Is privacy dead?

May 9 JDN 2459342

It is the year 2021, and while we don’t yet have flying cars or human-level artificial intelligence, our society is in many ways quite similar to what cyberpunk fiction predicted it would be. We are constantly connected to the Internet, even linking devices in our homes to the Web when that is largely pointless or actively dangerous. Oligopolies of fewer and fewer multinational corporations that are more and more powerful have taken over most of our markets, from mass media to computer operating systems, from finance to retail.

One of the many dire predictions of cyberpunk fiction is that constant Internet connectivity will effectively destroy privacy. There is reason to think that this is in fact happening: We have televisions that listen to our conversations, webcams that can be hacked, sometimes invisibly, and the operating system that runs the majority of personal and business computers is built around constantly tracking its users.

The concentration of oligopoly power and the decline of privacy are not unconnected. It’s the oligopoly power of corporations like Microsoft and Google and Facebook that allows them to present us with absurdly long and virtually unreadable license agreements as an ultimatum: “Sign away your rights, or else you can’t use our product. And remember, we’re the only ones who make this product and it’s increasingly necessary for your basic functioning in society!” This is of course exactly as cyberpunk fiction warned us it would be.

Giving up our private information to a handful of powerful corporations would be bad enough if that information were securely held only by them. But it isn’t. There have been dozens of major data breaches of major corporations, and there will surely be many more. In an average year, several billion data records are exposed through data breaches. Each person produces many data records, so it’s difficult to say exactly how many people have had their data stolen; but it isn’t implausible to say that if you are highly active on the Internet, at least some of your data has been stolen in one breach or another. Corporations have strong incentives to collect and use your data—data brokerage is a hundred-billion-dollar industry—but very weak incentives to protect it from prying eyes. The FTC does impose fines for negligence in the event of a major data breach, but as usual the scale of the fines simply doesn’t match the scale of the corporations responsible. $575 million sounds like a lot of money, but for a corporation with $28 billion in assets it’s a slap on the wrist. It would be equivalent to fining me about $500 (about what I’d get for driving without a passenger in the carpool lane). Yeah, I’d feel that; it would be unpleasant and inconvenient. But it’s certainly not going to change my life. And typically these fines only impact shareholders, and don’t even pass through to the people who made the decisions: The man who was CEO of Equifax when it suffered its catastrophic data breach retired with a $90 million pension.

While most people seem either blissfully unaware or fatalistically resigned to its inevitability, a few people have praised the trend of reduced privacy, usually by claiming that it will result in increased transparency. Yet, ironically, a world with less privacy can actually mean a world with less transparency as well: When you don’t know what information you reveal will be stolen and misused, you will constantly endeavor to protect all your information, even things that you would normally not hesitate to reveal. When even your face and name can be used to track you, you’ll be more hesitant to reveal them. Cyberpunk fiction predicted this too: Most characters in cyberpunk stories are known by their hacker handles, not their real given names.

There is some good news, however. People are finally beginning to notice that they have been pressured into giving away their privacy rights, and demanding to get them back. The United Nations has recently passed resolutions defending digital privacy, governments have taken action against the worst privacy violations with increasing frequency, courts are ruling in favor of stricter protections, think tanks are demanding stricter regulations, and even corporate policies are beginning to change. While the major corporations all want to take your data, there are now many smaller businesses and nonprofit organizations that will sell you tools to help protect it.

This does not mean we can be complacent: The war is far from won. But it does mean that there is some hope left; we don’t simply have to surrender and accept a world where anyone with enough money can know whatever they want about anyone else. We don’t need to accept what the CEO of Sun Microsystems infamously said: “You have zero privacy anyway. Get over it.”

I think the best answer to the decline of privacy is to address the underlying incentives that make it so lucrative. Why is data brokering such a profitable industry? Because ad targeting is such a profitable industry. So profitable, indeed, that huge corporations like Facebook and Google make almost all of their money that way, and the useful services they provide to users are offered for free simply as an enticement to get them to look at more targeted advertising.

Selling advertising is hardly new—we’ve been doing it for literally millennia, as Roman gladiators were often paid to hawk products. It has been the primary source of revenue for most forms of media, from newspapers to radio stations to TV networks, since those media have existed. What has changed is that ad targeting is now a lucrative business: In the 1850s, that newspaper being sold by barking boys on the street likely had ads in it, but they were the same ads for every single reader. Now when you log in to CNN.com or nytimes.com, the ads on that page are specific only to you, based on any information that these media giants have been able to glean from your past Internet activity. If you do try to protect your online privacy with various tools, a quick-and-dirty way to check if it’s working is to see if websites give you ads for things you know you’d never buy.

In fact, I consider it a very welcome recent development that video streaming is finally a way to watch TV shows by actually paying for them instead of having someone else pay for the right to shove ads in my face. I can’t remember the last time I heard a TV ad jingle, and I’m very happy about that fact. Having to spend 15 minutes of each hour of watching TV to watch commercials may not seem so bad—in fact, many people may feel that they’d rather do that than pay the money to avoid it. But think about it this way: If it weren’t worth at least that much to the corporations buying those ads, they wouldn’t do it. And if a corporation expects to get $X from you that you wouldn’t have otherwise paid, that means they’re getting you to spend that much that you otherwise wouldn’t have—meaning that they’re getting you to buy something you didn’t need. Perhaps it’s better after all to spend that $X on getting entertainment that doesn’t try to get you to buy things you don’t need.

Indeed, I think there is an opportunity to restructure the whole Internet this way. What we need is a software company—maybe a nonprofit organization, maybe a for-profit business—that is set up to let us make micropayments for online content in lieu of having our data collected or being force-fed advertising.

How big would these payments need to be? Well, Facebook has about 2.8 billion users and takes in revenue of about $80 billion per year, so the average user would have to pay about $29 a year for the use of Facebook, Instagram, and WhatsApp. That’s about $2.50 per month, or $0.08 per day.

The New York Times is already losing its ad-supported business model; less than $400 million of its $1.8 billion revenue last year was from ads, the rest being primarily from subscriptions. But smaller media outlets have a much harder time gaining subscribers; often people just want to read a single article and aren’t willing to pay for a whole month or year of the periodical. If we could somehow charge for individual articles, how much would we have to charge? Well, a typical webpage has an ad clickthrough rate of 1%, while a typical cost-per-click rate is about $0.60, so ads on the average webpage makes its owners a whopping $0.006. That’s not even a single cent. So if this new micropayment system allowed you to pay one cent to read an article without the annoyance of ads or the pressure to buy something you don’t need, would you pay it? I would. In fact, I’d pay five cents. They could quintuple their revenue!

The main problem is that we currently don’t have an efficient way to make payments that small. Processing a credit card transaction typically costs at least $0.05, so a five-cent transaction would yield literally zero revenue for the website. I’d have to pay ten cents to give the website five, and I admit I might not always want to do that—I’d also definitely be uncomfortable with half the money going to credit card companies.

So what’s needed is software to bundle the payments at each end: In a single credit card transaction, you add say $20 of tokens to an account. Each token might be worth $0.01, or even less if we want. These tokens can then be spent at participating websites to pay for access. The websites can then collect all the tokens they’ve received over say a month, bundle them together, and sell them back to the company that originally sold them to you, for slightly less than what you paid for them. These bundled transactions could actually be quite large in many cases—thousands or millions of dollars—and thus processing fees would be a very small fraction. For smaller sites there could be a minimum amount of tokens they must collect—perhaps also $20 or so—before they can sell them back. Note that if you’ve bought $20 in tokens and you are paying $0.05 per view, you can read 400 articles before you run out of tokens and have to buy more. And they don’t all have to be from the same source, as they would with a traditional subscription; you can read articles from any outlet that participates in the token system.

There are a number of technical issues to be resolved here: How to keep the tokens secure, how to guarantee that once a user purchases access to an article they will continue to have access to it, ideally even if they clear their cache, delete all cookies, or login from another computer. I can’t literally set up this website today, and even if I could, I don’t know how I’d attract a critical mass of both users and participating websites (it’s a major network externality problem). But it seems well within the purview of what the tech industry has done in the past—indeed, it’s quite comparable to the impressive (and unsettling) infrastructure that has been laid down to support ad-targeting and data brokerage.

How would such a system help protect privacy? If micropayments for content became the dominant model of funding online content, most people wouldn’t spend much time looking at online ads, and ad targeting would be much less profitable. Data brokerage, in turn, would become less lucrative, because there would be fewer ways to use that data to make profits. With the incentives to take our data thus reduced, it would be easier to enforce regulations protecting our privacy. Those fines might actually be enough to make it no longer worth the while to take sensitive data, and corporations might stop pressuring people to give it up.

No, privacy isn’t dead. But it’s dying. If we want to save it, we have a lot of work to do.

The fable of the billionaires

May 31 JDN 2458999

There are great many distortions in real-world markets that cause them to deviate from the ideal of perfectly competitive free markets, and economists rightfully spend much of their time locating, analyzing, and mitigating such distortions.

But I think there is a general perception among economists, and perhaps among others as well, that if we could somehow make markets perfectly competitive and efficient, we’d be done; the world, or at least the market, would be just and fair and all would be good. And this perception is gravely mistaken. To make that clear to you, I offer a little fable.

Once upon a time, widgets were made by hand. One person, working for one eight-hour day, could make 100 widgets. Most people were employed making widgets full-time. The wage for making widgets was $1 per widget.

Then, an inventor came up with a way to automate the production of widgets. For $100 per day, the same cost to hire a worker to make 100 widgets, the machine could instead make 101 widgets.

Because it was 1% more efficient, businesses began adopting the new machine, and now made slightly more widgets than before. But some workers who had previously made widgets were laid off, while others saw their wages fall to only $0.99 per widget.


If there were more widgets, but fewer people were getting paid less to make them, where did the extra wealth go? To the inventor, of course, who now owns 10% of all widget production and has billions of dollars.

Later, another inventor came up with an even better machine, which could make 102 widgets in a day. And that inventor became a billionare too, while more became unemployed and wages fell to $0.98 per widget.

And then there was another inventor, and another, and another; and today the machines can make 200 widgets in a day and wages are only $0.50 per widget. We now have twice as many widgets as we used to have, and hundreds of billionaires; yet only half as many people now work making widgets as once did, and those who remain make only half of what they once did.

Was this market inefficient or uncompetitive? Not at all! In fact it was quite efficient: It delivered the most widgets for the least cost every step of the way. And the first round of billionaires didn’t get enough power to keep the next round from innovating even better and also becoming billionaires. No one stole or cheated to get where they are; the billionaires really made it to the top by being brilliant innovators who made the world more efficient.

Indeed, by the standard measures of economic surplus, the world has gotten better with each new machine. GDP has gone up, wealth has gone up. Yet millions of people are out of work, and millions more are making pitifully low wages. Overall the nation seems to be worse off, even though all the numbers keep saying things are getting better.

There are some relatively simple solutions to this problem: We could tax those billionaires, and use the money to provide public goods to everyone else; and then the added wealth from doubling our quantity of widgets would benefit everyone and not just the inventors who made it happen. Would that reduce the incentives to innovate? A little, perhaps; but it’s hard to believe that most people who would be willing to invent something for $1 billion wouldn’t be willing to do so for $500 million or even for $50 million. At some point that extra money really isn’t benefiting you all that much. And what’s the point of incentivizing innovation if it makes life worse for most of our population?

In the real world there are lots of other problems, of course. Corruption, regulatory capture, rent-seeking, collusion, and so on all make our markets less efficient than they could have been. But even if markets were efficient, it’s not clear that they would be fair or just, or that they would be making most people’s lives better.

Indeed, I’m not convinced that most billionaires really got where they are by being particularly innovative. I can appreciate the innovations made by Cisco and Microsoft, but what brilliant innovation underlies Facebook or Amazon? The Internet itself is a great innovation (largely created by DARPA and universities), but is using it to talk to people or sell things really such a great leap? Tesla and SpaceX are innovative, but they have largely been money pits for Elon Musk, who inherited a good chunk of his wealth and made most of the rest by owning shares in PayPal. Yet even if we suppose that all the billionaires got where they are by inventing things that made the economy more efficient, it’s still not clear that they deserve to keep that staggering wealth.

I think the fundamental problem is that we have mentally equated ‘value of marginal product’ with ‘what you rightfully earn’. But the former is dependent upon the rest of the market: Who you are competing with, what your customers want. You can work very hard and be very talented, but if you’re making something that people aren’t willing to pay for, you won’t make any money. And the fact that people won’t pay for something doesn’t mean it isn’t valuable: If you produce public goods, they could benefit many people a great deal but still not draw in profits. Conversely, the fact that something is profitable doesn’t necessarily make it valuable: It could just be a very effective method of rent-seeking.

I’m not saying we should do away with markets; they’re very useful, and they do have a lot of benefits. But we should acknowledge their limitations. We should be aware not only that real-world markets are not perfectly efficient, but also that even a perfectly efficient market wouldn’t make for the best possible world.

How we sold our privacy piecemeal

Apr 2, JDN 2457846

The US Senate just narrowly voted to remove restrictions on the sale of user information by Internet Service Providers. Right now, your ISP can basically sell your information to whomever they like without even telling you. The new rule that the Senate struck down would have required them to at least make you sign a form with some fine print on it, which you probably would sign without reading it. So in practical terms maybe it makes no difference.

…or does it? Maybe that’s really the mistake we’ve been making all along.

In cognitive science we have a concept called the just-noticeable difference (JND); it is basically what it sounds like. If you have two stimuli—two colors, say, or sounds of two different pitches—that differ by an amount smaller than the JND, people will not notice it. But if they differ by more than the JND, people will notice. (In practice it’s a bit more complicated than that, as different people have different JND thresholds and even within a person they can vary from case to case based on attention or other factors. But there’s usually a relatively narrow range of JND values, such that anything below that is noticed by no one and anything above that is noticed by almost everyone.)

The JND seems like an intuitively obvious concept—of course you can’t tell the difference between a color of 432.78 nanometers and 432.79 nanometers!—but it actually has profound implications. In particular it undermines the possibility of having truly transitive preferences. If you prefer some colors to others—which most of us do—but you have a nonzero JND in color wavelengths—as we all do—then I can do the following: Find one color you like (for concreteness, say you like blue of 475 nm), and another color you don’t (say green of 510 nm). Let you choose between the blue you like and another blue, 475.01 nm. Will you prefer one to the other? Of course not, the difference is within your JND. So now compare 475.01 nm and 475.02 nm; which do you prefer? Again, you’re indifferent. And I can go on and on this way a few thousand times, until finally I get to 510 nanometers, the green you didn’t like. I have just found a chain of your preferences that is intransitive; you said A = B = C = D… all the way down the line to X = Y = Z… but then at the end you said A > Z. Your preferences aren’t transitive, and therefore aren’t well-defined rational preferences. And you could do the same to me, so neither are mine.

Part of the reason we’ve so willingly given up our privacy in the last generation or so is our paranoid fear of terrorism, which no doubt triggers deep instincts about tribal warfare. Depressingly, the plurality of Americans think that our government has not gone far enough in its obvious overreaches of the Constitution in the name of defending us from a threat that has killed fewer Americans in my lifetime than die from car accidents each month.

But that doesn’t explain why we—and I do mean we, for I am as guilty as most—have so willingly sold our relationships to Facebook and our schedules to Google. Google isn’t promising to save me from the threat of foreign fanatics; they’re merely offering me a more convenient way to plan my activities. Why, then, am I so cavalier about entrusting them with so much personal data?

 

Well, I didn’t start by giving them my whole life. I created an email account, which I used on occasion. I tried out their calendar app and used it to remind myself when my classes were. And so on, and so forth, until now Google knows almost as much about me as I know about myself.

At each step, it didn’t feel like I was doing anything of significance; perhaps indeed it was below my JND. Each bit of information I was giving didn’t seem important, and perhaps it wasn’t. But all together, our combined information allows Google to make enormous amounts of money without charging most of its users a cent.

The process goes something like this. Imagine someone offering you a penny in exchange for telling them how many times you made left turns last week. You’d probably take it, right? Who cares how many left turns you made last week? But then they offer another penny in exchange for telling them how many miles you drove on Tuesday. And another penny for telling them the average speed you drive during the afternoon. This process continues hundreds of times, until they’ve finally given you say $5.00—and they know exactly where you live, where you work, and where most of your friends live, because all that information was encoded in the list of driving patterns you gave them, piece by piece.

Consider instead how you’d react if someone had offered, “Tell me where you live and work and I’ll give you $5.00.” You’d be pretty suspicious, wouldn’t you? What are they going to do with that information? And $5.00 really isn’t very much money. Maybe there’s a price at which you’d part with that information to a random suspicious stranger—but it’s probably at least $50 or even more like $500, not $5.00. But by asking it in 500 different questions for a penny each, they can obtain that information from you at a bargain price.

If you work out how much money Facebook and Google make from each user, it’s actually pitiful. Facebook has been increasing their revenue lately, but it’s still less than $20 per user per year. The stranger asks, “Tell me who all your friends are, where you live, where you were born, where you work, and what your political views are, and I’ll give you $20.” Do you take that deal? Apparently, we do. Polls find that most Americans are willing to exchange privacy for valuable services, often quite cheaply.

 

Of course, there isn’t actually an alternative social network that doesn’t sell data and instead just charges a subscription fee. I don’t think this is a fundamentally unfeasible business model, but it hasn’t succeeded so far, and it will have an uphill battle for two reasons.

The first is the obvious one: It would have to compete with Facebook and Google, who already have the enormous advantage of a built-in user base of hundreds of millions of people.

The second one is what this post is about: The social network based on conventional economics rather than selling people’s privacy can’t take advantage of the JND.

I suppose they could try—charge $0.01 per month at first, then after awhile raise it to $0.02, $0.03 and so on until they’re charging $2.00 per month and actually making a profit—but that would be much harder to pull off, and it would provide the least revenue when it is needed most, at the early phase when the up-front costs of establishing a network are highest. Moreover, people would still feel that; it’s a good feature of our monetary system that you can’t break money into small enough denominations to really consistently hide under the JND. But information can be broken down into very tiny pieces indeed. Much of the revenue earned by these corporate giants is actually based upon indexing the keywords of the text we write; we literally sell off our privacy word by word.

 

What should we do about this? Honestly, I’m not sure. Facebook and Google do in fact provide valuable services, without which we would be worse off. I would be willing to pay them their $20 per year, if I could ensure that they’d stop selling my secrets to advertisers. But as long as their current business model keeps working, they have little incentive to change. There is in fact a huge industry of data brokering, corporations you’ve probably never heard of that make their revenue entirely from selling your secrets.

In a rare moment of actual journalism, TIME ran an article about a year ago arguing that we need new government policy to protect us from this kind of predation of our privacy. But they had little to offer in the way of concrete proposals.

The ACLU does better: They have specific proposals for regulations that should be made to protect our information from the most harmful prying eyes. But as we can see, the current administration has no particular interest in pursuing such policies—if anything they seem to do the opposite.

In defense of slacktivism

Jan 22, JDN 2457776

It’s one of those awkward portmanteaus that people often make to try to express a concept in fewer syllables, while also implicitly saying that the phenomenon is specific enough to deserve its own word: “Slacktivism”, made of “slacker” and “activism”, not unlike “mansplain” is made of “man” and “explain” or “edutainment” was made of “education” and “entertainment”—or indeed “gerrymander” was made of “Elbridge Gerry” and “salamander”. The term seems to be particularly popular on Huffington Post, which has a whole category on slacktivism. There is a particular subcategory of slacktivism that is ironically against other slacktivism, which has been dubbed “snarktivism”.

It’s almost always used as a pejorative; very few people self-identify as “slacktivists” (though once I get through this post, you may see why I’m considering it myself). “Slacktivism” is activism that “isn’t real” somehow, activism that “doesn’t count”.

Of course, that raises the question: What “counts” as legitimate activism? Is it only protest marches and sit-ins? Then very few people have ever been or will ever be activists. Surely donations should count, at least? Those have a direct, measurable impact. What about calling your Congressman, or letter-writing campaigns? These have been staples of activism for decades.
If the term “slacktivism” means anything at all, it seems to point to activities surrounding raising awareness, where the goal is not to enact a particular policy or support a particular NGO but to simply get as much public attention to a topic as possible. It seems to be particularly targeted at blogging and social media—and that’s important, for reasons I’ll get to shortly. If you gather a group of people in your community and give a speech about LGBT rights, you’re an activist. If you send out the exact same speech on Facebook, you’re a slacktivist.

One of the arguments against “slacktivism” is that it can be used to funnel resources at the wrong things; this blog post makes a good point that the Kony 2012 campaign doesn’t appear to have actually accomplished anything except profits for the filmmakers behind it. (Then again: A blog post against slacktivism? Are you sure you’re not doing right now the thing you think you are against?) But is this problem unique to slacktivism, or is it a more general phenomenon that people simply aren’t all that informed about how to have the most impact? There are an awful lot of inefficient charities out there, and in fact the most important waste of charitable funds involves people giving to their local churches. Fortunately, this is changing, as people become more secularized; churches used to account for over half of US donations, and now they only account for less than a third. (Naturally, Christian organizations are pulling out their hair over this.) The 60 million Americans who voted for Trump made a horrible mistake and will cause enormous global damage; but they weren’t slacktivists, were they?

Studies do suggest that traditionally “slacktivist” activities like Facebook likes aren’t a very strong predictor of future, larger actions, and more private modes of support (like donations and calling your Congressman) tend to be stronger predictors. But so what? In order for slacktivism to be a bad thing, they would have to be a negative predictor. They would have to substitute for more effective activism, and there’s no evidence that this happens.

In fact, there’s even some evidence that slacktivism has a positive effect (normally I wouldn’t cite Fox News, but I think in this case we should expect a bias in the opposite direction, and you can read the full Georgetown study if you want):

A study from Georgetown University in November entitled “Dynamics of Cause Engagement” looked how Americans learned about and interacted with causes and other social issues, and discovered some surprising findings on Slacktivism.

While the traditional forms of activism like donating money or volunteering far outpaces slacktivism, those who engage in social issues online are twice as likely as their traditional counterparts to volunteer and participate in events. In other words, slacktivists often graduate to full-blown activism.

At worst, most slacktivists are doing nothing for positive social change, and that’s what the vast majority of people have been doing for the entirety of human history. We can bemoan this fact, but that won’t change it. Most people are simply too uniformed to know what’s going on in the world, and too broke and too busy to do anything about it.

Indeed, slacktivism may be the one thing they can do—which is why I think it’s worth defending.

From an economist’s perspective, there’s something quite odd about how people’s objections to slacktivism are almost always formulated. The rational, sensible objection would be to their small benefits—this isn’t accomplishing enough, you should do something more effective. But in fact, almost all the objections to slacktivism I have ever read focus on their small costs—you’re not a “real activist” because you don’t make sacrifices like I do.

Yet it is a basic principle of economic rationality that, all other things equal, lower cost is better. Indeed, this is one of the few principles of economic rationality that I really do think is unassailable; perfect information is unrealistic and total selfishness makes no sense at all. But cost minimization is really very hard to argue with—why pay more, when you can pay less and get the same benefit?

From an economist’s perspective, the most important thing about an activity is its cost-effectiveness, measured either by net benefitbenefit minus cost—or rate of returnbenefit divided by cost. But in both cases, a lower cost is always better; and in fact slacktivism has an astonishing rate of return, precisely because its cost is so small.

Suppose that a campaign of 10 million Facebook likes actually does have a 1% chance of changing a policy in a way that would save 10,000 lives, with a life expectancy of 50 years each. Surely this is conservative, right? I’m only giving it a 1% chance of success, on a policy with a relatively small impact (10,000 lives could be a single clause in an EPA regulatory standard), with a large number of slacktivist participants (10 million is more people than the entire population of Switzerland). Yet because clicking “like” and “share” only costs you maybe 10 seconds, we’re talking about an expected cost of (10 million)(10/86,400/365) = 0.32 QALY for an expected benefit of (10,000)(0.01)(50) = 5000 QALY. That is a rate of return of 1,500,000%—that’s 1.5 million percent.

Let’s compare this to the rate of return on donating to a top charity like UNICEF, Oxfam, the Against Malaria Foundation, or the Schistomoniasis Control Initiative, for which donating about $300 would save the life of 1 child, adding about 50 QALY. That $300 most likely cost you about 0.01 QALY (assuming an annual income of $30,000), so we’re looking at a return of 500,000%. Now, keep in mind that this is a huge rate of return, far beyond what you can ordinarily achieve, that donating $300 to UNICEF is probably one of the best things you could possibly be doing with that money—and yet slacktivism may still exceed it in efficiency. Maybe slacktivism doesn’t sound so bad after all?

Of course, the net benefit of your participation is higher in the case of donation; you yourself contribute 50 QALY instead of only contributing 0.0005 QALY. Ultimately net benefit is what matters; rate of return is a way of estimating what the net benefit would be when comparing different ways of spending the same amount of time or money. But from the figures I just calculated, it begins to seem like maybe the very best thing you could do with your time is clicking “like” and “share” on Facebook posts that will raise awareness of policies of global importance. Now, you have to include all that extra time spent poring through other Facebook posts, and consider that you may not be qualified to assess the most important issues, and there’s a lot of uncertainty involved in what sort of impact you yourself will have… but it’s almost certainly not the worst thing you could be doing with your time, and frankly running these numbers has made me feel a lot better about all the hours I have actually spent doing this sort of thing. It’s a small benefit, yes—but it’s an even smaller cost.

Indeed, the fact that so many people treat low cost as bad, when it is almost by definition good, and the fact that they also target their ire so heavily at blogging and social media, says to me that what they are really trying to accomplish here has nothing to do with actually helping people in the most efficient way possible.

Rather, it’s two things.

The obvious one is generational—it’s yet another chorus in the unending refrain that is “kids these days”. Facebook is new, therefore it is suspicious. Adults have been complaining about their descendants since time immemorial; some of the oldest written works we have are of ancient Babylonians complaining that their kids are lazy and selfish. Either human beings have been getting lazier and more selfish for thousands of years, or, you know, kids are always a bit more lazy and selfish than their parents or at least seem so from afar.

The one that’s more interesting for an economist is signaling. By complaining that other people aren’t paying enough cost for something, what you’re really doing is complaining that they aren’t signaling like you are. The costly signal has been made too cheap, so now it’s no good as a signal anymore.

“Anyone can click a button!” you say. Yes, and? Isn’t it wonderful that now anyone with a smartphone (and there are more people with access to smartphones than toilets, because #WeLiveInTheFuture) can contribute, at least in some small way, to improving the world? But if anyone can do it, then you can’t signal your status by doing it. If your goal was to make yourself look better, I can see why this would bother you; all these other people doing things that look just as good as what you do! How will you ever distinguish yourself from the riffraff now?

This is also likely what’s going on as people fret that “a college degree’s not worth anything anymore” because so many people are getting them now; well, as a signal, maybe not. But if it’s just a signal, why are we spending so much money on it? Surely we can find a more efficient way to rank people by their intellect. I thought it was supposed to be an education—in which case the meteoric rise in global college enrollments should be cause for celebration. (In reality of course a college degree can serve both roles, and it remains an open question among labor economists as to which effect is stronger and by how much. But the signaling role is almost pure waste from the perspective of social welfare; we should be trying to maximize the proportion of real value added.)

For this reason, I think I’m actually prepared to call myself a slacktivist. I aim for cost-effective awareness-raising; I want to spread the best ideas to the most people for the lowest cost. Why, would you prefer I waste more effort, to signal my own righteousness?

How (not) to talk about the defense budget

JDN 2457927 EDT 20:20.

This week on Facebook I ran into a couple of memes about the defense budget that I thought were worth addressing. While the core message that the United States spends too much on the military is sound, these particular memes are so massively misleading that I think it would be irresponsible to let them go unanswered.

Tax_dollars_meme

First of all, this graph is outdated; it appears to be from about five years ago. If you use nominal figures for just direct military spending, the budget has been cut from just under $700 billion (what this figure looks like) in 2010 to only about $600 billion today. If you include verterans’ benefits, again nominally, we haven’t been below $700 billion since 2007; today we are now above $800 billion. I think the most meaningful measure is actually military spending as percent of GDP, on which we’ve cut military spending from its peak of 4.7% of GDP in 2010 to 3.5% of GDP today.

It’s also a terrible way to draw a graph; using images instead of bars may be visually appealing, but it undermines the most important aspect of a bar graph, which is that you can easily visually compare relative magnitudes.

But the most important reason why this graph is misleading is that it uses only the so-called “discretionary budget”, which includes almost all military spending but only a small fraction of spending on healthcare and social services. This creates a wildly inflated sense of how much we spend on the military relatively to other priorities.

In particular, we’re excluding Medicare and Social Security, which are on the “mandatory budget”; each of these alone is comparable to total military spending. Here’s a very nice table of all US government spending broken down by category.

Let’s just look at federal spending for now. Including veterans’ benefits, we currently spend $814 billion per year on defense. On Social Security, we spend $959 billion. On healthcare, we spend $1,018 billion per year, of which $536 billion is Medicare.

We also spend $376 billion on social welfare programs and unemployment, along with $149 billion on education, $229 billion servicing the national debt, and $214 billion on everything else (such as police, transportation, and administration).

I’ve made you a graph that accurately reflects these relative quantities:

US_federal_spending

As you can see, the military is one of our major budget items, but the largest categories are actually pensions (i.e. Social Security) and healthcare (i.e. Medicare and Medicaid).

Given the right year and properly adjusted bars on the graph, the meme may strictly be accurate about the discretionary budget, but it gives an extremely distorted sense of our overall government spending.

The next meme is even worse:

Lee_Camp_meme

Again the figures aren’t strictly wrong if you use the right year, but we’re only looking at the federal discretionary budget. Since basically all military spending is federal and discretionary, but most education spending is mandatory and done at the state and local level, this is an even more misleading picture.

Total annual US military spending (including veteran benefits) is about $815 billion.
Total US education spending (at all levels) is about $922 billion.

Here’s an accurate graph of total US government spending at all levels:

US_total_spending

That is, we spend more on education than we do on the military, and dramatically more on healthcare.

However, the United States clearly does spend far too much on the military and probably too little on education; the proper comparison to make is to other countries.

Most other First World Countries spend dramatically more on education than they do on the military.

France, for example, spends about $160 billion per year on education, but only about $53 billion per year on the military—and France is actually a relatively militaristic country, with the 6th-highest total military spending in the world.

Germany spends about $172 billion per year on education, but only about about $44 billion on the military.

In absolute figures, the United States overwhelms all other countries in the world—we spend as much as at least the next 10 combined.

Using figures from the Stockholm International Peace Research Institute (SIPRI), the US spends $610 billion of the world’s total $1,776 billion, meaning that over a third of the world’s military spending is by the United States.

This is a graph of the top 15 largest military budgets in the world.

world_military_spending

One of these things is not like the other ones…

It probably makes the most sense to compare military spending as a portion of GDP, which makes the US no longer an outlier worldwide, but still very high by First World standards:

world_military_spending_GDP

If we do want to compare military spending to other forms of spending, I think we should do that in international perspective as well. Here is a graph of education spending versus military spending as a portion of GDP, in several First World countries (military from SIPRI and the CIA, and education from the UNDP):

world_military_education

Our education spending is about average (though somehow we do it so inefficiently that we don’t provide college for free, unlike Germany, France, Finland, Sweden, or Norway), but our military spending is by far the highest.

How about a meme about that?