to indicate, the more time one spends on social media the more extreme their political views? Many people get most of their news from social media. Facebook does not care if what you read is accurate. If you are right wing, their algorithm will only “feed” you material from Fox news or something else that you like and with which you will agree. The same company will provide a completely different news perspective to someone on the left.

Capitalism is, of course, about making money. And were that all, I could understand why for many it would not be a problem. Unfortunately, it is not all. Blind pursuit of mammon breeds the depravity that ends up not only despoiling the natural environment, but also devastating society. In other words, capitalism is rife with social costs.

Just so Zuckerberg et al. can make money, they perform a mass virtual lobotomy on us, depriving us of our precious ability to think critically. As curated, customized news comes to dominate the cyber-sphere, we are less able to engage in respectful discussion with those outside our tribe with whom we might disagree. Yet it is through enlightened discussion and disagreement that we grow and make progress as a society.

Thirty years ago, I could partake in polemics with just about anyone. Today, I am much less comfortable doing so, unless my interlocutor is also a social media refusenik. Therein lies the “dilemma” we all confront. Choose between preservation of your mental faculties (at the cost of social isolation) and “connectedness” (and brain degradation).

Today’s extreme political polarization takes on an entirely new dimension when we consider the incessant social media manipulation that fuels it. One of the tech company whistleblowers in the film fears an inevitable civil war. At the end of the movie, another one states that we need to change the direction in which all this (social media) is taking us. When asked if he thinks we can get there, he replies “we have to.” True indeed. But can we?

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