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.