A sideways look at economics

Don’t you hate that feeling when you’ve had an amazing two-week holiday in Italy, you get back to London, get given a bunch of new work, the weather is bad, COVID is on the rise and on Wednesday you find out that you are writing this week’s TFIF blog? You all know the feeling; and also the way that, when this happens, your mind flirts rebelliously with TFIF topics like ‘How to avoid writing a TFIF’, ‘The office politics of TFIFs’, ‘The economics of procrastination’ or ‘How to enjoy an Italian holiday’. In the end, I’ve decided to write a movie review instead, of the Netflix documentary, The Social Dilemma. I think it’s the first ever TFIF movie review – you’re welcome. As well as thinking about the film, I’ll discuss some of the issues at hand and consider the economic consequences.

The movie makes some compelling points, highlighting the dangers to society from social media platforms and big tech. It is a documentary, with a dose of fiction. The documentary is done through interviews with current and former tech executives, while the fiction is played by actors, using hypothetical scenarios to illustrate the points, such as teenagers preferring to look at their phones rather than chat at the dinner table. The thrust of the argument is that tech firms deliberately distract us and ‘steal’ our data, and that this indirectly ends up fuelling addiction, promoting fake news and, ultimately, undermining democracy. Noteworthy lines from the film include:

The tools that have been created today are starting to erode the fabric of how society works

These companies trade in human futures like some companies trade in pork belly futures

Never before have 50 designers made decisions that would have an impact on two billion people

Everything [people] do online is being watched, tracked, measured

They know when people are looking at photos of your ex romantic partners

They build models that predict our actions, and whoever has the best model wins

We’ve put deceit and sneakiness at the centre of everything we do.

It is not crackpots that saying these things – it’s current and former executives from blue chip tech firms, and a handful of academics. Of course, the most vocal critics no longer work for the firms in question, and those that are interviewed might not necessarily reflect the average view of those who work in the industry. But some big names such as Sean Parker (former president of Facebook), Roger NcNamee (venture capitalist) and Jaron Lanier (who wrote the book Ten arguments for deleting your social media accounts now) make these points. One of the most interviewed people is Tristan Harris, a former design ethicist at Google, who wrote a memo in 2013 calling for his fellow employees to find ways to reduce the distraction that Google alerts made to people’s lives. Apparently, it was well received at Google initially, but subsequently ignored. He later left and set up an organisation called the Centre for Humane Technology, which is worth a look if you want to reduce your digital footprint.

Ironically, the film doesn’t really promote a nuanced debate around tech (stifling nuanced debate is the very thing it accuses tech of doing), although admittedly that would make for slightly more boring viewing. And to be fair there are some clips of the interviewees singing the praises of tech. Another, in my opinion valid, criticism of the film is that it seems to blame many of the ills of society on tech, which is a bit like blaming the subprime crisis on derivatives. Yes, derivatives were used, but the underlying problem was irresponsible lending and an unsustainable build up in debt, not the derivatives themselves.

That being said, the issues are different here – and with fake news being spread on the tech platforms, it seems right to me that those firms should be forced to regulate and remove this content. More broadly, if those interviewed in the movie are right, what might the economic costs be? I’m not going to attempt to assign a monetary value to them or try to determine the extent to which tech is responsible for them, but it is not hard to see that the economic costs (not to mention social costs) are potentially extremely high. It is worth taking these criticisms of big tech seriously, so I’ll go through them one by one.

Undermining democracy

One of the key points in the film is that the algorithms employed by these companies end up creating echo chambers and, in some cases, actively promoting fake news and false conspiracy theories. Does this undermine democracy? And how much is democracy and freedom worth? The chart below plots the Fathom Political Index (FPI) score with GDP per capita for 140 countries. The FPI is a measure of freedom which incorporates factors such as respect for the rule of law, control of corruption, free speech, accountability and political freedom. There is a clear positive correlation between FPI scores and GDP per capita – in other words, freer countries tend to be richer. Undermining that freedom would be likely to negatively affect economic activity.

Not doing something productive for two hours a day

In the UK, the average salary is about £29k per year. That’s £557 per week, or £16 per hour (assuming a 35-hour week). In these terms, if you spent two hours a day checking social media when you should be working you waste 14 hours per week, which equates to £223. There are 34 million economically active people in the UK’s 63 million population. That’s a lot of time wasted, with a potentially high monetary cost.

The cost of addiction and mental health disorders

Defining who is addicted to their phones and to tech isn’t straightforward. But many of us are addicted, and we know that this is bad – it causes distress, distracts us from doing constructive things (covered in the point above) and costs money to treat. NHS England spends approximately £12 billion per year on treating mental health for the general population.


The Social Dilemma cites figures from the US Centres for Disease Control and Prevention which show that suicides of girls aged 10-14 have increased by 151% since the first decade of this century. Of course, there may be many potential reasons for this, but the increase has occurred at the same time as social media usage has increased. The figures show that suicides in boys have also increased. A separate study, published in The LancetChild & Aolescent Health journal, found that very frequent use of social media is associated with decreased life satisfaction, happiness and increased anxiety in young girls – through a reduction in hours slept, physical activity and being subject to more bullying. The social and economic costs here are obvious.

Promoting things that make us dumb

The average cost of a bachelor’s degree in the United States starts at around $35k – that’s tuition fees, never mind living and other expenses, and prices rise sharply depending on the quality of the school. Education is expensive, for a reason. Un-educating ourselves is costly too.

Cost of people not taking a vaccine

The coronavirus pandemic has come at a huge social and economic cost. Many consider the most effective solution to be the development of a safe vaccine which will allow us to go about our daily lives again without having to socially distance (and thereby reduce economic activity). The promotion of fake news seems to be pushing many people into not wanting to take a vaccine, which could have a huge economic cost. This is a touchy subject – there are some who won’t take a vaccine because they believe in unproven conspiracy theories, while there are others who have legitimate concerns that a COVID vaccine may be pushed through without passing the necessary safety checks, for political or economic reasons. The spread of fake news and undermining of democracy make the task of convincing the population to take a safe COVID vaccine harder.

Looked at from another angle, there are, of course, many great things about social media. Stepping back from this – technology is the answer, not the problem. The problem is the way tech is being used, implemented and controlled in some cases. The issues discussed in the movie should be taken seriously and need to be better understood and properly regulated. Since it’s Friday, I’ll end on a more positive note, and point out some of the benefits of tech and the services that the big tech firms offer.

For starters (and perhaps somewhat controversially), targeted marketing could be good for consumers and producers. It seems better for consumers to be shown ads for things that we might actually want, rather than things that are a complete waste of time. It is only bad for the consumer if the ads make us think we want them, but we don’t actually want them – or if the seller uses price discrimination, leveraging our personal data to charge us more because they know how much we want something. Targeted marketing is better for sellers too – tech (and use of our personal data) provides a more efficient matching service between buyers and sellers. It improves the marketplace.

Social networks increase happiness by allowing us to reunite with long-lost friends, and reduce loneliness by helping us to stay in touch with friends and family on the other side of the world. They have also facilitated great things like helping people who need organs find donors. Online maps and emails are very useful. We also have information and things like encyclopaedias at our finger tips. The bants on Twitter is insane. The point with tech is that we need to use it better – use the good things and cut out the bad things. Time to put down the phone and watch the movie.