TikTok Panic and the Physical Fallacy

Yes, content creators do generate "real" value for consumers.

Last week, The Hill’s Ameshia Cross and Batya Ungar-Sargon discussed a pump and dump scheme carried out by TikTok influencers to the tune of $100M. The two hosts’ justified castigation of the fraudsters unfortunately turned to a much less defensible description of entertainers on the app providing consumers with no “real” economic value. Inevitably, arguments for reshoring American manufacturing followed. After all, so the argument went, TikTok is an intangible, immaterial, socially corrosive fad. Steel plants, on the other hand, are dignified, noble, physical, and real.

First, I would like to state forthrightly that I share Ameshia and Batya’s distate for the particularly addictive social media app. I subjectively find the entertainment value I derive from TikTok fails to compensate for the monumental opportunity cost of time, attention, and focus. I also feel this way about Instagram, Facebook, LinkedIn, and Twitter. Since all of these apps fail to pass my marginal cost-benefit analysis, I have none installed on my phone. Isn’t freedom great? I chose not to engage with things I have determined to be net negative for my flourishing.

However, other people do derive value from TikTok (and similar apps). Whether their time is less valuable to them than mine is to me, their opportunity cost less, or the happiness derived from funny vertical video clips that much greater, many people enjoy using TikTok. Who’s to say that their enjoyment of the non-physical good of a TikTok video—a laughter service, if you will—is any less real than their enjoyment of a physical good, e.g., a soccer ball or, less healthfully, alcohol? Would Ameshia and Batya call for government to put an end to soccer ball manufacturing or distilleries? The latter is certainly at least as addictive and socially detrimental—however this is to be objectively quantified, I haven’t the foggiest—as people distractedly and obsessively watching videos on their smartphones.

The two Rising hosts would not call for the state to shutter factories that make “unnecessary” and even unhealthful goods, nor would they denigrate the labor force involved in their production, so long as the goods are tangible. This is rather ironic, considering neither Ameshia nor Batya are in the making-physical-stuff business. They are knowledge workers who render the immaterial service of providing news coverage and political commentary. They are digital content creators just like the TikTokers they uncharitably and inaccurately describe as not providing “real” value.

Thomas Sowell destroys the physical fallacy pithily in Knowledge and Decisions. For those readers uninterested in my summary thereof, I recommend the following spoken explanation from the titan himself:

In short, matter is neither created nor destroyed, but changed from one form to another. The farmer creates economic value not by synthesizing soil or seeds ex nihilo, but by arranging those two pre-existing inputs in a more valuable manner, i.e., planting the seeds in the soil after tilling it. Perfectly analogously and no less legitimately, the merchant and financier create economic value by allocating goods and capital, respectively, where they are most highly valued in time and space. Similarly, the virtual content creator and service provider create economic value not by magically endowing the earth with more matter—save for asteroids from space and rocks brought from the moon, the earth is a closed system—but by arranging inputs—photons, audiowaves, etc.—in a more valuable manner, i.e., to communicate information, make someone smile, cry, laugh, etc.