An Economic Model of Loneliness and Being Extremely Online

Bo Burnham is a comedian and musician who, like so many of the artists I enjoy, produces art that I can only describe as extremely specific to him. His newest special on Netflix features a song, “Welcome to the Internet” (some NSFW lyrics), that I liked so much I thought it was worth writing as a formal model.

No, really. Hey, we all need a hobby.

The whole song is a meditation on the overwhelming nature of the internet and is, in my opinion, fantastic. I think if we zero in on two pieces of refrain in the lyrics, we can get some traction in what Burnham believes is the underlying problem, if not outright crisis, that resides within the internet and those that are “extremely online”:

First, the lure:

Could I interest you in everything?
All of the time?
A little bit of everything
All of the time

This is the value-add of the internet and why we can never, and will never, leave it behind willingly. This is also the “cognitive overload” hypothesis of why the internet is bad. Sure, for the infovores of the world there hasn’t been a bigger technological shift since the printing press, but there certainly exists the possibility that most human minds (if any) aren’t built to handle the deluge of information they are drowning in. That’s one theory, but I think that’s the kind of problem that isn’t actually a problem. Some will consume more of the internet, some will consume less, c’est la vie.

It’s in the second half of the refrain, however, that we see the actual problem.

Apathy’s a tragedy
And boredom is a crime
Anything and everything
All of the time

And therein lies the rub. You can’t opt out. But is that true? Well, that depends on who you are and how you live your best life i.e. how you optimize your utility function. So let’s do it. Let’s write down the utility function that lives inside the song. What we’re going to do is this- we’re going to lay out the simple components as natural language, then turn it into formal math, and then bring it back to natural language.

In our Burnhamian mode, people need two things: Private goods like food and shelter and Social Goods like friendship and camraderie. How much Utility you enjoy will always be increasing in both, but the optimal mix will depend on your constraints (wealth, time, accessible population) and the mathematical function determining how much Utility you get from a mix of Private and Social goods i.e. are they additive, multiplicative, or something else. Utility equal to zero is equivalent to death.

Let’s add one last layer of complexity. Let’s say that your Social goods are a function of two kinds of elements: Friends and Clubs. Friends are direct, one-to-one relationships. Clubs are large social groups. We will define and differentiate between the two as such: if you cease to be part of a friendship (whether between 2,3, or 5 people), then that friendship no longer exists in the same form. If you drop out of a club, on the other hand, that club will persist without you.

So what a person has to do is, within their constraints, try to optimize how much of their resources they invest in their Private goods, their Friends, and their Clubs.

The first line is our base model, the second is an expanded version with our two-input model of Social goods. The function we are using is called a Constant Elasticity of Substitution utility function. The key parameter, α, determines how Private and Social goods interact. If α=1, then they are what economists call perfect substitutes. All that matters is how much you have in total of the two inputs, and if you want you could specialize in just one of them. They are perfectly additive. If, on the other hand, α=-∞ (negative infinity), then they are perfect complements, like right and left shoes. There is no point in adding even one more unit of Private goods until you have another unit of Social goods to pair with it. In a sense, they are multiplicative, meaning if either value is zero, then your utility is zero. The value of α will tell us whether the best life requires more of a mix of Social and Private inputs (if they are more complementary), or simply the most of whatever is the easiest to come by (if they are good substitutes for each other).

We’ve nested in our Friends and Clubs production of Social goods as a CES function within the second equation, with a similar story, only here β will determine how much of a mix of Friends and Clubs we want, or whether we can specialize more in one over the other. In the third and last line of the model, we’ve reduced it down to the underlying questions that will tell our story represented by addition and multiplication signs:

Are Private and Social Goods complements (multiplicative) or substitutes (additive) when we internally produce utility? Are Friends and Clubs complements or substitutes when we internally produce our Social goods?

Assumption 1: α= -0.1 Private and Social goods are weak complements. What this means is that there are diminishing returns to Private and Social goods, you need some of both, but you can have less of one or the other and its fine. Let’s just assume wealthy people need other people in their lives to stay sane while, at the same time people with rich social lives and supportive communities still need food and shelter. You can specialize a bit more on one side, depending on what’s available, but you can’t live without at least some of both.

We’re all different in how we build our social lives and, in turn, how we internalize the internet in our lives. I think we can gain some insight into this process by working out the stories in this simple model through our second parameter, β. Let’s consider three broad types of people.

Person Type 1: Friends and Clubs are Strong Substitutes (high β)

These people are either relatively offline (e.g. they still use their phones as phones to make phone calls) or extremely online (e.g. they get a panic attack unless they have 80% battery and a charge pack on their person). These are the people who can become hyper-specialized in new clubs if they are extricated from prior social networks or club settings. This is why cults recruit people who move to new places where they don’t know anyone. This is how your diehard hippie socialist friend grew up to be a conservative evangelical after they moved to the Texas suburbs.

With regards to our original question, people who hyperspecialize in their club and club identity will be constantly contributing grist to the club’s identity: evidence of the necessity of the club and it’s mission, rage at non-members, disappointment in members who aren’t committed enough, and constant vigilance in the monitoring of everyone else’s commitment. They are in it, they are of it, and they are ready to purge.

Apathy’s a tragedy (You must care about everything the club cares about)
And boredom is a crime (All of your time must be allocated to the club)
Anything and everything
All of the time

Type 2: Friends and Clubs are strong complements (low β)

These are the people that I think Burnham’s song is targeted at, for whom he has the most sympathy, and with whom I suspect he would count himself. These are people for whom the internet is the most taxing, the most exhausting to navigate.

Type 2 folks want to have personal friendships and friend groups while still feeling a part of something bigger, whether it’s a community, a political movement, or spiritual affiliation. Type 2 people will have preferences towards one or more social identities manifested as clusters on the internet, but they don’t want to purge people who don’t share those preferences from their circle of friends. Type 2 folks are interested in civil rights and social justice, but they want to diversify their emotional and material resources across their personal relationships and private wellbeing as well.

The deluge of the internet, with its stark images, focus on extreme outcomes, battle cries, and public reputation mauling, are constantly admonishing and shaming Type 2’s. Type 2 people are tired. Perhaps most importantly, the pandemic has been especially hard on Type 2’s. While Type 1 club-specialists have thrived by focusing the totality of their efforts to the online arena, their voices have been tearing the Type 2 social-portfolio diversifiers to shreds.

Type 3: Friends and Clubs are weak complements (middle β)

Type 3 people are a lot like Type 2’s, but it is easier for them to compartmentalize the production of their social goods. Type 3 people are often in clubs, but they are rarely of clubs. They’re not joiners. Whether you’re looking at sacrifice-demanding religious cults or extremely-online political culture warriors, if the social associations of the world demand too much of Type 3 people, they are happy to half-ass their contribution or opt-out entirely. They might be on Twitter or Facebook, but they don’t need to reply to anyone. They might go to church on Sunday with the family, but if the minister tells them their sister is going to hell for their sexual preference, it’s just not that costly to stop going. For them clubs will always remain a luxury good, never a necessity.


To be clear this post is an exercise in building a toy model of something big and complex and important. It’s a gross abstraction and shouldn’t be taken too seriously. The process of formalizing your thinking on a social mechanism, however, is something that I think you should take very seriously. Formal models are useful because there is no hiding what your idea actually is. There’s no “sorry, you misread me” or reliance on obscure jargon. Formal models force you to clarify and reveal your thinking to everyone, including yourself. They can open up new avenues for explorations and even generate empirically testable predictions. Formal models have in many ways been the principal force behind economic imperialism in the social sciences. Not because the math is perfect or all encompassing or even correct. It’s because it’s all out there, ready to be judged and dissected and tested. That transparency makes it a useful.

I don’t know if my interpretation of Bo Burnham’s theory of the internet is correct or even necessarily what he intended it to be. But this is one way we can take it a step forward and see what we can actually learn from it. Which is pretty much all I want to do for the rest of my research life, on every topic, all of the time.

Streaming Content: Scattering Vs Dumping

Like a good millennial, I don’t have cable. Instead I have Netflix, Amazon, Hulu, Disney+, YouTube, and a free trial of Apple TV. And before you say that I’m spending just as much as I would have spent on cable, just – no. First, I am not. Second, I have way more capability and discretion than I ever had with cable. Each of these streaming services now has their own studio(s) and competition is causing them to produce some content of exceptional quality. And, they differ in their decisions scatter vs dump. Amazon and Apple TV scatter their new episodes on a weekly schedule. You can still watch the episodes whenever your heart desires once they’re released. But if you are up-to-date, then you must wait 7 days until new episodes are available. Netflix, on the other hand, dumps out a new series all at once. You can spend the afternoon (or morning, or night) watching an entire season of the newest content from a high-end studio.

If we take a look through the way-way-back machine, then we can observe must-see-TV on NBC in the 1990s. Networks followed the scattering model. Most people didn’t own a DVR and on demand wasn’t really a thing except for pay-per-view. VCR (video cassette recorders) were ubiquitous, but people enjoyed watching their shows as they were released rather than later watching a recording. The 90s and early 00s were a special time for NBC in particular: Friends, Seinfeld, Frasier, 3rd Rock from the Sun, and ER were all a part of the weekly line-up – with Will & Grace and Scrubs soon following the finale of Seinfeld.

New weekly episodes that were released during a literal ‘season’ of the year had been the model for as long as television signals had been broadcasted. Several of today’s streaming services still adhere to the 80-year-old practice.

Why?

I’ve got 3 reasons for why streaming services still scatter new releases. The first is the one I that have the least to say about: Buzz. It’s good marketing for a show to be released over a longer period of time. In a world of social media, the longer the time that a show is salient in your life, the greater the opportunity for you to share the show with your friends or for critics to acclaim (or pan, as the case may be). It’s a marketing tactic. If all of the episodes in a season were released all at once, then a show would be in-and-out of your life like a stray ice cube that goes rogue from the refrigerator ice-dispenser. You care for a bit. But soon, it’ll evaporate and never be a concern again. I’m not an expert in marketing. So I’ll just leave it at that.

The second reason is due to the time value of money. The sooner that we can enjoy revenues and the later that we can push costs, the better. It’s true for multiple reasons. Financially, every day sooner that you receive a dollar is an additional day during which you can earn a return by investing it elsewhere. For ease, let’s hold the schedule of costs constant and just worry about the revenues. If a streaming service releases episodes weekly, then episodes can start dropping before the season finale is even completed. There’s nothing that says that the whole season has to be ready by the time the first episode is released.  And, when episodes are released earlier, would-be viewers are sooner willing to sign-up and become paying customers. Releasing episodes weekly allows a studio to increase revenues before the whole product has finished production.

The 3rd and final reason for streaming services to release on a weekly schedule is due to the subscription structure of marginal revenue. Streaming services earn *no* additional revenue per episode viewed by customers. The marginal revenue earned from paying customers comes from subscriptions. That is, each month of a subscription is revenue for the streaming service provider – no matter how many episodes a subscriber watches. Therefore, if a season is released piecemeal, then it increases the number of weeks during which the streaming service receives revenues from the customer. Of course, people could just wait until all of the episodes are released and then subscribe for a single weekend of lethargic binging. But that can only happen when a viewer is comfortable with forsaking the frontier of new video content. That would mean that a viewer is out of fashion and out of the conversation that their friends and co-workers are having. And if this sounds like small potatoes, then keep in mind that such conversations are often about signaling belonging, comradery, and cultural sophistication. Many people are inclined to stay up-to-date on TV, the news, and sports and therefore have a greater willingness to pay.

There you have it. The 3 reasons for streaming by scattering over weeks rather than dumping all at once are 1) More persistent saliency among viewers and potential viewers, 2) Sooner rather than delayed revenues, and 3) More periods for which streaming service can charge their customers for new content.

I only have one explanation for why some streaming services do in fact dump an entire season at once. Netflix does it on the regular and Amazon started doing it in the past several years too. I suspect that they do it as a means of attracting a particular market segment: binge-watchers. There being two players who compete on this margin may make either provider appear less attractive for consumers who desire new, binge-worthy content. But, luckily for Netflix, streaming content providers aren’t in a perfectly competitive market. That content an imperfect substitute means that it’s monopolistically competitive. And, for the moment, that means higher profits. The keen reader will recognize, however, that zero long run economic profits are also implied.

Happy Fourth of July

Like most works of genuis, the Hamilton soundtrack is the result of much deliberate work. I just watched the documentary called “Hamilton: One Shot to Broadway”.

In one of the interviews with creater Lin-Manuel Miranda, he explained how he wrote each character with a different msuical style. George Washington has lines that sound militaristic, as opposed to the synchopated complex raps that Alexander Hamilton spits out. Hamilton is not merely undifferentiated “hip hop” music. Miranda used jazz music to inspire the Thomas Jefferson solos.

If you have already enjoyed the Disney+ recorded version and/or the soundtrack, then I recommend the documentary as an extension of the fun.

Happy Independence Day from EWED!

Created By

There is an old adage, I don’t know who to attribute it to (probably Norman Lear), that theater is for actors, movies for directors, and television for producers. The logic behind it is fairly straight-forward and compelling.

No matter how much the director works to make their vision come to life on the stage, when the curtain rises the production succeeds or fails based on the choices the actors make that night, in that moment. They have all the power. Cinema is a different animal, granting considerably more influence to the director. They place the camera, and therefore the audience, wherever they want. They can demand take after take until they fill the frame with the vision they hold in their mind. They can lean over the shoulder of the editor at every step, telling the story they want to tell. The director does not, by any means, hold unchecked power, but they are the high-leverage determinant of a project’s success or failure.

Television as a producer’s medium is, in my opinion, slightly out of date. When people spoke of the power of producers within television, they were speaking of network television; a landscape with limited channels where few would ever be so foolish to dismiss the power of the median voter theorem. Producers thrived because they made the high leverage decision: what gets to be on television. The actors, the writing, the (ha!) cinematography, those were all 2nd-order concerns, trivial concerns really, that lived in the shadow of the one decision that truly mattered: did you get to be on television?

Whole lines of economic research and theory center on the economies of scale and network effects. If you’ve ever wondered why books about old Hollywood have some of the craziest stories you’ve ever heard, it all comes back to the simple, but rich, economics of a marketplace with massive network effects for consumers (you want to watch what everyone else is watching), enormous fixed costs for setting up a network that absolutely trivialize the marginal costs of producing a show, the nearly zero marginal costs of broadcasting, and the enormous barriers to entry for potential rival networks. Coupled with the enormous status of associated with “being on television”, you arrive at an outcome where the artistic quality of content is almost irrelevant to market success, labor is willing to work for peanuts, and your capital inputs are almost exclusively fixed costs. Who’s the high leverage determinant of outcomes? The person who gets to decide what gets to be put on television.

That world is gone and I am grateful for it. Television is now the medium for writers.

We live in an endless wonderland of channels and content. The median viewer is still well served by a multitude of outlets, but it is within the microbiomes of this new ecology of entertainment that most of us are lured towards. If the defining attribute of the supply of entertainment has become its specificity, then the defining attribute of our demand is its depth. We demand 32 film superstructures with fully fleshed out worlds within worlds within worlds. We demand 6 seasons and a movie exploring the relationships between a community college study group and their metacommentary on film and television and how it has come to define how we view relationships. We demand 10th season callbacks to a sight gag from season 2 that was originally an homage something Truffaut did (which was itself an homage to Hitchcock). We want the story to keep going and going and going, and if has to end, it sure as hell had better not all been a dream.

Showrunners, who are typically the final typewriter that most scripts go through, and their teams of writers are producing the content that we voraciously binge. I don’t (want to) know how many hours of television I watch a year. but I have no doubt that I’m consuming 1000’s of manhours of writing, which makes it hard to complain about the price of HBOMax when I’m effectively paying pennies per hour for good writing. Maybe good writing has always been in short supply, but for the first time it is the the high leverage determinant of the success and failure of outcomes– good writing is the short side of the market. So if you want to make it as a writer, keep writing! But if you want to make a career and pay a mortgage as a writer, I suggest you bone up on your television story structure.

NB: for the couple dozen or so of you who read this, be advised that I am Mike Makowsky, the economics professor, not Mike Makowsky the talented screenwriter. Please do not blame him for my opinions, though I do encourage you to watch his movie Bad Education, which is excellent.

In Defense of Austenland (2013)

Imagine you finish watching The Greatest Showman and immediately watch it all again. The sets are beautiful and the movie inspires you to believe in the American Dream again. Looking for someone who shares your joy, you google movie reviews. Up comes the NYT website and some reviewer has written, “I expected a movie about the circus to have clowns, but director Michael Gracey disappoints.” You would be upset and feel the need to set the internet record straight.

Today I write to defend female filmmaker Jerusha Hess and her delightful directorial debut Austenland (2013). I will not link to or quote the nasty NYT review.

Jerusha Hess is the brilliant writer of Napoleon Dynamite (2004). I loved Napoleon Dynamite so much that I used my screen printing assignment in high school art class to create custom shirts with references to the movie. If you don’t get Napoleon Dynamite, you really don’t get it. It is funny, and every visual feature is intentional.

Austenland is also funny. There are slapstick moments that made me laugh. I also enjoyed little details such as the recurring motif of characters holding fake animals. Ironically, one of the only real animals is a newborn horse foal, who ultimately turns out to be part of a lie. The fake things are real and the real things turn out to be fake. This film is meta. It has layers, like Shrek. It is only inside of the theatrical play within the theme park that the leading man expresses his true feelings.

On the surface, this film is a guilty pleasure romantic comedy. It does deliver on fantasy wish fulfillment, which I think it should. Impressively, it delivers on wish fulfillment while simultaneously delivering interesting commentary on fantasy versus reality.

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Female orphan with superpowers stories

It’s been a heavy week. Here’s something for the weekend to take your mind off of Covid deaths and democracy in peril.

Disney made almost $1.5 billion from the theatrical release of Frozen II in 2019. Netflix reported The Queen’s Gambit (TQG) was one of its most popular shows of 2020. TQG attracted tens of millions of viewers around the world. These two stories are strikingly similar to each other.

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Meaningful Life and The Queen’s Gambit

If you liked Star Wars: A New Hope, and everyone does, then you will enjoy The Queen’s Gambit. It’s like The Mighty Ducks for chess, with a lot more drugs and female coming-of-age.

The main character, Beth, achieves success and seems happy at the end. There is some pretty on-the-nose dialogue about happiness in the show.

Other female characters represent other arenas of achievement. A high school friend, Margaret, has a baby. The baby curtailed Margaret’s freedom and locally-high-status social life. Marriage and children is portrayed as a drag. Margaret’s baby carriage basket contains only clinking bottles of alcohol, which I suppose is meant to indicate that Margaret is even more miserable than the face she presents to Beth when they meet in a store.

Motherhood is not interesting to Cleo, a model. However, even her own achievements in terms of physical beauty leave Cleo unsatisfied.  Cleo says, “Modeling and models are insipid.” Cleo’s life might seem exciting to those of us on the outside of the fashion world, but Cleo wishes she could win at chess and is openly envious of Beth.

A non-Beth female character who is pursuing a life of the mind is Jolene. Jolene is a paralegal who aspires to be a lawyer because she believes that will make her powerful and respected. Jolene envies Beth’s winner status. Jolene has an active role in giving Beth straight talk about drugs and also in loaning Beth money.

Patriotism and religion are despised by Beth and Jolene. They hate the Christians who run an orphanage where Beth and Jolene apparently received an excellent education. Jolene says she was happy when the director of the “Home for Girls” broke her hip and became crippled thereafter.

The irony of the Queen’s Gambit is that the show exalts intellectual ability and yet a social scientist is left with very little to think about. The star of the show is mesmerizingly beautiful. Viewers mostly just stare at her. Here is some honesty from Twitter

In the show, every typical source of meaning is knocked over like a king in checkmate. It all works out for Beth, because of her inimitable talent and adoring fans.

If you are actually thinking, you might wonder what those of us who are not chess champions should do with ourselves. We can’t all become lawyers, and not even all lawyers are happy.  

Some research shows that American women report wishing they had more children.

In the show, Beth is just as beautiful and fashionable as Cleo, but also wins at chess. Some of us mortals can’t have it all. If anyone is wondering, this is the haircut of the woman who might be the most comparable historical female to Beth.

Incidentally, a social science book has recently been written about the economic power wielded by the Cleo’s. You can listen to Ashley Mears on status and beauty here.

Thoughts on “The Social Dilemma” Documentary

I rarely watch things right when they come out. For once, I’m fairly current on something: the Netflix documentary “The Social Dilemma”.

Former employees of tech companies are using their talents to try to make sure that technology takes our society in a good direction. They appear to feel guilty for creating a product that is so fun it has become addictive.

They call attention to the negative effects of social media, which were difficult to foresee. The guy who claims to have created the Facebook “Like” button says that his intention had been to spread happiness. They didn’t realize that the lack of likes could exacerbate teen depression. They worry that in some cases it has even led to suicide.

They mention early on that social media has actually done some good. I know personally someone who was adopted from a foreign company and then reconnected with his birth family by searching his family name on Facebook.  That’s neat.

I think they underrate Facebook as a utility for adults. Parents are using Facebook to notify neighborhood residents of school fundraisers. Adults are using Facebook to sell used furniture.

Facebook is a place to turn for entertainment, but it’s really become more than that for my generation. We don’t have physical address books. We have a phone Contact list and we have our Facebook accounts.

Facebook is not the only service being scrutinized. Former employees of Google and Pinterest, among others, came forward to talk about how those services use customer data to sell advertisements.

One of the good points they make is that the algorithms that maximize ad revenue do not have user well-being in mind and can unintentionally lead to spreading false “news” stories. It’s important for users to know this. I am glad that more people are aware, thanks to the documentary.

The fact that radio is funded by ad revenue never caused us to shut down radio. Maybe it was always more transparent to listeners, and the fact that it is less individualized makes it feel less creepy.

Speaking of creepy, this documentary is creepy. It’s full of creepy music and long pauses in which your mind goes to dark places. They should have made it one hour instead of 1.5 hours. It was very manipulative, which makes sense because it was made by people who confess that they are professional manipulators.

My conclusion is that we should treat social media like alcohol. Most people can live with alcohol, but it kills. Every year, alcohol kills people. The US government estimates that alcohol kills 88,000 people every year in the US. We should be more careful with alcohol and we should all be more educated on the potential for harm.

Some people would be better off if we completely banned alcohol, but currently the strategy is to manage harm through EMTs and medical treatment. There are support groups for people such as Alcoholics Anonymous.

We think young people are more likely to hurt themselves with this dangerous item, so we restrict the sale to youth.

The internet can be very harmful to children and teens. It’s important to point out that respectable social media services like Pinterest are not the only places where kids can go. Kids and “screens” is a whole ball of twine. Regulating Facebook may actually do very little to protect children.

We can do a public health campaign, sort of like what’s going on with sugary sodas right now. I think this documentary is the beginning of a productive conversation.

It’s hard to say that I disagree with the conclusions of the filmmakers. I suspect that I do, and yet they mostly just tell stories and ask open questions and fidget quietly on screen. So, it’s hard to pin them down on precise policy recommendations. Although I resent having to watch them fidget for so many minutes, I also don’t want to sound ungrateful for the effort they made to raise awareness of an issue they feel strongly about.

Let’s have more documentaries, and more blogs, and more in-person conversations about how to make a better world now that the internet genie is out of the bottle. Let’s keep middle school students off of social media. It starts at home and in the neighborhood.