January 17, 2010
The Internet, Competition, and Censorship—Posner's Comment
The Internet, Competition, and Censorship-Becker
Invention of the telegraph and telephone in the nineteenth century had revolutionary impacts on the speed of communications among individuals separated sometimes by vast distances. The Internet and wireless transmission has not only vastly extended the ease of communicating quickly, but also provides quick access to information on a scale far surpassing anything available before.
"Googling" is a new word not only in English but in many other languages as well that means using Internet search engines to discover information on an endless number of subjects. These include finding the cheapest online price for tennis rackets, cars, hotels, and many other goods and services, finding a time series on GDP per capita for the United States, China, and other countries, discovering when a famous phrase was first used, finding out what is contained in the House of Representatives' and the Senate's versions of the health "reform" bills, reading criticisms of government policies, getting email addresses for particular individuals, and tens of thousands of other purposes. I would find it virtually impossible to fit posting on our blog into a busy teaching, research, and speaking schedule without quick access through the Internet to generally reliable information.
Although newspapers have frequently been subject to various forms of censorship, Internet access is affected by hackers as well as by censors. We were forced to change our website address and the technical manager of this blog because the old website was hacked so much that posting of commentary became impossible (we do not know who was doing this). Of course, various governments try to deny their citizens access to websites that they consider too critical of government policies. A few weeks ago I received an email from someone in China complaining that he and his friends no longer could access our website because it was being blocked by the government. I was surprised by the claim, and yet a little flattered that we were considered important enough to be blocked. I suggested he try our new website address, and he discovered it was available with no problems. Access was prevented by hackers on our old website rather than by the government.
Google recently complained about Chinese censorship, and claimed that hackers from China gained access to gmail accounts of some persons critical of government policies. As a result, Google threatened to shut down its Chinese website. It is difficult to determine when the censorship goes so far that the benefits of making the Google search engine (or other online facilities) available to the Chinese population is no longer worth accepting the censorship. My own view is that censorship has to be very extensive and destructive before the benefits of withdrawing Google exceed the costs to the population of losing access to an important information search engine.
This weighing of benefits and costs is especially pertinent since many Chinese Internet users, and presumably also those in other countries with extensive censorship of the Internet, have learned how to "scale the wall". That is, they discovered ways to get around Internet restrictions by using proxies, virtual private networks, and other tools that allow computers to access the Internet through remote servers located outside China.
The strong efforts of some countries to try to block Internet access to articles and discussions that their governments do not want their citizens to see indicates the scope of the knowledge and information the Internet makes available that was unavailable in the past. This leads me to conclude that generally Google and other companies experiencing censorship should stick it out. However, perhaps they should fund research on finding additional ways to "scale the wall".
During this financial crisis, various financial markets have been criticized, some of them justifiably, as being much less efficient than had been claimed. Nevertheless, search engines, social networks over the Internet, like Face Book and Twitter, apps, and other electronic forms of communication, have greatly improved the efficiency of many markets, including financial markets. For example, the open outcry system on stock and futures exchanges to buy and sell securities, like the New York Stock Exchange or the Chicago Mercantile Exchange (CME), was made obsolete by much faster and more efficient electronic communication (see Leo Melamed's book, "For Crying Out Loud" for a fascinating discussion of the battles to get the CME to go electronic). Retail and other companies continue to expand their online presence and websites in recognition of the growing share of their business and sales that is conducted online. Persons in small towns with only a few stores often now have access to the same variety of goods and to the price competition that used to be available only to residents of large cities, where many stores competed for their business.
Many persons lament the decline of newspapers and magazines due to the migration of help wanted ads and other advertisements to the Internet. Some politicians and public intellectuals have even proposed greater subsidies to newspapers in order to slow down their decline. Clearly, top papers like the New York Times, Wall Street Journal, Financial Times, and Washington Post often have in depth reporting on various subjects seldom found on television or radio. However, the Internet has a greater variety of news presentations and articles on specialized subjects, and much more up to date reporting, than is available even in the best newspapers. The Internet has been remarkable in being able to tap into the desire of people from all walks of life to write, through blogs, social networks, and other ways. Hundreds of economists have blogs, although many are not very good, and the same is true for other fields. Some blogs compile the scholarly citations of other individuals who are blogging, in order to give readers at least one measure of their authority and reliability.
I am old fashioned enough to read three newspapers in hard copy each day, but the overwhelming majority of young people seldom read any major newspapers. This difference between the young and old in their reading habits predicts a continuing further decline in newspaper circulation, and a further migration of news reporting and opinion pieces to the Internet. On the whole, this is a good development from the point of view of increasing competition among news and opinion sources, although it is sad to see the decline of an industry that has been so crucial historically in providing information and preserving political freedoms.
The Internet, Competition, and Censorship—Posner's Comment
I agree with Becker that the Internet has been on the whole a valuable innovation. It is a less costly form of communication than either telephone or mail, and (a related point) a better substitute for personal communication than either telephone or mail; it economizes on time by reducing the transportation involved in meetings. I commute to work less frequently nowadays because I can work efficiently at home; and academics in different universities or even different countries can collaborate in writing books and articles at far lower cost than if they had to rely on the older modes of interaction. The Internet also, as Becker emphasizes, reduces the cost of access to information (though not always accurate information); it thus reduces information costs as well as communication costs.
As with most new technologies, however, there are downsides as well as upsides. The effect on substitute services as such should not be cause for concern except to the producers, for substitution effects are the inevitable consequence of innovation. The hotel and travel industries are hurt if business travel falls because of the substitution of online for in-person conferencing, though the hurt is offset to the extent that by lowering the costs of communication the Internet increases the amount of business activity and the geographical scope of firms.
But other harms caused by the Internet warrant social concern. The Internet lowers the cost of communication and there are bad as well as good communications: bad in the sense that they promote activities that reduce overall welfare. Examples are the use of the Internet by terrorists, by advocates of hate crimes, by purveyors of child pornography, by plagiarists, by defrauders, by violators of copyright law, and by identity thieves. The increase in these pathologies as a result of the Internet is a social cost and may be considerable. The contribution that the Internet has made to the recruitment and coordination of terrorists has created a considerable threat to our national security.
Of course, it is possible to monitor Internet communications, and our security and law enforcement agencies do that. But the volume is overwhelming; coded communications provide a challenge to monitors; and privacy advocates insist on limitations on monitoring.
The Internet is also highly vulnerable to penetration and disruption by enemies of the United States.
China and other authoritarian countries censor the Internet to prevent their populations from obtaining access to information critical of government. I agree with Becker that we should not make efforts to prevent China from censoring the Internet. I don't think we should interfere in the internal affairs of countries that are not enemies of the United States. I also don't think that Chinese censorship will be effective in the long run; it is too easy to circumvent Internet censorship.
The negative impact of the Internet on the newspaper industry is a possible source of concern. Newspapers are a bundled product: the publisher provides a large variety of news, opinion, and advertising in an effort to obtain a large enough readership to offset the heavy fixed costs of producing information. The Internet enables unbundling at low cost, which makes it difficult to cover those heavy fixed costs. As classified advertising migrates from newspapers to inexpensive Internet services, for example, the revenues of such advertisng no longer support costly newspaper newsrooms. But the effect on the extent to which the public is well informed may be offset by the rise of the blogs, which provide immense quantities of information and opinion on public issues at zero cost (other than time cost) to readers. At the same time, however, because the blogs are an unfiltered medium they are also a source of a great deal of misinformation. Yet Wikipedia illustrates how prompt correction, which the Internet also facilitates, can reduce inaccuracies in online dissemination of information.
The time costs imposed by the Internet are a source of some concern. People receive a great many more communications, because of their lower cost, in the form of email than they did in letters and phone calls, because email is cheaper. This can be a burden, and it is only partially offset by the "junk mail" filter programs that email services provide. The sender of a communication will usually not consider the cost to the recipient. Information overload can be a real cost.
Finally, we have become aware recently than the use of the Internet by drivers is a significant source of automobile accidents.
The net effect of the Internet on social welfare has probably been positive, but it is difficult to say how great it has been. Communication and information flows were rapid before the Internet, and the effect of increased rapidity on economic output and personal satisfaction may not be great when the full costs of the Internet are taken into account.