We humans like to think of ourselves as reasoning beings, in contrast to other creatures — pigeons or mice, for example. Yet behavioural science debunks human exceptionalism. Often we act according to rules of thumb rather than rational calculation. In embracing this insight, economists are applying lessons long since learnt by advertisers and marketers, and demonstrated anew by digital businesses enticing us with just one more click and then another.
Historian Timothy Snyder argues in a recent essay that digital addiction represents the wiring into our lives of psychologist BF Skinner’s experiments with conditioned behaviour. Like the Mad Men of Madison Avenue, their Silicon Valley successors are using these techniques to persuade us to buy and browse and click, in their pursuit of profit. Many digital companies operate an advertising-based business model. We pay them no money but donate ample time; in return for our attention they earn revenue from advertisers.
Is this a good or bad thing? There’s some evidence that people place a high value on these free digital goods. But the corrosive effects of compulsive clicking are evident too. Economists have trouble evaluating the social cost and benefit of advertising because the way we define economic welfare assumes people have fixed, known preferences and — given those — decide how they want to spend their money. This standard approach ignores the essence of the ad-based model, namely that people are spending time rather than money.