Do search engines fulfill their economic function?

Posted by Alexander Ginzburg on August 19, 2007
Filed Under Search Engines |

Or, what a historian and a penis enlargement expert have in common?

As I’ve mentioned in my previous post, there are two actions to be done by the mediator in order to satisfy both the suppliers and the consumers – transfer suitable information against appropriate reward. For example, a book publisher publishes the best books on subjects that the readers wish to read, people buy books that suite their taste, and eventually the publisher rewards the writers of these books. Whether the publisher hasn’t chosen the best writers, or the writers aren’t awarded sufficiently, the quality of the books will suffer because the best writers won’t write them.

In order to demonstrate the case of the Internet, I’ll use an example. Like a true economist, I’ll simplify it with an assumption that money is the only incentive that motivates the information producer (I’ll refer to other incentives in my future posts, especially to philanthropy). In one case, let’s imagine a plastic surgeon that is the leading expert on penis enlargement methods. He knows that if he shares his knowledge on a website that appears among the first results in Google, he will be rewarded for his information via advertising. However, he also realizes that the fact that he can supply information of a supreme quality isn’t enough to place him high among search results for such a commercial keyword. Therefore, his information won’t be consumed to a degree that will reward him sufficiently, so he’ll probably decide to keep his knowledge off the Internet. In another case, let’s assume that this man is a leading Historian that specializes in Italian history during the Renaissance period. There is no doubt that he could make a significant contribution to the quality of information available on the Internet on this subject. However, he knows that even if he succeeds to become a well-known authority on the subject and to climb to the peak of Google’s priority list, he won’t be financially rewarded due to the non-commercial nature of the field. Consequently, he’ll keep his distance from the Internet.

In both scenarios the Internet loses high quality information due to the inability of the search engines to accomplish their purpose. In the next posts, I’ll try to understand the reasons for the failure of the search engines to realize each one of their two tasks.