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There was an interesting finding from a business perspective that photo-sharing may be the killer application for social networks, as this features was promoted far more often than sharing videos, blogging, or playing games. Unfortunately the news was mostly negative from a privacy standpoint. We found some predictable but still surprising problems. Too much unnecessary data is collected by most sites, 90% requiring a full-name and DOB. Security practices are dreadful: no sites employed phishing countermeasures, and 80% of sites failed to protect password entry using TLS. Privacy policies were obfuscated and confusing, and almost half failed basic accessibility tests. Privacy controls were confusing and overwhelming, and profiles were almost universally left open by default.

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Nicholas Gruen is an economist with the consulting group, Lateral Economics. His paper ( PDF) (blog entry) was titled "Adam Smith 2.0: Emergent Public Goods, Intellectual Property and the Rhetoric of Remix." And he introduced the paper by remarking a fact that I had missed -- this year is the 250th anniversary of Adam Smith's first (and last) published book, A Theory of Moral Sentiments (alas, the second edition). (Last because he finished his 6th edition of the book responding to the terrors of the French revolution just before he died in 1790).

What the modern misunderstanding of markets forgets about Smith is that his aim was as much to understand the provision of public goods as it was to understand the role of the market. Indeed, you could only understand the role of the market against a background of public goods (including civil society), and one critically important question is how a society produces those public goods.

Unlike statists of later years, Smith was fascinated by emergent public goods -- goods that were public goods (since nonrival and nonexcludable, as economists later would formalize the concept), but that were created not by any central actor like the state, but by the mutual and voluntary actions of individuals. Language is the simplest example -- language is a quintessentially public good, but no central coordinator is necessary to produce language. But Smith was eager to describe a wide range of emergent public goods that set the preconditions to a well functioning market.

Obviously, in this focus on civil society, Smith is not alone -- even among the heros to libertarian/capitalist/free marketeers. In this respect, Hayek continues the tradition Smith began. He too was deeply sensitive to the health of civil society, and recognized how civil society was produced by "masses of people who own the means of production [and] work toward a common goal and share their products in common, [people who] contribute labor without wages and enjoy the fruits free of charge." But Hayek too was not "

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emergent public goods adam smith hayek economics

[....] Googlenomics actually comes in two flavors: macro and micro. The macroeconomic side involves some of the company's seemingly altruistic behavior, which often baffles observers. Why does Google give away products like its browser, its apps, and the Android operating system for mobile phones? Anything that increases Internet use ultimately enriches Google, Varian says. And since using the Web without using Google is like dining at In-N-Out without ordering a hamburger, more eyeballs on the Web lead inexorably to more ad sales for Google.\n\nThe microeconomics of Google is more complicated. Selling ads doesn't generate only profits; it also generates torrents of data about users' tastes and habits, data that Google then sifts and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads. This is the heart and soul of Googlenomics. It's a system of constant self-analysis: a data-fueled feedback loop that defines not only Google's future but the future of anyone who does business online.\n[....] Kamangar and Veach decided to price the slots on the side of the page by means of an auction. Not an eBay-style auction that unfolds over days or minutes as bids are raised or abandoned, but a huge marketplace of virtual auctions in which sealed bids are submitted in advance and winners are determined algorithmically in fractions of a second. Google hoped that millions of small and medium companies would take part in the market, so it was essential that the process be self-service. Advertisers bid on search terms, or keywords, but instead of bidding on the price per impression, they were bidding on a price they were willing to pay each time a user clicked on the ad. (The bid would be accompanied by a budget of how many clicks the advertiser was willing to pay for.) The new system was called AdWords Select, while the ads at the top of the page, with prices still set by humans, was renamed AdWords Premium.\n\nOne key innovation was that all the sidebar slots on the result

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google auction googlenomics economics varian adwords

The Austrian school of economics was founded in 1871 with the publication of Carl Menger’s Principles of Economics. [....]

The Science of Economics
Proposition 1: Only individuals choose.
Proposition 2: The study of the market order is fundamentally about exchange behavior and the institutions within which exchanges take place.
Proposition 3: The “facts” of the social sciences are what people believe and think.

Microeconomics
Proposition 4: Utility and costs are subjective.
Proposition 5: The price system economizes on the information that people need to process in making their decisions.
Proposition 6: Private property in the means of production is a necessary condition for rational economic calculation.
Proposition 7: The competitive market is a process of entrepreneurial discovery.

Macroeconomics
Proposition 8: Money is nonneutral.
Proposition 9: The capital structure consists of heterogeneous goods that have multispecific uses that must be aligned.
Proposition 10: Social institutions often are the result of human action, but not of human design.

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... unprecedented changes in the economics of interaction. \n\nInteractions-the searching, coordinating, and monitoring that people and firms do when they exchange goods, services, or ideas-pervade all economies, particularly those of modern developed nations. They account for over a third of economic activity in the United States, for example. [...] \n\nJust such a change is now beginning to occur. A convergence of technologies is set to increase our capacity to interact by a factor of between two and five in the near future. This enhanced interactive capacity will create new ways to configure businesses, organize companies, and serve customers, and have profound effects on the structure, strategy, and competitive dynamics of industries.

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interaction searching coordination monitoring economics