A few weeks ago I saw this question posed on Facebook:
Would you give up the internet for $1million?
I don't know what it would mean exactly to give up the internet.
- I presume doing so would include not explicitly paying others to use the internet for you, though it would not rule out use of the internet by others whom you might hire (e.g. physicians).
- It would also have to include not asking your family, friends, or even strangers, to do things for you on the internet (though how would one distinguish that from the first part where you would be allowed to hire the services of people who routinely use the internet?)
- I don't think it would mean giving up texting and cellphones, but it would certainly mean not using the cellphones to do anything on the net (i.e., no data plan).
- It would definitely mean no internet searches, no email, no Facebook, no Skype, no internet-based landlines, no online shopping, no wifi for your cellphone, no blogs, no JStor for journal articles, no internet porn, etc. I would have to go back to hard copy for newspapers, magazines, and books; and I would have to use snail mail or telephone for communications.
I'm not sure where the line would be drawn. However, despite this incomplete understanding of the conditions, I doubt if I would take the deal. I'd rather have the internet than have someone give me a million dollars.
I asked several of my friends (via email, of course) if they would take the deal, and they all said "no".
That means the internet is generating one heck of a lot of consumer surplus (roughly speaking, the difference between what something is worth to us and what we pay for it). If having the internet is worth more than a million dollars to millions of people, then the total consumer surplus must be gazillions of dollars.
Interestingly, this exercise does not work symmetrically: I would not be willing to give up $1million to have the internet; if I had to pay $1million to be able to use the internet, I'd give the internet up in a flash. The wealth differences between having the internet and not having it are so large, the situations are not comparable.
So here's another way to consider the exercise:
If someone said you must pay $1million for the internet and at the same time that person gave you $1million, would you use the money to buy access to the internet?
I'm not sure I would. But that raises questions about the validity of my initial answer, since the situations are financially identical.
Part of the reason for my hesitation in this second scenario is that if I have the internet, I have something called "the endowment effect" --- I'd be reluctant to give it up if I have it; but if I don't have it, I might also be hesitant about buying it.
Part of the reason might also be that I would be upset about someone else getting all that money (the dreaded economics and politics of envy) that could have been mine.
In the old days when the rational expectations cowboys dominated the economics profession, they would merely have pointed out that the inconsistency in my answers shows I'm not being rational (in fact am being pretty stupid) without examining the nature of human behaviour in general.
Increasingly, though, economists are recognizing that most people have these tendencies (see behavioural economics) and that our assumptions of rational maximizing and rational expectations, while very useful, do not explain all of human behviour.
Addendum: Including data plans for our phones and our household internet plan, Ms Eclectic and I are paying perhaps as much as $2000/year for access to the internet. If those fees can be expected to persist and if we expect to live a long time, the present value of those fees at a real interest rate of 1% would be less than $200,000. So we are, indeed, paying a lot for the internet, but nowhere near $1m.