Monday, 18 October 2010

Why we need an IKEA Champion now

The BBC's excellent technology correspondant Rory Cellan-Jones reported on the Today programme this morning that this week is Get Online Week. I have to say that I was unaware of this effort until this morning.  Nor was I aware that we had a Digital Champion, Martha Lane Fox, who promotes it (with a mix of private and public money).  She has launched her Manifesto for a Networked Nation which aims to "get everyone of working age and those preparing for retirement online within the lifetime of this parliament".

Cellan-Jones reports the information provided by the Champion: "More than nine million Britons have never used the internet, and they tend to be more elderly and less well-off. Events promoting web use will take place across the UK. The campaign will hammer home a simple message, that the internet can save you money. Research by UK Online Centres, which was set up by the government to provide public access to computers, found that a third of new internet users reckoned they had already saved more than £100 by being online."

The number of eBay, Facebook and Google users (let alone of online pornography) makes me think it's unlikely that people are having much trouble logging on.  So let's have a champion to help with something that's really difficult.  I mean of course putting up IKEA furniture.  To test this proposition, I tried cutting and pasting IKEA for "online" and "internet" into the paragraph above.  It reads:

"More than nine million Britons have never used IKEA, and they tend to be more elderly and less well-off. Events promoting IKEA use will take place across the UK. The campaign will hammer home a simple message, that IKEA can save you money. Research by UK Online Centres, which was set up by the government to provide public access to computers, found that a third of IKEA users reckoned they had already saved more than £100 by using IKEA."

This IKEA test suggests to me that Online week is a waste of money. Why don't we use this public money instead to help with the Science Budget the evidence for which suggests very high returns?

For students of economics, I offer the following thoughts.  Economists genererally justify public subsidies if the activity produces public goods (R&D) and taxes if public bads (carbon).  What public good does this campaign produce?  Internet usage confers a private benefit to the user, which is why we generally trust users to get on without public money.  But there is some public benefit over and above that since new use of the internet improves things for others (a "positive externality")by expanding the network with whom one can communicate. How much is that positive externality?  In the Competition Commission's 2002 inquiry into Mobile Phones, this argument was used by the Phone companies.  They argued it that monopolistic termination charges (charges levied by operators to users on other networks) were socially optimal since they helped subsidise handsets so expanding the network.  Mr. Justice Moses, the High Court judge who eventally had to adjudicate on this, awarded a fraction of a penny per call for this social externality.  So I don't think this is a wise spend of public money.

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