The other day, I loaded a video on YouTube, and was met with a 20-second advertisement. “You don’t have Adblock?” my friend asked, astonished. “You gotta download it. Gets rid of ads,” he said, as if it were that simple.
Sure, if my friend uses Adblock, YouTube won’t notice, and he gets to avoid ads. But what happens if everyone uses this logic?
- A significant portion of YouTube users—say, 10 percent—download Adblock.
- Advertisement vendors realize that their ads aren’t reaching as many people. So, they’re not willing to pay as much to have their ads shown. Perhaps a 20-second ad on a popular video used to fetch $1000, but now, only $900.
- YouTube’s losing significant revenue. They might implement longer or more frequent ads, but this only causes more people to get Adblock, which causes the price of ads to slide further.
- Eventually, YouTube is making so little money from ads that they’re forced to change their business model. They might reduce the size of their server network to cut overhead, increasing load times. Or they might start charging for a YouTube Pro membership. Users would have to pay to view videos over a minute long, or to view over 20 videos per month, or to upload.
And that’s how Adblock could ruin YouTube for all of us. Looks like there really is no free lunch!
Of course, every one YouTube user is just a drop in the bucket. If I downloaded Adblock, the chances that I alone would cause YouTube to change their business model are astronomically low. So why don’t I? Maybe it’s my sense of morality, or maybe I just can’t be bothered because I don’t mind the ads.
What I do know, though, is that I would support a ban on Adblock. If we can all get together and make sure no one uses the software, we can ensure that YouTube stays free. Thus I would support a law that would reduce my own freedom.
The general idea of Adam Smith’s “invisible hand” argument (1) is that, when people act according to their selfish interest, their actions simultaneously serve to better society. For example, a man opens a bakery because he wants to make money. He does make money, and he benefits, but so do all the townspeople who get to purchase and eat his delicious bread. Collective action problems are the exception to this rule. In these cases, when people act selfishly (buy Adblock), everyone loses (YouTube Pro). The only way to solve the collective action problem is to enforce cooperation via the law (ban Adblock). Interestingly, in collective action problems, collectivized decision-making (like the decision to ban Adblock) achieves the pareto optimum. However, outside of collective action problems, collectivized decision-making causes market failure (e.g. unions).
The real question we should be asking is: what exact circumstances produce collective action problems? Why do they arise in some cases but not in others? Only in a collective action problem can an individual act such that he enjoys the positives of that action, but distributes the negatives among everybody. And by distributing the negatives, the individual himself either greatly reduces his downside (like in pollution) or greatly reduces the chances of ever seeing a downside in the first place (like with Adblock–YouTube is probably not going to start charging anytime soon). I guess it’s the very ability to distribute consequences that permits the collective action problem.