I was recently posed the following question: "The most important way in which the internet and online social media are changing our world is [fill in the blank]." My standard answer is that it changes the balance of power between individuals and institutions. But this was a sophisticated audience of economists and students, gathered for the 20th anniversary of Moscow’s New Economic School. I needed new material.
So I challenged the audience to consider the following: For much of human history, there was no economy based on trade and fungible goods. People operated in small groups and fended for themselves. Scarcity was self-limiting: If you could not grow or catch your own food, you died (or moved). Specialisation, trade and pricing - not to mention religions and (economically) unproductive religious institutions, mass production, mass media and big government - are all recent developments.
Our current world is a mix of people still subsisting with almost no external income, people generating (and consuming) surpluses and other people consuming surpluses generated by others. Commodity prices spread worldwide, though influenced by local conditions and constraints (including tariffs and other protectionist measures in China, Russia, America and elsewhere).
Intellectual work for free
Many activities that were previously performed "for free" (often within a household), such as sex, home maintenance and care for the sick and elderly, are now frequently outsourced and counted as economic output. In general, it is fair to say that these activities are performed more efficiently as a result: People whose skills are worth, say, $50 per hour spend more of their time earning $50, rather than performing chores "worth" $10 or $20 per hour.
But the internet is changing that as well, in a way that may befuddle the many companies who view it primarily as an economic platform, where they can market or sell things, or even charge for content. Those companies go online to earn money. Google is perhaps the purest example of a company that transforms purchase intentions into income; most other "internet" companies offer something of independent value on the other side of those searches.
But many individuals, most of the time, go online without any interest in buying something. They are there to find out about the world, catch up with friends, play games, listen to music, chat, or just hang out - and, increasingly, to get the attention of other people. Thanks to highly productive surplus economies, they can spend a lot more time being economically inactive.
This is not the familiar question of whether our machines will put us all out of work. In fact, the question is whether we will start doing more and more intellectual work for free or for barter, becoming more like our ancestors. Instead of producing food or housing for ourselves or for barter, we will be producing content and amusement for one another, without engaging in explicit (taxable) financial exchange. Yes, there is a so-called gift economy, but there is also an attention market that may not be fungible or priced - a distributed, many-to-many economy that harks back to the old days.
The economic and psychological implications of this are profound. It seems pretty clear that most people gain self-esteem and mental health from doing something useful, whether raising children or earning a salary. I am not predicting a utopian world in which everyone is equally valued. But it may be a world in which people use their Klout Score (a measure of one’s online influence), their Twitter following, or a similar measure to justify their existence, assign value to their activities and measure their self-worth.
The trouble (for economists and traditional businesses, at least) is that this future disturbs traditional notions of economic growth. Companies that provide content will increasingly find themselves competing with individuals who offer entertainment for free. This phenomenon is not visible yet, because analysts focus on popular bloggers and online media sites competing with traditional media.
The attention economy
But the real change is the rise of the "long tail" - millions of additional units of content - email, Facebook posts, test messages - being read by only a few people each. That is possible only on the internet, with its vanishingly small distribution costs. This will not be the unmeasured economy of yesteryear, but rather one where we quantify our efforts in other ways.
How do we tell if this is happening, economically? If we generate our own economic surplus without accounting for it - what the American writer Clay Shirky calls "cognitive surplus" - how does that influence reported economic statistics and, ultimately, shape incentives and activities? Do we spend more on "communications", meaning the hardware and infrastructure, even as the real value is unaccounted for? Can we apply that surplus to something "useful"?
Right now, fashion (let alone clothing) is becoming cheaper and cheaper. But you can "do" fashion for free by designing an avatar for yourself. Will the world of cognitive surplus make it easier for us to be environmentally responsible, guided also by the inclusion of externalities in the prices of physical goods, so that we end up "consuming" fewer physical things and spend more on virtual value?
This attention economy is not the intention economy beloved of vendors, who grab consumers’ attention in order to sell them something. Rather, attention here has its own intrinsic, non-monetisable value. The attention economy is one in which people spend their personal time attracting others’ attention, whether by designing creative avatars, posting pithy comments, or accumulating "likes" for their cat photos.
Just as we are driven to spread our physical DNA, so apparently do we have an urge to spread our virtual identities, so that we cannot be erased. Instead of physical descendants, we are offering our own virtual selves to posterity.
Esther Dyson, CEO of EDventure Holdings, is an active investor in a variety of start-ups around the world. Her interests include information technology, health care, private aviation, and space travel.
A version of this article first appeared on Project Syndicate .