Is Facebook Affecting the Economy?

Recently on this blog, I talked about how people sometimes misunderstand the nature of certain websites in this post.  Facebook and Google are sort of like apples and oranges: there is no way to directly compare them.  Now, it seems some people are even willing to blame Facebook for the downturn in the economy.  Sounds funny, but read on:

“While Facebook has been taking off and Zuckerberg has been banking billions, however, a lot of other things have been going wrong. So I created a few charts comparing Facebook’s growth to the unemployment rate, the median price of a home, and the S&P 500 stock index. If you’re a conspiracy theorist, you’ll be very, very suspicious.”

In this article (quoted above), the author notices the correlation between unemployment, low real estate prices, and the stock market on one hand, and the extreme success of Facebook on the other.  Why, he asks, does Facebook seem to do well whenever the economy gets worse?  Is Facebook hurting the economy?

This is one of those cases where my wife, who questions everything, would likely tap this guy on the shoulder and say, in a sort of academic tone, “correlation does not establish causation.” In other words, just because two things happen together all the time, it’s not always easy to tell if one causes the other or the other way around.

For example, when my son was a baby, there was an article in one of our parenting magazines about how children who had night lights in their rooms were more likely to have glasses when they grew up.  Oh no, everyone said!  We can’t use night lights, because they cause nearsightedness!

A year or two later, the recommendation to go without nightlights was rescinded.  Can you guess why?  You may have already figured it out:  Nightlights are purchased by parents who have trouble seeing in their children’s rooms at night, and parents with poor vision tend to have…?  Children who grow up to need glasses (just like their parents do).

So, using that principle, I think it’s far more reasonable to conclude that the relationship between bad economy and Facebook is pretty intuitive.  Facebook is not harming the economy; far from it.  It’s even created some new jobs and new career paths.  The reason that Facebook does killer business when the economy is down is that unemployed people are bored, and bored people love Facebook!

Hence, the economy is influencing Facebook.  It’s not rocket science.