How much is social media worth to us? “Facebook generates welfare worth $ 2,000 per user”

Abhijit remembers it as the most enjoyable hours of the day. Certainly, they could be added to the calculation of well-being. However, the conventional definition of national income does not take into account even a hint of this childhood delight. Economists know it well, but it is nevertheless worth emphasizing this fact. When a rickshaw driver in Calcutta, Abhijita’s hometown, takes the afternoon off to spend it with his beloved, GDP is falling, but is the well-being of two lovers not increasing? When someone cuts down a tree in Nairobi, the woodcutter’s work and the value of the wood harvested are counted in GDP, but not the lost shade or the beauty of the landscape. Only things that can be valued and sold on the market are taken into account in the National Income Account.

This is important because growth is always measured in relation to GDP. In 2004, when TFP growth slowed again after a brief recovery that had begun just nine years earlier, Facebook entered the scene, and today it occupies a disproportionate amount of space in people’s lives. Two years later, Twitter joined him, and in 2010, Instagram. The common denominator of these three platforms is their apparent freeware, low maintenance, and insane popularity. When, in line with the methodology of the national income account, we judge the value of viewing content or updating profiles on the basis of the price paid by users, which is often zero, or even the cost of setting up and maintaining Facebook, we greatly underestimate the impact of these platforms on human well-being. Of course, if someone thinks that waiting in suspense for someone to like their post is not pleasant at all, but cannot quit Facebook because all their friends are there, GDP can go wrong the other way.

Either way, the cost of running Facebook, which is included in GDP, says very little about how satisfied (or dissatisfied) people are using the service. The fact that the recent slowdown in measured productivity growth coincides with the explosion in social media popularity raises a problem because one might think that the gap between what is accounted for in GDP and what should be taken into account in a welfare account. it grew in exactly the same moment. Could it be that there has been a real increase in productivity – in the sense that people’s sense of well-being has really increased – but this has not been accounted for at all in the calculation of the national income?

Robert Gordon completely rejects this possibility. In fact, he thinks Facebook is partly to blame for the productivity decline, as too many people waste time updating their private profiles at work. This supposition, however, seems completely wrong. Since humans are much happier now than they were before, who are we to judge whether they have put their time in a valuable way, and should we not include this in the well-being calculation?

ENDLESS JOY

Could the missing value of social media compensate for the apparent slowdown in productivity growth in rich countries? The difficulty, of course, is that we have no idea how much value to put on these free products. We can, however, try to estimate how much people would be willing to pay. Attempts have been made to do this, for example by measuring the amount of time users spend on the internet as a representation of the value attributed to this activity. It was based on the assumption that people could work and earn money during this time. If we take this approach, it turns out that the average annual value of the Internet for a typical American has increased from 3,000 to 3,000. dollars recorded in 2004 to 3.9 thousand. dollars in 2015. If we were to add the missing amount calculated on this basis to the 2015 GDP, we would have an explanation of about a third of the “lost production” of this period, amounting to $ 3 trillion (calculated by comparing it with the hypothetical amount of GDP that would have been achieved had it not been for the year 2004). until it slows down).

There is a problem with this understanding of the consequences of using the Internet, however, because it is based on the assumption that instead of surfing the Internet, people could work longer and earn more money. Meanwhile, this is not true for the majority of full-time employees who, after returning home, must rather find some entertainment (or a springboard from unpleasant reality) for the next few hours each day. If someone spends time on the Internet in this situation, it only means that they enjoy it more than reading books or hanging out with friends or family. For a person who is not particularly social and does not like to read, surfing the Internet does not require sacrifice and is probably worth much less than PLN 3.9 thousand. dollars.

However, there is also a problem of the opposite nature. Imagine someone who can’t live without the internet, who feels a strong urge to spend an hour on Twitter every morning. This first hour is a source of almost infinite joy for him. But when it ends, when all enemies are pinned down, and all the brilliant phrases have been processed and sent on, the second hour is much more bland – so much so that the third is never there. Compare this person to someone who spends two hours reluctantly replying to Facebook posts by half-forgotten friends or people with whom he or she would prefer not to know at all. In the dataset, the two would be equivalent as each user spent two hours using the network. It is obvious, however, that treating them equally may lead to a significant underestimation of the value of the Internet.

Faced with the possibility of severely overestimating or underestimating the value of the internet for consumers, researchers looked for other ways to measure it. In particular, several randomized controlled trials have been carried out on what happens when an experimenter (with the consent of the study participants) for a relatively short period of time blocks a randomly selected group of people from accessing Facebook (or social media in general). The largest of these experiments paid over two thousand users to turn off Facebook for a month, after which it found that people who stopped using Facebook became happier in many ways and, interestingly, were not more bored ( and maybe even less bored). It seems they found a different pastime and spent more time with their friends and family.

After restoring access to Facebook when the experiment was over, people who had not used it for a month were in no rush to return, and after a few weeks they spent 23% less time on the app than before the experiment. Consequently, the estimated amount they would have to receive for refraining from using Facebook in the second month was significantly lower after the end of the first experiment period and experiencing a life without Facebook.

All of this seems perfectly in line with the notion that Facebook is addictive – in the sense that it’s hard to imagine functioning without it, but once you try to part with it, your quality of life doesn’t deteriorate at all. Nevertheless, it is interesting that after a month of abstinence, the participants of the experiment still expected money for abandoning Facebook for another month – they did not feel simple gratitude for getting rid of it from everyday life. The researchers assumed that, in fact, people missed him – albeit less than expected – and concluded that Facebook generated well-being worth $ 2,000. dollars per user.

How do you reconcile this with the fact that being cut off from social media has generally increased people’s happiness? Well, some people just like Facebook a lot, and this fact has escaped in the study – as always when the respondents’ behavior is averaged. Moreover, it is quite likely that the greatest discomfort for a typical participant in the experiment turned out to be the only person in the social group who was cut off from the platform, and the intensity of this annoyance increased as the period of abstinence increased (it is sometimes good to be free from social media but it is costly to abandon them altogether.) This would not be a problem if there were no Facebook.

Where has this gotten us? We don’t have a definite answer. We can only state with some certainty that Facebook is not an obvious boon to all mankind as its followers would like, although people still value it more than the price they pay for it – at least in its current setup where all their friends are on. Facebook, Instagram or Twitter. Could it be that if we were to price these new technologies according to their real value, the growth would be much faster?

Based on the evidence currently available, probably not. As such, we can say with certainty that none of the available evidence supports the promise of a return to the rapid growth measured by GDP that was the experience of a glorious thirty years in Europe and a golden age in the United States.

Excerpt from the book “Good Economics. New Solutions to Global Problems,” by Abhijit V. Banerjee and Esther Duflo, 2019 Nobel Economic Laureates. Agora Publishing House, translated by Michał Lipa.

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