There are silly ideas, left wing ideas and then some so insane that only the truly gaga can possibly believe. Like this one from Ezra Klein – Facebook is a problem of capitalism. Or perhaps of free market competition – Ezra does the usual trick of confusing the two. Proof that we should never be taking Klein’s suggestions for how to run the world seriously.
Facebook is a capitalism problem, not a Mark Zuckerberg problem
Given that Ezra edits the place yes, he is responsible for that headline.
But Hughes’s confidence in the healing power of competition is misplaced. Capitalism created our Facebook problem. It’s not going to fix it.
What damn problem with Facebook? The company’s this generation’s shining example of why the system works. How it is that we – yea even statist technocrats – are the richest peoples to have ever bestrode Gaia?
Facebook is a problem created by capitalism, not Mark Zuckerberg. If it wasn’t Zuckerberg running the largest network, it would be someone else, and that person might well be worse. Hughes’s op-ed is offering a solution to the Mark Zuckerberg problem when what we need is a solution to the capitalism problem.
What damn problem?
The aim and purpose of our having an economy is so that value is created, produced. For it is only value that has been produced that can be consumed. And we’re really pretty sure that human beings like consuming value. So, how much value does Facebook produce?
Fig 2 shows that the annual extrapolation for the one-week bid mirrors the findings from Auction 2 (Student sample; $2,076) and Auction 3 (MTurk sample; $1,921). The bid amount for the community sample in Auction 2 was relatively low. This could be a function of multiple factors. The community sample was considerably different in terms of socioeconomic make-up from the two homogenous student samples, yet not as representative as the MTurk sample. Nonetheless, across all three samples, the mean bid to deactivate Facebook for a year exceeded $1,000. Even the most conservative of these mean WTA estimates, if applied to Facebook’s 214 million U.S. users, suggests an annual value of over $240 billion to users.
As noted previously, Facebook reached a market capitalization of $542 billion in May 2018 . At 2.20 billion active users in March 2018 , this suggests a value to investors of almost $250 per user, which is less than one fourth of the annual value of Facebook access from any of our samples. This reinforces the idea that the vast majority of benefits of new inventions go not to the inventors but to the users . Further, our results provide evidence that online services can provide tremendous value to society even if their contribution to GDP is minimal. If the billions of people who use Facebook and other free online services derive anything close to $1000 per year in benefits, the productivity slowdown cited by Solow and others may not be reflected in a slowdown in the growth rate of welfare measures like consumer surplus. Many observers have commented on the difficulties of measuring productivity growth in great technological change . While our current study does not offer a solution that can be broadly applied to address this challenge, it does present a methodology and results that provide important insight into the scale of the issue when considering the online revolution of our current era.
Concerns about data privacy, such as Cambridge Analytica’s alleged problematic handling of users’ private information, which are thought to have been used to influence the 2016 United States presidential election, only underscore the value Facebook’s users must derive from the service. Despite the parade of negative publicity surrounding the Cambridge Analytica revelations in mid-March 2018, Facebook added 70 million users between the end of 2017 and March 31, 2018 . This implies the value users derive from the social network more than offsets the privacy concerns.
We need to do a couple more things to these numbers. Firstly, Facebook’s user base is actually some 10 times that US user base. So, multiply that value by 10, giving us $2.5 trillion a year in value to consumers.
Then we need to note that the valuation of Facebook itself is a capitalisation of the annual revenue flow. It’s the wealth valuation of the income if you like. We should perform a similar calculation for that consumer surplus – what is the increase in wealth, not income that is. Leave aside Facebook’s actual earnings multiple and use a more general market one, say 20 times annual income as a capitalised value.
Facebook produces for consumers $50 trillion of capitalised value. Consumers get this value for free, entirely buckshee. This system brought to you by capitalist free marketry. Ezra Klein describes this as a problem with capitalist free marketry.
Why the hell is Ezra Klein editing something instead of being sectioned?