I was recently posed the following question: “The mostimportant way in which the Internet and online social media are changing ourworld is [fill in the blank].” My standard answer is that it changes the balance of power between individuals and institutions.But this was a sophisticated audience of economists and students, gathered forthe 20th anniversary of Moscow’s New Economic School. I needed new material.
So I challenged the audience to consider the following: Formuch of human history, there was no economy based on trade and fungible goods. People operated in small groups and fended for themselves. Scarcity was self-limiting: Ifyou could not grow or catch your own food, you died (or moved). Specialization,trade, and pricing – not to mention religions and (economically) unproductivereligious institutions, mass production, mass media, and big government – areall recent developments.
Our current world is a mix of people still subsisting with almost no external income, peoplegenerating (and consuming) surpluses, and other people consuming surplusesgenerated by others. Commodity prices spread worldwide, though influenced bylocal conditions and constraints (including tariffs and other protectionistmeasures in China, Russia, America, and elsewhere).
Many activities that were previously performed “for free”(often within a household), such as sex, home maintenance, and care for the sickand elderly, are now frequently outsourced and counted as economic output. Ingeneral, it is fair to say that these activities are performed more efficientlyas a result: People whose skills are worth, say, $50 per hour spend more oftheir time earning $50, rather than performing chores“worth” $10 or $20 per hour.
But the Internet is changing that as well, in a way thatmay befuddle the many companies who view itprimarily as an economic platform, where they can market or sell things, oreven charge for content. Those companies go online to earn money. Google isperhaps the purest example of a company that transforms purchase intentions intoincome; most other “Internet” companies offer something of independent value onthe other side of those searches.
But many individuals, most of the time, go online withoutany interest in buying something. They are there to find out about the world,catch up with friends, play games, listen to music, chat, or just hang out –and, increasingly, to get the attention of other people. Thanks to highlyproductive surplus economies, they can spend a lot more time being economicallyinactive.
This is not the familiar question of whether our machineswill put us all out of work. In fact, the question is whether we will startdoing more and more intellectual work for free or for barter,becoming more like our ancestors. Instead of producing food or housing forourselves or for barter, we will be producing content and amusement for oneanother, without engaging in explicit (taxable) financial exchange. Yes, thereis a so-called gift economy, but there is also an attention market that may notbe fungible or priced – a distributed, many-to-manyeconomy that harks back to the old days.
The economic and psychological implications of this areprofound. It seems pretty clear that most people gain self-esteem and mentalhealth from doing something useful, whether raising children or earning asalary. I am not predicting a utopian world in which everyone is equallyvalued. But it may be a world in which people use their Klout Score (a measureof one’s online influence), their Twitter following, or a similar measure tojustify their existence, assign value to their activities, and measure theirself-worth.
The trouble (for economists and traditional businesses, atleast) is that this future disturbs traditional notions of economic growth.Companies that provide content will increasingly find themselves competing withindividuals who offer entertainment for free. This phenomenon is not visibleyet, because analysts focus on popular bloggers and online media sitescompeting with traditional media.
But the real change is the rise of the “long tail” – millions of additional units of content –email, Facebook posts, test messages – being read by only a few people each.That is possible only on the Internet, with its vanishinglysmall distribution costs. This will not be the unmeasured economy ofyesteryear, but rather one where we quantify our efforts in other ways.
How do we tell if this is happening, economically? If wegenerate our own economic surplus without accounting for it – what the Americanwriter Clay Shirky calls “cognitive surplus” – how does that influence reportedeconomic statistics and, ultimately, shape incentives and activities? Do wespend more on “communications,” meaning the hardware and infrastructure, evenas the real value is unaccounted for? Can we apply that surplus to something“useful”?
Right now, fashion (let aloneclothing) is becoming cheaper and cheaper. But you can “do” fashion for free bydesigning an avatar for yourself. Will the worldof cognitive surplus make it easier for us to be environmentally responsible,guided also by the inclusion of externalities in the prices of physical goods,so that we end up “consuming” fewer physical things and spend more on virtualvalue?
This attention economy is not the intention economy beloved of vendors,who grab consumers’ attention in order to sell them something. Rather,attention here has its own intrinsic, non-monetizable value. The attention economy is one in which people spend theirpersonal time attracting others’ attention, whether by designing creativeavatars, posting pithy comments, or accumulating “likes” for their cat photos.
Just as we are driven to spread our physical DNA, soapparently do we have an urge to spread our virtual identities, so that wecannot be erased. Instead of physical descendants, we are offering our ownvirtual selves to posterity.