Economic Impact and Costs of Disinformation

In the broader discussions of countering disinformation, one of the areas that remains relatively unexplored is the economic impact of disinformation. While more research into economic impact is needed, preliminary estimates show that disinformation has already resulted in tens of billions of dollars in economic losses. For additional details, please read on:

The costs of disinformation, both economic and otherwise, have far outweighed the costs required to launch such campaigns. While difficult to quantify, experts have estimated that disinformation activities have resulted in $78 billion in economic damage and $9 billion in health/social costs (without considering lives lost). The lack of available data on costs and impact necessitates that disinformation’s economic effects be more closely examined, and that those costs be included in the broader discussion of combating disinformation. Private sector stakeholders should be encouraged, based on economic effects, to enact policies which counter disinformation actors.

Impact of Disinformation

· In a 2018 report published by the World Economic Forum (WEF), “digital wildfires” (a phenomenon that takes place as a result of deliberate disinformation efforts or fake news, a more colloquial but inexact term) surged from its first tracking in 2013. WEF assessed there would be economic impacts from the phenomenon, but cited difficulty in quantifying or measuring the impact.

· A 2018 examination of stock market activity and fake news found that small firms’ stock prices fluctuated in correlation with the content narrative and dissemination success of fake news. That could pose a vulnerability that can be exploited deliberately for profit via insider trading or other illicit schemes.

· A 2019 report issued jointly between CHEQ (a company specializing in cyber security) and the University of Baltimore calculated the economic impact of fake news at $78 billion based on correlating stock market activity with fake news events.

· Incidents of fake news have caused shocks in stock prices; one incident used a compromised Associated Press Twitter account to claim an explosion had injured Barack Obama, leading to $130 billion loss in stock value. Another incident of falsified press reporting targeted a French construction firm, leading to 19% drop (6 billion Euros) in stock value. An overview in 2019 of how fake news affects businesses showed that in addition to stock price manipulation of small firms and profiteering based on such activity, rumors about small and local businesses could drastically harm those businesses.

· In the field of health, disinformation related to genetically modified organisms (GMOs), often referring to hybridized or altered plants and materials in food products, seemed to gain more attention via the monetization efforts of small groups of pro-conspiracy sites associated with “alternative health” rather than via traditional media outlets. This is indicative of how some disinformation tactics are used for monetization. Additionally, the economic impact from the anti-vaccine movement and the prevalence of people choosing to forego measles vaccination in the United States, for example, has been estimated to be losses of $9 billion annually.

Costs of Disinformation

· A 2005 examination of the disinformation and media coverage regarding climate change found that the oil and gas industry paid just three “skeptics” approximately $1 million in the 1990s. Their ensuing work distorted the coverage of climate change-related news inordinately into the early 2000s, reducing coverage of the issues up to 70% compared to an expected unbiased reporting rate.

· Russian trolls reportedly spent between several hundred thousand dollars to several million dollars overall for the disinformation related to the 2016 US elections. The ensuing United States special counsel’s investigation into Russian meddling cost considerably more. Those Russian disinformation activities likely also had indirect economic impacts that have not yet been calculated.

· Further research from CHEQ estimated that up to $200 million could be spent on disseminating disinformation in relation to the United States presidential and associated elections in 2020.

· Research into measuring the impact of disinformation can be complex due to the number of factors that need to be considered, such as information flow, cost-benefit analysis, and comparison to expectations (based on unbiased information). These research paths have shown that it may be feasible to quantify resource input into disinformation efforts and then correlate those efforts to outcomes.

In addition to research into the economic impacts and costs of disinformation, further examination of the motives of disinformation actors is needed. It is often not clear whether they intend simply to cause harm (possibly also causing unintended economic effects), or if they seek political, financial, or other gain. Some actors, such as those in Russia’s disinformation efforts in the 2016 US presidential election, do not seek tangible gain and are simply out to propagate chaos and derail discourse (though it has been widely reported that they favored the election of one candidate over another as a desired result). Due to the vast array of disinformation campaigns, actors, and motives, a multilateral approach coordinated across a variety of stakeholders will be required. For example, government and private entities could consider how much revenue advertisers or media entities derive from disinformation and then craft policies that those advertisers can enact to combat disinformation dissemination. If disinformation actors are generating revenue and supporting their own activities via advertising networks, removing the revenue stream could be an effective counter. To counter disinformation sponsored by foreign government actors, alternative methods, such as economic pressure and/or sanctions, in conjunction with diplomatic efforts, will likely be required. Disinformation actors have also taken advantage of the low-cost, low barrier-to-entry nature of the information environment. Those same low-cost and diverse technologies could be adapted to incentivize truthful content and fact checking.

This product was created by a team of graduate students from American University’s School of International Service. The work herein reflects the team’s research, analysis, and viewpoints.