by Péter Isztin — Co-founder at Ixy Labs
Ixy Labs produces articles, videos and a podcast investigating the future of private life, and is an independent offshoot of the Ixy app.
The Price of Things
Have you ever wondered how bread, milk, fruits and other goods arrive to the shelves of a supermarket and ultimately at your table? How do producers and merchants know what the consumers want at each moment of time?
The seemingly magical result is made possible by the price system, a mechanism that the economist Friedrich Hayek called the greatest invention of our civilisation.
How do prices achieve efficiency? When demand for a good increases, its price increases and that ‘signals’ to producers that more is needed to be produced of it, and at the same time provides them with an incentive to produce more. Likewise, if the cost of production of something increases, its price will increase to reflect this change, providing a signal and giving an incentive to consumers to economise on that good.
Prices are, as Tyler Cowen and Alex Tabarrok call them, signals wrapped up in an incentive.
Today, we also participate in another kind of “economy” in our everyday life.
Almost all of us are, to some extent, involved in the world of social media — both as a consumer and as a producer of content.
In the online market economy called “social media” many things — most of all, popularity — are not allocated through the price system. Instead we rely on other signals: likes, retweets, comments…
Do these signals approximate the efficiency of the price system? Or if they do not, do they at least make our lives, online and offline, better?
An Infinite Amount of Likes
How often do you ask yourself: What is your “like policy”? Why is it that we like some content and not some other content? Do we like popular content or do we really reward good content with our likes?
Microeconomic theory causes us to be somewhat skeptical about the efficiency of the like system. Content on social media is, in economists’ word, nonexcludable. Obviously, if I post something on Twitter and Facebook, everyone can enjoy it to the same degree whether or not they will like, share or retweet it.
(This is not the situation in the case of most ordinary goods! If I want to eat a sandwich, I have to pay for it, otherwise I don’t receive it.)
There is, however, a solution to this problem. Sure, my individual like won’t affect the incentives of many people on social media but I might still like good content because liking is practically free.
Once we solve the free-riding, however, another problem arises: likes and retweets provide us with incentives to post what people within our social media circle value but maybe it is not always a wise thing to do.
We don’t treat political preferences the same way as we treat our preferences for private goods: we value discussions and persuasion.
Simply giving others reinforcement may provide a private benefit for people, but there would be social benefits from exposing them to different views — as this would likely be inconvenient for them, they would be unlikely to “like” it, yet this would prove better from society’s point of view.
The “Like Crime”
We express our liking with like buttons, retweets and praises. However, we also have means to signal our disapproval and punish “wrongdoers” on social media.
While there is no “dislike button” on Twitter and Facebook, we all know too well that twitter ‘mobs’ are easily formed: and in my view: way too easily.
The reason is that just like giving out likes, joining a social media mob is a low-cost activity.
You can easily become part of a “punishment squad” simply by retweeting or posting disparaging comments.
Punishing individuals for expressing “wrong” opinions is thus almost costless and, furthermore, it confers benefits to the punisher: it may make them feel morally justified and/or enable them to signal allegiance to their social group by engaging in the social media mob.
When punishment is privately beneficial and near costless, it is likely excessive.
At the same time, self-defence against an internet mob is costly. Even if you admit your “crime” and apologise, you might make things worse by apologising the wrong way. There is always a way to make the punishment even harsher.
If you are a social media user in such an environment, there is not only the risk of writing something “criminal”. You may commit a “crime” simply by liking someone else’s tweet, post or comment!
You are, however, safe to like controversial statements that express the viewpoints of your internet “tribe”.
This feature of the like system provides incentives to social media content producers to write tweets and posts that please their own crowd, and avoid expressing original thoughts that might be controversial among in-group members.
How to Make the Like System Better
As we have seen, the like (and retweet, repost etc.) system is not nearly as efficient as the price system in an economy. Still, there are methods borrowed from economics to make it better.
After all, the like system consists of our signals, and we can all improve on the margin in our online behaviour. How? Let’s look at a few simple rules…
1) If many people in your social network have already posted an article or post, don’t always follow suit.
Yes, sometimes “virtue-signalling” is necessary, but most often than not it is self-serving and will not provide much useful information for others. Instead of mimicking you peers, try to post something most of your friends do not already know.
2) If you’re bold enough, post something controversial. Help to start a debate!
It might be risky to your social reputation in the short run, but you can be controversial in a non-threatening way if you simply ask questions, point out contradictions, seek out new books, thinkers, podcasts to recommend to your friends.
3) If one of your friends posts something new, original and/or controversial, if it makes you learn something new, do not hesitate to like or retweet it!
Simply put, this is the way to make the like system better. If enough people do it, likes will encourage more novelty and intellectual risk-taking.
This way, instead of joining a “circle-jerk”, you can gently offer opportunities to everyone to engage in new ideas. If done right, this could result in a Pareto improvement, at least in the long run.
