Is Twitter changing economics?

Posted by: Paul Donovan

24 Jan 2020
  • The rise of social media is changing society. That means it is changing economics.
  • Social media is good at spreading fake news very widely. It is good at spreading fake news very quickly. On Twitter, fake news is 70% more likely to be retweeted.  It takes the truth six times longer than fake news to reach the same number of people. Fake news is also more sensational. It inspires more surprise and disgust in response. [i]
  • This creates risks for investors. Social media adds an unpredictable risk to elections. Fake news about a candidate can change how people vote. Social media makes all forms of protest easier. Companies can be targeted with social media-led boycotts. Such protests are not organized. It makes them harder to predict.
  • The recent pneumonia virus is widely compared to SARS in 2003. The economic cost of a virus is generally from the fear of the disease, not the disease itself. Seventeen years ago social media was essentially non-existent. Social media today gives more opportunities to spread fear. That fear may lead to economic change, which may be costly.
  • The biggest problem is that economists struggle to fight these risks. Economic research has shown that economists are not very good at tweeting.

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