Tim Worstall looks at the calls to regulate the big tech firms and points out that we already get a very good deal on “free stuff” that isn’t reflected in standard economic statistics:
It won’t have escaped your attention that rather large numbers of people are calling for the regulation of the tech companies. The Amazon, Google, Facebook (Apple and Microsoft often added, just because they’re large) nexus have lots of power over markets and thus therefore – well, therefore something. My own prejudice here is that certain people just cannot look at centres of power and or money without insisting that they, the complainers, should be the ones exercising that power and determining the disposition of that money. Thus much of the drive for “democratic” regulation of the economy more generally, the self proclaimed democrats being the ones who would end up with the power. The advantage of this analysis being that it does describe reality, the same people do end up making the same arguments about different companies over time. Mere prominence brings the demand for control.
The economist on this subject is Jean Tirole. His Nobel was for exploring this very subject, tech companies and the two sided market. Google, for example, sells the search engine to us and us to the advertisers. The tech here is different, obviously, but the underlying economics is the same as that of the free newspaper.
Tirole’s a new book out and there are a number of interesting points to be had from it:
Yes, on the whole consumers tend to get a good deal, because we use wonderful services — like Google’s search engine, Gmail, YouTube, and Waze — for free. To be certain, we are not paid for the valuable data we provide to the platforms, as for example Eric Posner and Glen Weyl remind us in their recent book Radical Markets. But on the whole, our living standards have substantially improved thanks to the digital revolution.
From which we can extract a few points. We’re richer, we really are. Substantially richer and yet in a manner that normal economic statistics entirely fail to capture. As Hal Varian has pointed out, GDP doesn’t deal well with free. Near all of those benefits of the digital revolution are coming to us for free and so aren’t recorded in that GDP. So, we’re richer yet the numbers say we’re not. In that is much of the explanation of slow economic growth these days, even of slow real wage growth. We’re just not counting what is happening to our living standards.
But we can and should go further than that. If the above is true then we’re very much less unequal than we’re recording. Stuff that’s free is, obviously enough, distributed rather more evenly among the population than extant monetary incomes. You, me and Bill Gates all have access to exactly the same amount of Facebook at the same price. We’re entirely equal in that sense. Bill’s actually poorer concerning search engines, stuck for emotional reasons with Bing as he is while we get to use Google or DuckDuckGo. Our standard measures of inequality are wrong both because of the undermeasurement of new wealth and also the extremely equitable pattern of the distribution of that new wealth.
