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Here we'll explore the various economic and financial principles that impact the business of technology, keeping up to date on the various ideas, theories, trends and numbers, dispelling the silly buzzwords, slogans and fads and generally trying to understand how recent developments affect this industry going forward and may help divine what's going on and where things may be headed. Among the topics we'll touch on: regulatory issues, intellectual property, network effects, the general economy, productivity and more.

About this editor

Arnold Kling has a Ph.D. in economics from MIT; founded homefair.com, one of the very first commercial websites, in 1994; separated from Homefair in January 2000 after it was sold to Homestore; is author of Under the Radar: Starting Your Internet Business without Venture Capital



and is an essayist. Please send any comments, as well as suggestions for what we might point to from this page, to us at econ@corante.com


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THE BOTTOM LINE

By Arnold Kling

Is Blogging a Fad?


4:41 pm

By Arnold Kling

Is Blogging a Fad?

The Internet has produced significant social phenomena, such as email and the Web. However, it also has produced its share of fads and failures. One phenomenon that currently ranks high on the hype meter is web logs,or blogs. Are blogs a trend or a fad?

One way to distinguish a fad from a trend is to ask what would happen if you reversed the order in which technologies were invented. For example, suppose that we had all of the highly-touted electronic technologies for distance learning, and then someone came along and invented the book. My guess is that the book would be greeted as a technological marvel--easy to hold, convenient to carry, outstanding resolution, and so forth. This thought experiment leads me to suspect that electronic distance learning is a fad.

On the other hand, suppose that everyone had recordable DVD players (or DVD's with hard drives to record), and someone invented the VCR. Would anyone buy the VCR? If the answer is "no," then DVD's are not a fad.

Before we can evaluate blogs in this way, we need to ask what it is that blogs do. In this essay, I will abstract from many possible ways to view blogging in order to look at it as a system for disseminating information.

How Blogging Disseminates Information

I consume, digest, and excrete information for a living.
--Cory Doctorow

Suppose we were in a world in which all of us described our jobs as being to consume, digest, and excrete information. At the risk of reverting back to the mathematically masturbatory ways of academic economics, let me propose a simple model.

In the model, our information needs are all different. Certain information is more valuable to me than it is to others. We can represent this concept by thinking of everyone as being located at different points on a circle. The points closest to you in the circle are people with similar interests. They might be workers in nearby cubicles, or they could be people located at a great physical distance but working in the same field.

I live in the economics neighborhood of the circle. My neighbor to the left is Brad, and my neighbor to the right is Virginia. All communication is via blog.

Every day, each of us receives new information. Think of this as news, or as a flash of inspiration. I post my new information to my blog. This information has value that consists of two random components. One component is its general value--which is equal for everyone on the circle. The other component is local value, which means that the farther it gets from me, the lower its value becomes. However, I only observe the total value of a piece of information to me. It is impossible for me to distinguish between the two components, so I do not know who else might be interested in the information.

I also read my neighbor's blogs. I evaluate each piece of information that I find on Virginia's blog. If its value to me exceeds some threshold value, then I link to it, which makes it available to Brad. If its value does not exceed the threshold, then I do not link to it. In this way, I act as a filter of information moving from right to left. I also do the same thing with information moving from left to right.

This filtering process makes all of us more efficient. Information with low value does not travel far. Information with high general value tends to travel the farthest. Information with low general value but high local value tends to reach interested people but then die out because as it gets passed along its value decays below the threshold. Everyone tends to receive information with a high value to them, and they avoid having to read information that has low value to them. If the filtering system works well, I get to read lots of economic insights, and I never have to read anything about, say, Olympic figure skating.

Some remarks on the model.

  1. The circle simplifies the geometry of the model, but it artifically makes it one-dimensional. Clearly, the information space can be multidimensional. That means that I will read more than two blogs, because in information space I have more than two neighbors.

  2. Would I read the blog of the neighbor the left of Brad, say, Paul? That depends. If I believe that Brad is very efficient, so that the probability of his making a type I error (filtering out information that I actually want to see) is low, then I do not have to read Paul. On the other hand, if Brad is prone to making errors, then I will tend to sample other blogs on my left. In the real blogging world, I rarely check Instapundit's neighbors, because I expect that when they have something interesting for me, he will pass it along.

  3. The model assumes that we all have about the same cost and the same skill at digesting information. If someone were particularly efficient at this process, we might appoint that person to assimilate and filter a large quantity of information.

  4. It is important that I cannot perfectly distinguish local value from general value. If I can know where information will have local value, then I can just pass it along to everyone who needs it, without sending it through the blogging-filtering process.

Organizational Communication Flows

Suppose that in a corporation or other large organization, the written communication infrastructure consisted only of blogs. Then someone "invented" memoranda, departmental newsletters, email distribution lists, and so forth. Would these alternative technologies supplement or replace blogs?

It is not clear to me that blogs would be insufficient for communication within an organization. Blogs might threaten the hierarchy, because there is nothing to stop a low-level analyst's blog from becoming more popular than that of a senior vice-president. But in what David Weinberger would call a hyper-linked organization, subverting the hierarchy is a feature, not a bug.

If I were an executive in a large organization, I would encourage the organization to experiment with using blogs instead of other forms of communication. My guess is that blog filtering could enhance productivity by improving the relevance for workers of the information that they have to process.

Dissemination of News

Suppose that the news media consisted of individual reporters and blogs. If someone came along and invented newspapers, CNN, or other centralized news media, would we see this as an improvement?

From the standpoint of pure efficiency of disseminating information, it is not clear to me that the mass media model beats a blog-based model. However, I believe that many people consume news for entertainment value, and the mass media seem better suited at presenting news as entertainment.

My prediction is that in niches where the ratio of information value to entertainment value is high, blogs will prove to be superior mechanism for disseminating news. For example, local politics tends to have lower entertainment value than national politics. To me, that implies that at some point we will start to see elections for school board or city council influenced more by coverage in blogs than by coverage in newspapers.

Economics

Everyone who follows blogging wonders about the economic model. Do bloggers need to be paid in order for blogging to be sustainable? If so, then who will pay them?

In the simple circular model that I sketched, the blogging system as a whole has value. However, no individual blog is the source of that value. I believe that this collective nature of the benefit of the blogging system is what makes it particularly difficult for an individualized economic model to be successful. Thus, I believe that neither the donation model nor the advertising model will prove to be viable (there may be some transitory exceptions). Instead, I think that payment mechanisms that reward collections of bloggers hold more promise for the long run:

  • Corporations, nonprofits, and government may come to expect their employees to maintain blogs as part of their jobs. Some of these blogs may be made available externally as well as internally.

  • Traditional news organizations may pay for a network of bloggers to help in the news filtering process, although blogging will not replace all of the other forms of communication and entertainment in the news media.

  • Some organizations may use paid bloggers to replace some of their publications. For example, the American Contract Bridge League could give its members access to professional blogs, rather than mailing out a print publication. For that matter, the American Economics Association could do the same.

Conclusion

I sketched a model of blogs in which blogging serves as a filtering mechanism in the dissemination of information. The model is built on assumptions that make blogging very efficient. To the extent that those assumptions mirror reality, then blogging is not a fad. On the contrary, it could have a lot more potential for growth.




* * * * *








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