26 Feb 2017

The hidden costs behind our screens

Nastasia writes*

Social media and online networking platforms such as Facebook are often praised for having lowered the transactions costs of communication and its implications, and because they have done it ‘for free’! However, is that really so? – According to E. Dolan, “there ain’t no such a thing as a free lunch”. Just because something of value doesn’t have a market price, it doesn’t mean that it comes at no cost.

The benefits for ‘ordinary’ users are somewhat intuitive: simplified worldwide connectivity, real-time information sharing, commonality of interest, etc. However, it’s somewhat counter-intuitive to assume that founders of online giants like Facebook and Google have such astronomic net worth if the latter were truly ‘free’.

Admittedly, most ‘ordinary’ users are knowledgeable of being exposed to the commercial uses of the giants every time an ad distractingly pops on their screen. Thus, the giants are making profits by charging whomever is willing to pay for advertising their product. Assuming basic marketing knowledge, it follows that entrepreneurs must somehow segment their market. This is when the giants who are storing each user’s personal details and tracking their online activities come into play, selling the stored information. Psychometrics further filter the information, create profiles and allow entrepreneurs to target the society accordingly. By now, media consumers have engaged in using online platforms in exchange for their personal information and being continuously polluted by ads. Is that a violation of UN’s Human Rights? Yes.

On top of infringing the right to privacy, the exchange also promotes conspicuous consumption, which fuels horizontal comparison that spreads epidemically throughout the social web, generating anxiety, low self-esteem, narcissism, time fragmentation, decline in close relationships, and the related mental health issues including addiction to social media. All these “FOMO”-driven, and all contribute to the erosion of social capital. R. Putnam claims that the latter undermines democracy, which up until now has been viewed as the foundation of the welfare state. The outcome is intuitive. Moreover, political interests too, are nowadays employing media to target their consumers. Recent research has shown that Facebook-stored data were sold to political interest groups that used it to influence the outcome of the US presidential elections.

Even though such costs are somewhat reflected in the prices that interest groups pay for obtaining data, they are clearly not equitably distributed; the ‘pollutees’ are not compensated. The benefits are restricted to small groups free riding at the expense of the negative externalities borne by the rest of the society.

Bottom Line Social media and related platforms are not intrinsically ‘bad’, but their commercial and political priorities may result in benefits to the few at the expense of many. It is therefore a matter of social well-being to trace such costs regardless of their nature, and to look for ways to correct them. This is challenging, since the interests and the policies serve other purposes. This suggests that a neutral third party enforcer is a somewhat utopian concept, and therefore it is perhaps a matter of initiating collective action and looking for equally efficient means of communication less the associated negative externalities caused by private interests. Social media is a good servant but a bad master, and it becomes the society’s master when the latter fails to find interest-free or fully priced alternatives to it.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.


  1. Great post! What I found interesting is that you concluded that social media is not intrinsically bad. I agree with that but personally I would suggest caution and awareness when using it. You mentioned R. Putnam who claims that social media is undermining democracy and this is actually a common believe that due to 'bubbles' created by social media, meaning you only see posts of people with similar interests and opinions, the true value of democracy is lost. This article even states that most americans didn't know anyone voting for the opposition within their circles. http://www.abc.net.au/news/2017-01-20/social-media-death-of-democracy-and-toxic-politics/8198142

    There is a new trend though, called digital democracy: "Digital democracy is the use of information and communication technology in all kinds of media for purpose of enhancing political democracy or the participation of citizens in democratic communication." https://goo.gl/W1cka4. This seems troubling to me that we tackle the problem of the loss of democracy through social media with the same technology. OviewApp is an example of a startup that aims at enhancing democracy but at the same time collecting data the same way other social media platforms do in order to sell the data. My question is, therefore, can we revive democracy through communication technology at all?

    1. @Joanna: That seems very interesting, Jo, I hadn’t heard about a democracy-enhancing app before. I agree with your related skepticism, though. It seems like a situation of fighting fire with fire, with one shortcoming in terms of ‘fairness’: one party has considerably more control over fire, so to speak. Recently, Romanians have organized en masse successful (in relative terms) protests via Facebook against the corrupt government in place, which shows, to some extent, that social media can be quite handy, although to be honest, my guess would be that the fact that Romanian politicians didn’t display of psychometrics and all that fancy stuff helped substantially.

      Overall, I maintain a skeptical position vis-à-vis social media when it comes with ‘invisible’ strings attached.​

  2. Insightfull post! At the end of your post your write:

    "Social media and related platforms are not intrinsically ‘bad’, but their commercial and political priorities may result in benefits to the few at the expense of many."

    I totally agree with this argument, however personally I think that the focus is too much on Facebook and other giants such as Google being the "bad guys". It would be interesting to research: 1. how aware users are regarding their privacy and information about them being sold? 2. How much do users actually care?

    Disclaimer: I am not arguing that this is not a problem rather that the lack of motivation and or awareness might be slowing down the process of improving policies concerning social media. Therefore, it might be interesting to also include the attitude and opinion of users in your analysis?

    1. I understand your awareness-related concern, and to be fair, I came to the same conclusion whilst drafting my final essay. Indeed, a vast amount of users are not aware, whilst those who are likely not to be 'convinced' enough, or, perhaps, not enough motivated to actively engage into actually 'doing something'. Thus, the main step towards solving this issue, I'd say, is that of raising awareness. However, that does not let the 'giants' off the hook, in the sense that to some extent, those kilometer-long agreement policies are designed in such misleading ways that instigate rational ignorance i.e., they make the costs of reading everything seem to outweigh the benefits of doing so, which constitutes, form my perspective, a major (and successful) part of the deployed marketing strategy. That is not to say that consumers shall not be held accountable.

      However, since they 'connect' in order to lower transactions costs, they do so because they deem it necessary, whilst the time allocated to read those policies represents a considerable amount of time to *spend*, whereas what you're trying to do is precisely to avoid that. Of course, that could be considered mere consumer naivety, if you will. I think, though, that it's worth mentioning that the latter may also stem from the fact that individuals are granted rights to privacy (at least theoretically) by the European law, as well as UN-related policies, which also arguably justifies their not paying attention since they might assume that the giants' data safety policies have a legal basis.


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