Many Internet services are free: email, Internet search, and maps, for example. But what if you had to pay to use them? An economist sets out to discover how much people value various Internet services by asking how much they would need to be paid to give them up. It’s an example of a core economic principle: decision making. Listen to find out which Internet services people value most.
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PrintSTEVE INSKEEP: What’s the value of an Internet service that you get for free? It would be hard to assess the value to you of social media or the map on your phone, but now you have a chance to find out, thanks to our economics podcast The Indicator, hosted by Stacey Vanek Smith and Cardiff Garcia.
STACEY VANEK SMITH: A couple of months ago, economist Tim Harford went to China. It took some planning.
TIM HARFORD: I had to wrestle with this really difficult problem, which is the Great Firewall of China.
CARDIFF GARCIA, BYLINE: Harford was going to have to give up a bunch of the online services he was used to. And, of course, he’s an economist so he started thinking about how to quantify that value. And then he found this paper.
SMITH: So what these economists did was ask people how much they would have to be paid to have those services taken away, and then they used that to try and figure out how much we value these services. So here we go. The Internet service that people valued the least, social media. The study looked at the median price people said they would need to be paid to give up all of those likes and hearts and retweets. So for all of that, people would need to be paid…
HARFORD: Three-hundred dollars, all social media.
GARCIA: Then a bit more valuable to users, in fifth place, e-commerce. Fourth place was video streaming, which brings us to the third-most valuable service…
SMITH: GPS and maps.
HARFORD: Three thousand, five-hundred dollars people would have to be paid to quit all digital maps.
SMITH: OK. Now, Cardiff, we are down to the final two. These are the two most valuable services to the average person, and you actually don’t know…
GARCIA: Yeah. I don’t know these answers.
SMITH: …How this shook out.
GARCIA: This is actually about to be a surprise. This is actually about to happen.
SMITH: What is your guess between email and Internet search?
GARCIA: I would guess Internet search in second place.
SMITH: You are wrong.
GARCIA: Really?
SMITH: In second place was email.
GARCIA: OK.
SMITH: And can you guess how much people said they would need to be paid in order to give up email for a year?
GARCIA: Ten-thousand dollars.
SMITH: Eight thousand, five-hundred dollars.
GARCIA: Pretty close.
SMITH: The average person would have to be paid $8,500 to abandon email for a year. Which brings us to, in first place, the Internet service that we value the most, Internet search.
HARFORD: Seventeen thousand, five-hundred dollars.
SMITH: And as Tim was looking over this study, this sort of interesting thing occurred to him.
HARFORD: It’s saying that access to Internet search is worth maybe 50 times access to social media. But when you look at the companies that provide email and Internet search, they are not worth 50 times what Facebook’s worth. They’re worth about twice what Facebook’s worth, very roughly.
SMITH: So this is a really interesting disconnect, and Tim thought that part of it might be sort of a competition thing. So a service like Google has a lot of market power, but everyone could just switch over to another service in a heartbeat. So Google has to stay sharp. But Facebook is trickier because your whole social network is on Facebook, and even if there’s a new social network that you think you’d like more, you would have to start from scratch and you might lose connections if your friends didn’t all switch over. So even if you don’t love Facebook, you stick around because it’s a lot of trouble to switch.
GARCIA: But it’s also possible that we value certain things more or less than we think we value them. I mean, it’s easy to say sure, yeah, I’ll give up social media for $300. But what if, like, two or three weeks in, you start to think, well, actually you can have your $300 back. I want that social media because I get more out of it than I realize.
SMITH: Also, as Tim points out, we are not actually the customers for these services, anyway. We are the products. The real customers here are the advertisers. And what really matters to these companies is not in fact how much we value them. It is how much advertisers value them. We’re just, like, a data point in that equation.
Stacey Vanek Smith.
GARCIA: Cardiff Garcia, NPR News.
© 2018 National Public Radio, Inc. Used with the permission of NPR. All rights reserved. Vocabulary
- assess – evaluate
- firewall – a computer network system that controls incoming and outgoing traffic
- quantify – to determine or express the amount of something
- median – situated in the middle; the midpoint
- market power – the ability of a firm to raise a price to a level that would be impossible if there were competition; also called monopoly power
Listening Comprehension Questions
- What did economist Tim Harford hope to find out?
- What did the study discover about how people value Internet services?
- Which Internet services did people in the study value most?
- How is the study in this story an example of a decision making?
- What is the “interesting disconnect” the economist reveals about how much users value certain services?
Discussion Themes
- If you had to give up two Internet services, which would they be? How would you make your decision?
- What issues does the story raise that call into question the study’s findings?
Teacher’s Guide
Activate student knowledge: Open class by asking students to think about how they make decisions. Explain that economics is based on the idea of scarcity—people always want more than they can have because resources are limited. Decision-making is at the heart of economics, because in a world of scarcity we are always choosing how to use our resources. Some decisions involve money, but others involve things that are hard to quantify, such as time, or in the case of this audio story, Internet services. Ask students to think about how they might quantify the value of things they value that do not have dollar values.
Introduce the story: In this audio story, you will hear about an economic study that set out to see how much or how little people value various Internet services that they currently do not pay for. Listen to hear what the study revealed.
Active listening supports:
- The Summary Chart will guide student listening as they takes notes on this audio story.
- The Language Identification organizer allows students to follow along and track important phrases while listening to the story.
Reflect on the story: Take time for student reflection on the audio story and discussion questions to check for understanding. Focus on different things students consider when they make decisions. Introduce useful terms—costs, benefits, opportunity cost, and so on—as necessary for students to use to describe their decision-making processes. Ask students to rank 5 things they value that don’t have a monetary value to have them walk through the cost benefit analysis.
Paired Text: Use the Documents of Freedom essay Making Economic Decisions to pair with this audio story. The essay explains the basic economic concepts at play, but not stated, in the audio story. Encourage students to use academic language from the essay in their discussion of the audio story.