The Information Market

Capitalism’s Takeover of the Final Good

“What is the goal of economics?” My Principles of Microeconomics professor, a lithe figure with bright blue eyes and an air of academia, asked on the first day of class my freshman year. No one answered, of course.

“It’s the study of resource allocation,” he began, “and thus the goal of economics is to allocate resources to their highest-valued use.” As he finished, he scanned the room expectantly, hoping his words might resonate with some, rather than simply echoing off the walls and ending up scrawled hastily at the top of a page after a colon attached to a heading that read: “The Goal Of Economics.” A few people shuffled nervously in their seats. Someone else coughed.

Resource allocation doesn’t sound flashy, but as long as our society’s success exists as a function of our ability to allocate resources to their highest valued use, the science of economics will maintain its place at the table of vital disciplines. One of the seminal principles put forth by economics — the idea that efficient resource allocation should guide government policy making — came to guide my thinking over the next four years. Studying economics gave me a new lens through which to see the world, and I came to understand that markets — not the ones you walk into to buy groceries, but rather the ones that define how our society trades and transacts — are the most effective way to realize the goal of economics, and optimally distribute the scarce resources that exist in every realm of life — everything from food, to water, to seats at a bar in Chicago’s Wrigleyville for game 7 of the World Series.

Cubs fans “queue up” at 5:30am outside bars in Wrigleyville before game 3 (article here)

Upon first learning about the market mechanism, I was astounded by the simplicity of supply and demand. The theoretical outcome of a perfect market is that society will operate at the point where supply and demand equate. Thus, every transaction that should happen, will happen, and both buyers and sellers will maximize their welfare. This renders everyone better off than they would’ve been without the transaction. The beauty of the market mechanism rests not on the assumption that supply and demand will always equate, but on the market’s ability to self-correct; it does not require a government or central planner to work. For instance, if more people want coffee mugs, and the supply of coffee mugs is fixed in the short run, their price will rise. The higher price signals to other potential suppliers that it is now more valuable than it was previously to sell coffee mugs, so they begin to do so, and briefly reap the profits before supply increases in proportion to demand (as more suppliers enter the market to capture profits), and the price settles back near or at its original level. (This is Uber’s surge pricing model, in a nutshell.)

Upon learning the basics of the market mechanism, I not only began to see it everywhere, I began to appreciate its effectiveness in a way I never had before. I felt enlightened; elevated, almost, as if the world’s problems were nothing more than questions that economics had yet to answer. But of course, as I came to understand the beauty of the market mechanism, I also began to see beyond its theoretical perfection. Markets have a dark side. Never has that side been more obvious than it is today.

To anyone who has lived, or is living in a world characterized by scarcity, the idea of questioning markets is absurd. Societies post-agricultural revolution were plagued by famine, drought, and other scarcity-based issues, and thus adopted solutions that minimized the inherent friction generated by the effort to connect people with the resources they needed to survive — enter: markets.

A perfect market ensures that every person is connected with exactly the resources they need at every moment — hence, no truly perfect market exists. Even in the best ones, there will still be goods that go unsold and unused, and consumers that leave unsatisfied and unfulfilled. A good argument can be made (and has been — here) that apps like Uber are as close as we have come to creating a perfect market. Of course, surge prices will turn some people away from taking rides, and questionable corporate practices have led many to boycott the service, but I have spoken with few who believe the world is worse off because Uber exists. Even those who disagree with its business model and corporate practices are hard-pressed to argue that the service is anything less than incredibly convenient. Uber’s service is hard to critique — there is no real argument to be made against the efficacy of connecting people with transportation faster and more efficiently than ever before, except maybe that it puts many cab drivers out of jobs. (On the whole, I would still argue that it’s worth it.) Their service decreases wait times for rides, limits drunk driving, eases congestion in large cities, and decreases environmental degradation.

As any economist will tell you, economics is about resource allocation, but that alone is not enough to explain it. The entire reason the discipline exists is simple: resources are scarce. Uber’s success is predicated on their ability to allocate scarce resources — rides — better than any other company. If rides were abundant, Uber would have no place, and neither would economics in determining how to allocate them. Granted, there are aspects to the discipline that would remain important in a world of abundance, but only because in a world of abundance, new types of scarcities emerge. In the days of information scarcity, people relied on newspapers and television outlets for news. You could choose which paper to read, or what channel to watch, but the differences between each were trivial compared to the differences between the content available on the internet today. The arrival of the internet broadened the spectrum of beliefs available for consumption by multitudes, and took us from a world of information scarcity to information abundance almost overnight. Web-based platforms like Google and Facebook now exist to address the new scarcity in a world of information abundance: information curation. This curation is what creates the market for information that exists on Facebook.

Facebook’s information market is driven by users “paying” for free access to Facebook through the sale of their personal data. Users do not pay for any ad-driven online platform (Facebook, Google, Twitter, Yelp, etc.) in the traditional sense — rather they voluntarily surrender their personal to data to these platforms so that it can be resold to businesses who utilize it to inform their marketing strategies. This system is summarized by the quote: “If a service is free, you’re the product.” Thus, the way users gain access to Facebook — by “selling” their data to advertisers — does resemble, albeit loosely, a traditional market. In the end, though, what users are paying for is not access to resources that are scarce, what they are paying for (through the “sale” of their personal data) is access, per Facebook’s algorithm, to a curated feed — a fraction — of the content abundance that is Facebook. This insight is key to understand in the modern world: markets — in more ways than ever before — exist now less to allocate resources, assuming scarcity, but rather to hierarchically organize and then distribute resources, assuming abundance.

Newspapers and television stations were, admittedly, curation mechanisms in their own right, but they were constrained by a lack of knowledge about their users, and thus they were unable to customize content for each user in the same way that Facebook can. This meant that their utility as an advertising avenue was deeply limited. It also meant that when Facebook came along, the fall of newspapers and television stations as premium advertising avenues was not far behind.¹ Newspapers and magazines were also responsible for producing and curating their own content, but that content had less to do with what the public wanted to see than what the newspaper or television station felt obligated, as an organization in charge of responsibly disseminating the state of the world, to present.² Facebook, meanwhile, relies upon an abundant stream of content coming from their nearly two billion users, and its effectiveness rests in its ability to present customized portions of that content to each one of its users. It is for this reason that journalists and broadcasters alike have come to label this time in history as the “post-truth” era, one in which people are entitled to not only their own opinions, but their own facts. (That, and the tendencies of the man standing at the helm of our country.)

So how is content to survive in a post-truth world wrought with information abundance? Ideally, accuracy and presentation quality would be the main two factors affecting consumption of information, but if there’s one thing television (and the advertising explosion that came along with it) has taught us, sensationalism outperforms accuracy eight days a week. If you don’t believe me, watch almost any Super Bowl ad, ever. (Though 2017’s Super Bowl ads were noticeably more tame — great take on that here.) As Neil Postman, the late author of “Amusing Ourselves to Death: Public Discourse in the Age of Show Business”, puts it, “The television commercial is not at all about the character of products to be consumed. It is about the character of the consumers of products.” The content that we are forced to take in every day — we, those consumers that Postman refers to — is louder, more absurd, and more distracting than ever before, because that’s how it has to be to stand out from the crowd. Everything that isn’t sensational enough, then, is simply noise that serves to passively engage our eyes and our ears as we sit and watch, our brains turned off, waiting for the next sensationalist message to pop up on the TV, or on our phones, and capture our attention for a moment before disappearing, the only evidence it was ever there a slight decrease in our attention spans, and a slight increase in our collective ability to remain unmoved by what we just watched. The next thing that comes along had better be louder, more distracting, and more sensational, or it, too, will get lost in the noise.

Ever felt this way?

Markets, by their nature, fulfill needs. But given how much larger the entire pie of resources available to humanity has become over the past several hundred years, the market mechanism is now better described as one that fulfills wants. Hundreds of years ago, fearing starvation was rational. Now, humans are far more likely to die of obesity-related causes than starvation. This shows the power of markets, but also their inherent danger — they give us what we need in the beginning, but over time, they begin to give us what we want, too. Unchecked, this can get ugly — and it has.

Unlimited access to things that cannot even be labeled as “resources”, such as unhealthy food and drink, mindless online content (“tag someone you know” comes to mind), and television have altered the way society functions. Obesity is the most prominent health issue facing a populace that less than a century ago was facing food shortages.³ The amount of people experiencing an inability to pay attention for extended periods of time — myself included — is so vast that an entire industry has sprung up with the goal of returning us to a state in which our attention spans are longer than the length of whatever sensationalist clip just popped up on our newsfeed. As a collective, we are losing our ability to discern good from bad; to discern logic from emotion; to discern truth from noise. Our attention, continually under assault by ever more sensationalist propaganda, flits from place to place, from product to product, never settling on anything because the world we were raised in trained us to consume as much content as we could for as long as we could, with no concern for the consequences of doing so. Unlike food, or water, both of which we can handle only a finite amount of, content is physically weightless. So how much of it can we consume? Do we even want to know?

This need to consume has led us into a world in which we crave constant entertainment, and it is for this reason that a candidate like Donald Trump was able to command such attention in this year’s election cycle.⁴ Reading one of Trump speeches is like reading a monologue written by an 8-year-old. Watching him, however, is either invigorating or revolting, depending on who you are and what you believe. Few, if any, are indifferent while watching Trump speak, because it is impossible not to have an opinion on what comes out of his mouth. And yet, no one hangs their hat on Donald Trump’s rhetoric, rather they trust in his ability to captivate and entertain. Political analysts have offered up the explanation that Trump was elected because for the first time in a long time, he gave a voice to a long-forgotten and oft-ignored subgroup of the American populace. There must be some truth to this, but the overarching truth is far simpler: in our entertainment-based world, Trump commanded attention better than almost any politician, ever. If Lincoln was the literary masterpiece of presidential candidates, Trump was the television — entertaining, easily digestible, and accessible — and more importantly, relatable — to those whose votes he needed. Had he run two hundred years ago, his incoherence and utter contempt for fact-based argument would have been his downfall. Today, however, those same traits fed into his capacity to captivate and entertain audiences whose trust he earned, and whose votes he won.

The theory of competitive markets is that the best products emerge as the industry leaders, and thus in the long run, consumers are exposed to the highest quality goods. As I’ve said before, this need not worry us with regard to things like transportation, fashion, athletics, or most other consumer-facing industries, because believing that one good or brand is superior to another will not, in most cases, eliminate that person’s ability to engage meaningfully with someone who disagrees.

Apple rocks.

The “ideas” being sold in the information market — in the form of content — have subjective value, like any consumer good. An article that agrees with someone’s preexisting belief will tend to afford them subjective value, while an article that doesn’t, won’t. (Unless, of course, you are in the minority of people who derive value from dissenting opinions — 👏👏, if so.) This isn’t in and of itself a problem, but it becomes one when two people with differing ideas confront one another, which happens all the time on social media, given that people are far more willing to engage in faceless conflict than face-to-face. As a market for information, Facebook provides people with the most powerful source of confirmation bias in history — a market whose sole purpose is to deliver self-affirming content — and then offers itself as a platform where faceless discourse devolves quickly into shouting matches where no one is held accountable for their words, because they’re speaking on the internet, instead of in person. If it were possible for all of modern society to adopt the same worldview, then these problems would eventually dissipate, but it isn’t, and historically, we are more likely to find harmony by acknowledging difference than by ignoring it. Thus, continuing to utilize tools that promote polarization through insulating users from dissenting opinions is something we should attempt to curtail.

Harmony through the acknowledgement of difference. Leave it to Eataly to get it right.

The information market has the capability to be far more dangerous than a market for food, or for transportation, because like how a supermarket allows us to pick and choose what we want to eat, an information market allows us to pick and choose what we want to believe. There is no inherent truth to food — it all does the same thing, albeit in different capacities. More importantly, wars are not started over a disagreement on whether a Ribeye is or is not objectively better than a Filet, and the worst that happens if someone consumes too many of the former — or the latter — is that they gain some weight. This doesn’t affect anyone else, though — just them. Same with transportation — people want a ride somewhere, and as long as they get it and the service is above average, both parties are satisfied, and no externality emerges from the interaction. There is, however, truth — and weight — to information. The rich history of Islam offers a potent metaphor. Following the prophet Muhammad’s death in 632, the Shia claimed that one of their own — Ali — was the rightful successor to the Prophet Muhammad. Ali never obtained this status, however, and is believed to have been assassinated by Sunnis, as were his sons, Hassan and Hussein. These deaths came about because of disagreements over who was Muhammad’s true heir, and have led to hundreds of years of religious conflict in the Middle East. The information market is not religion, but the principle holds: when you’re completely convinced of your world view due to the echo chamber of either religion or Facebook, and you meet someone who disagrees, bad things happen.

Markets are now taking over the distribution of information, and given how they work, and how people behave, the information market is one that promotes two things: polarization and sensationalism. People tend to value information that attracts their attention and agrees with their beliefs, and thus social media sites that master building confirmation bias into their algorithms will maximize their own benefit, and profits. Similarly, given the abundance of media that exists in the world, the content that captures attention will be not only agreeable, but sensationalist — how else is content of any sort to survive in a world of abundance other than by finding ever more absurd ways of attracting consumer attention?

If our goal as a society is to be well-informed, instead of comforted; curious, instead of satiated; knowledgeable, instead of entertained, then we must question this system, reexamine how media is framed, distributed, and consumed, and maintain vigilance at every turn as the content thrown at us devolves from objective truth to warped sensationalism. The first step is understanding why markets — effective means of resource allocation in almost every other industry — are incredibly dangerous when applied to information.

On the whole, markets are an undeniable good. They promote general welfare, increase quality of services, and afford the maximum amount of people access to services and goods that they both want and need. A market for information, however, when offered on a silver platter to a society that is already struggling with massive political polarization and a lack of general empathy for differing beliefs, is nothing less and nothing more than gasoline on a flame. If we continue to pour it, the fires of polarization and sensationalism will continue to burn.

Acknowledgements: Thank you to Olivia Desilva, David Perell, Tyler Kimble, and Desmond Dahlberg for their time and feedback. Y’all killed it. Also props to Tim Hwang for this brilliant piece that I came across only days before publishing this. Also, this — and if you don’t want to read that, check out this extension that automatically inserts contrarian news into your Facebook feed (though you have to choose between “democrat” and “republican” news).


¹ By “premium” I mean “targeted”. Newspaper and television ads still capture a massive amount of the advertising dollars spent every year in the United States, and remain incredibly valuable in a variety of different industries, but their ads are nowhere near as targeted as Facebook’s, or Google’s.

² There are plenty of publications that contradict this “responsible dissemination” principle. Tabloids are an example. So too were early newspapers, specifically The New York Sun, which in 1835 ran an article claiming that a scientist named Sir John Herschel had invented a new telescope, and through that telescope had witnessed beings on the moon that he described as ‘…four feet in height…covered, except on the face, with short and glossy copper-coloured hair, [with] wings composed of a thin membrane, without hair, lying snugly upon their backs.’ This content was undoubtedly meant to attract nothing more than attention, and it did so in fantastical way — after the piece’s initial circulation and the publication’s subsequent explosion in popularity, The New York Sun because the most widely-read newspaper in the world. (At the time, this meant a circulation of around 19,360!). But no tabloid, nor paper that spoke of mystical beings on the moon, has ever had even close to the same reach, or ability to tailor its own content to its users’ desires, as Facebook.

³ Speaking generally of the United States.

⁴ I say “need” to consume because in many cases I don’t believe it’s a true desire, but rather an addiction. Addicts often know they need to stop consuming whatever it is they’re addicted to, but they can’t. This same feeling plagues me at times, as well as people I know.

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