Finance and economics

Feb 14th 2019

THERE HAS never been such an agglomeration of humanity as Facebook. Some 2.3bn people, 30% of the world’s population, engage with the network each month. Economists reckon it may yield trillions of dollars’ worth of value for its users. But Facebook is also blamed for all sorts of social horrors: from addiction and bullying to the erosion of fact-based political discourse and the enabling of genocide. New research—and there is more all the time—suggests such accusations are not entirely without merit.

It may be time to consider what life without Facebook would be like.To begin to imagine such a world, suppose that researchers could kick a sample of people off Facebook and observe the results. In fact, several teams of scholars have done just that. In January Hunt Allcott, of New York University, and Luca Braghieri, Sarah Eichmeyer and Matthew Gentzkow, of Stanford University, published results of the largest such experiment yet. They recruited several thousand Facebookers and sorted them into control and treatment groups.

Members of the treatment group were asked to deactivate their Facebook profiles for four weeks in late 2018. The researchers checked up on their volunteers to make sure they stayed off the social network, and then studied what happened to people cast into the digital wilderness.Get our daily newsletterUpgrade your inbox and get our Daily Dispatch and Editor’s Picks.Those booted off enjoyed an additional hour of free time on average.

They tended not to redistribute their liberated minutes to other websites and social networks, but chose instead to watch more television and spend time with friends and family. They consumed much less news, and were thus less aware of events but also less polarised in their views about them than those still on the network. Leaving Facebook boosted self-reported happiness and reduced feelings of depression and anxiety.

It also helped some to break the Facebook habit. Several weeks after the deactivation period, those who had been off Facebook spent 23% less time on it than those who had never left, and 5% of the forced leavers had yet to turn their accounts back on. And the amount of money subjects were willing to accept to shut their accounts for another four weeks was 13% lower after the month off than it had been before. Users, in other words, overestimate how much they value the service: a misperception corrected by a month of abstention. Even so, most are loth to call it quits entirely.

That reluctance would seem to indicate that Facebook, despite its problems, generates lots of value for consumers, which would presumably vanish were the network to disappear.Yet that is not quite clear. Consider the choice faced by the treatment group when the deactivation period is over: to rejoin the network or remain off while the rest continue to like and share. It is possible that a user might not want to go without a service used by 2.3bn others, but also that the world would be better off if the service did not exist at all.How could that be? A social network thrives thanks to increasing returns to scale.

The more people on a network, the more potential connections it facilitates and the larger its value to each user. Such effects helped power Facebook’s rise; founded in 2004, it took off as the share of the population online grew explosively. New netizens naturally gravitated to the social network used by most of their friends and family, which reinforced Facebook’s advantages—in much the same way that a booming city attracts new residents because of the opportunities created by the large pool of people already there.

You could say Facebook is the world’s first digital megacity, thronging with people, enabling huge amounts of human contact, both good and bad.In the life of physical cities, the attraction of being close to others can lead to remarkable durability. Industrial towns sprouted along the Great Lakes in the 19th century because of the advantage of being close to water transport—especially once canals linked the lakes to the Atlantic. Great Lakes shipping is not the economic force it once was, yet millions of people remain in cities like Chicago and Detroit, Cleveland and Buffalo. Interpreting that durability is tricky. Suppose a team of researchers were to approach a few thousand midwesterners and ask them, for the sake of experiment, to spend a month in southern California.

The subjects of the experiment might find the experience surprisingly enjoyable, yet nonetheless return home because of the friends, family and professional contacts who remain in the Midwest. The choice to return could reflect the unique value created by midwestern cities. But it might instead mean that midwesterners are stuck in a bad equilibrium: that well-being would go up if only they could agree, collectively, to decamp to sunnier climes.

Friends, RomansSuch things occur outside idle thought experiments. Guy Michaels, of the London School of Economics, and Ferdinand Rauch, of the University of Oxford, studied the fortunes of Roman-era towns in Britain and France. When the empire foundered, those fortunes diverged; the French political order was less disturbed by the collapse than the British, and more towns continued to function in France than in Britain. As a result, new towns arose more readily in Britain than in France when, in later centuries, the advantages of proximity to navigable water became apparent.

Between 1200 and 1700, populations grew much faster in towns with access to the coast than in those without. Britons benefited from having their urban network “reset”, while the French were stuck liking and sharing the towns their Roman ancestors occupied.Such ruts are hard to spot in real time, and there may well be net value in a Facebook-like network. Were Mark Zuckerberg to turn off his creation, another, similar platform might be propelled to dominance. But the Facebook era could instead be the product of unique, fleeting historical circumstances. In that case, a sunnier social-network ecology might be achievable—if only the citizens of Facebook could be nudged to seek something better.This article appeared in the Finance and economics section of the print edition under the headline “Replacebook”

©2019 Sloane

 

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