What the internet is good for

Several years ago, a Redditor posed the question: “If someone from the 1950s suddenly appeared today, what would be the most difficult thing to explain to them about life today?” The most upvoted answer? “I possess a device, in my pocket, that is capable of accessing the entirety of information known to man. I use it to look at pictures of cats and get in arguments with strangers.”

The answer itself is a paradox: Its cleverness demonstrates the internet’s potential, while acknowledging how badly we use it.

And we certainly aren’t using it well: the evidence is mounting that our internet usage is making us unhappy; even Facebook acknowledges as much. But how did we get here?

The early worries with email communication were that they’d crowd out richer interactions, like time spent in-person with friends and family. Happily, that didn’t happen, or at least not at first. The more time people spent on email, the more time they spent socializing in person and on the phone. To make time for email, they watched less TV.

The question, then, is how we went from this happy situation where the internet enabled communication and crowded out TV, to one where social media and other forms of screen-time seem to be making us miserable. I don’t have an answer, but I want to offer a few ideas.

The first is that there are, at least, diminishing returns to more communication, and quite possibly a point at which more communication is actually a negative. In this view, email was the key advance in communication technology, and everything else — instant messaging, texting, social media, etc. — has been either only a very marginal improvement or even detrimental. There is some evidence for this view. When you measure how much money people would require to give up a given technology, email is far and away the most valuable among communication tools. Social media and messaging are worth 2-3% as much as email; Facebook is less than 1%. (pg. 21)

This seems consistent with the hypothesis that we simply don’t really benefit from making it easier to communicate with each other, beyond some point. It may be that by the time we had email, we more or less had the big benefits we were going to gain from cheap communication.

Another theory would be that, whereas early internet communications were a substitute for TV but still a very different activity, much of today’s “communication” technologies like social media are more or less a TV equivalent. (In the language of economics, the internet has evolved to be a more-perfect substitute for TV.) In this view, we’re spending more and more time on media, much of it mindlessly entertaining ourselves watching videos and scrolling through photos.

These are just hypotheses. I don’t know that I believe either one of them. But in any case, the Redditor’s point seems right: we don’t really use the internet very wisely. The internet made communication and entertainment cheap, and put endless information at our fingertips. It seems likely that we’ve overdone it on cheap communication and entertainment, and underdone it on instant access to other forms of information. Far and away the most valuable internet service, again as measured in how much money people would require to give it up, is the search engine. It’s more than twice as valuable as email, the next most valued service.

When I think about what the next phase of the internet should look like, the Redditor’s joke serves as a decent guide. We don’t need more ways to argue with strangers nor do we need more cheap entertainment. We have a universe of information at our fingertips. We need more services that use it to make us better off.

Update: I tweaked the section discussing internet as a TV substitute to be a bit clearer.

More on regulation

A few bits on regulation, in one place.

In May of 2017, I wrote:

it seems clear that the net benefits of regulation vary considerably depending on which ones you’re talking about. The Clean Air Act seems to have had large positive effects. On the other hand, overzealous land use regulations that prohibit building have had large negative effects.

In December I wrote about an analysis of regulation and human welfare, by Ed Dolan of Niskanen. Ed shows that the negative correlation between regulation and human welfare evaporates once you start controlling for the obvious things. He wrote a nice piece for us at HBR that I edited on this topic. In it, he summarizes his previous analysis:

I found that quality of government is a statistically significant predictor of GDP and of broader prosperity indexes. At the same time, when I controlled for quality of government, regulatory freedom lost its predictive power. I interpret this to mean that quality of government is the real cause of economic and social prosperity. Regulatory freedom, at least as it is measured by the Heritage and Cato indexes, is not an end in itself. Rather, it is an outcome of good government in the more general sense.

And he offers three sensible rules for thinking about regulation:

  • Retain regulations that support the basic rules of a market economy.

  • Replace regulations that have legitimate aims but also have harmful unintended consequences.

  • Repeal regulations that are motivated primarily by the manipulation of public policy for private gain.

Finally, this EconoFact explainer is a nice, concise case for why regulations can bring significant net benefits to society. Basically, externalities, limited information or ignorance about harms, and unequal power dynamics.

Update: Why the commonly cited numbers on the cost of regulation are not trustworthy.