27 September 2011

The economics of Twitter/Google+/Tumblr

I have this Google+ account where I post almost nothing, and yet people keep adding me. That puzzled me until I realized that the cost of adding someone who doesn’t post anything is almost zero because they will not pollute your feed anyway. There is a cost only to add people who keep posting garbage.

As far as interesting people are concerned, the more interesting they are (whatever that means) the more followers they tend to have. Also – up to a certain point – the more interesting posts per day they have the more followers they tend to have (because they increase their chances of being reblogged by others and thus they increase their visibility on the network). However, if they post too many things per day they’re beginning to be annoying and there’s a point beyond which they post so many things that they are all over people’s feeds crowding out other people. Beyond this point people get upset and unfollow them.

The story in a single picture:

economics of twitter

17 September 2011

Some highlights of David Schmidtz’ talk on the institution of property

Property is a bundle of rights (check out Wesley Hohfeld).

Property = right to use + right to forbid use by others.

[My comment: this seems insufficient as it doesn’t distinguish ownership from rent.]

Right to exclude is more fundamental than the rest of the rights in the bundle (all the others are conditional on it for their existence).

Property rule: others need your consent in order to use it.
Liability rule: if others use it without your permission they have to compensate (e.g. eminent domain).
Inalienability rule: can't use/sell at all (illegal to sell your kidney, prostitution, voluntary slavery contracts etc.).

Purpose of rights is to organize social behavior efficiently. Corollary of this: We should have the minimum number of rights that are able to achieve this because beyond that minimum we are inflicting unnecessary constraints.

Contracts = algorithms that grant permissions for the use of property.

A system of property rights is working when it facilitates:
- production
- trade
- creative destruction (i.e. experimentation)
- growth of businesses
- limits externalities
- minimizes transaction costs

[Question: Doesn’t the minimization of transaction costs cover all the other conditions?]