What is the attention economy?
The attention economy treats human attention as a scarce resource that publishers and advertisers compete for. Its sources run from a 1971 chapter to a 1997 paper, a history of the newspaper trade and two economic models.
Answer to the question
What is the attention economy?
The attention economy is the idea that, when information is abundant, people's attention becomes the scarce resource that publishers, producers and advertisers compete for and trade. Herbert Simon described the scarcity in 1971, and Michael Goldhaber argued for the name in 1997.
Key takeaways
- Herbert Simon (1971) argued that abundant information uses up the attention of its recipients, so attention has to be allocated among competing sources.
- Michael Goldhaber (1997) proposed that information is worth something only when someone attends to it, and that networked economies run on competition for attention.
- Tim Wu (2016) dates the trade in audience attention to the New York Sun of 1833, a newspaper sold for a penny and paid for by advertisers.
- Christopher Sims (2003) models decisions made through a channel of limited capacity, and Josef Falkinger (2008) models firms competing for consumers' limited attention.
- The term describes how scarce attention is allocated and paid for. None of the sources cited tests what the allocation does to individuals.
A New York printer once began selling a daily newspaper, the Sun, for a penny, well below the price of rival papers. Tim Wu, a legal scholar, reads that launch as the first working version of the attention economy: readers pay little, and advertisers pay for the readers' notice. The phrase is much newer than the practice, which on Wu's account ran for well over a century before anyone gave it a name. The Sun reached its readers in New York, and Wu treats it as the template that later media copied for the next century and more.
How Simon's scarcity of attention became the economy Goldhaber named
Simon started from a plain observation about information. In a chapter in a volume on computers and the public interest, he argued that a wealth of information produces a shortage of whatever the information uses up, which is the attention of the people who receive it. His conclusion was that attention has to be allocated among competing sources, and that treating more information as always better is a mistake. He likened the problem to a fixed supply of food shared among a growing population of rabbits. He added that the cost of a message includes the time spent receiving it, which can exceed the cost of producing it.
Simon wrote about organisations and managers, and the phrase attention economy came later. His chapter still supplies the premise the later attention economy rests on. If information is abundant and attention is fixed, then attention has to go somewhere, and many parties have reason to want it. The same scarcity operates at the scale of a single room, as [Why You Hear Your Name in a Crowd](https://thewhyweproject.com/articles/why-you-hear-your-name-in-a-crowd) explains.
If information is abundant and attention is fixed, then attention has to go somewhere, and many parties have reason to want it.
Michael Goldhaber took the idea of scarce attention to the Internet in a paper for First Monday in 1997. He proposed that as people spend more of their lives on networks, the economic rules that govern those spaces should suit them, and that the rules in question are those of an attention economy. In his account, information is worth something only when somebody attends to it, and every transfer of information needs attention to flow back the other way. Because each person has only so much attention to give, it stays scarce even as information multiplies. The paper is an early attempt to say what networked life would mean for economics.
He also argued that in advanced economies material goods were nearing saturation, so that growth would come increasingly from competition for attention. The terminology and the framing of attention as something that can be given, held and competed for stayed in use, and the attention economy has been discussed in those terms since.
How economists build attention into models of choice and competition
Economists did not wait for the label. Rational inattention, set out by Christopher Sims in 2003, starts from an assumption that decisions rely on observations that reach a person through a channel of limited capacity, and the limit works much like an adjustment cost or a signal extraction problem in standard models. The paper puts into the formal machinery of economics the scarcity that any attention economy assumes. The costs of dividing attention at work are a separate matter, covered in [Why Attention Residue Lingers at Work](https://thewhyweproject.com/articles/why-attention-residue-lingers-at-work).
The firms' side comes from Josef Falkinger, whose 2008 model applies findings from the psychology of attention to ask how consumers' limited attention shapes competition between firms. In the model, whether an economy counts as information-rich or information-poor comes out of the analysis rather than being assumed, and when consumers have attention to spare the economy behaves like a conventional competitive one. The paper examines how better information technology, wider integration across countries and the media affect product variety and the effort firms put into seeking attention, and it goes on to consider welfare and policy.
The two models also treat attention differently from Simon and Goldhaber. In Sims's paper it is the capacity of a channel, a quantity with a precise definition in information theory. In Falkinger's model it is what consumers may or may not have to spare, and firms compete to attract it. For Simon it was the time a recipient spends on messages, and for Goldhaber something one person gives and another receives.
The trade Wu traces to a New York penny newspaper
Wu's 2016 history, The Attention Merchants, gives the attention economy a lineage. He argues that selling the attention of an audience to advertisers is an identifiable trade with a birth date, the Sun of 1833, and that the same trade moved into the poster, the radio hour, television and then digital media. Each new medium, in his account, began by capturing attention cheaply and then settled into the arrangement the Sun had pioneered. The later stages are Wu's own interpretation of a repeating pattern, while the Sun itself rests on standard press history.
In the attention economy as Wu describes it, there are two kinds of customer. The audience receives content or a service at a low price or none, and the advertiser receives access to the audience's attention. That makes attention the unit being traded, which is why the attention economy comes with measures such as audience size and time spent. Wu also describes a counter-model, businesses funded by subscription, where the audience is the paying customer. What the audience gives up and gets in the free version is taken up in [What You Actually Pay for Free Apps](https://thewhyweproject.com/articles/what-you-actually-pay-for-free-apps).
Wu does not present the merchants as a plot. His closing argument is that nothing can be judged on its merits until it has been noticed, so a contest for attention comes before every other contest, for products, candidates and ideas alike. On that reading, winning notice comes first.
Common questions
What is the attention economy?
The attention economy is the idea that, when information is abundant, people's attention becomes the scarce resource that publishers, producers and advertisers compete for and trade. Herbert Simon described the scarcity in 1971, and Michael Goldhaber argued for the name in 1997.
Who coined the term attention economy?
Goldhaber argued for the term in a 1997 paper in First Monday. The scarcity idea behind it is Simon's, from 1971. The sources cited here do not settle whether anyone used the exact phrase earlier.
How does an attention economy make money?
In the model Wu traces to the New York Sun of 1833, the audience pays little or nothing and advertisers pay for access to the audience's attention. Subscription is the alternative arrangement he describes, with the audience as the paying customer.
Is the attention economy a scientific finding?
No. It is a framing from economics and media history. Formal models of limited attention, such as those by Sims in 2003 and Falkinger in 2008, build the scarcity into their assumptions, and none of the sources cited here measures effects on individuals.
Sources
Wu, T. (2016). The Attention Merchants. Seed book.
Simon, H. A. (1971). “Designing organizations for an information-rich world.” In M. Greenberger (Ed.), Computers, Communications, and the Public Interest. Baltimore: Johns Hopkins Press. https://openlibrary.org/books/OL5078472M
Goldhaber, M. H. (1997). “The attention economy and the Net.” First Monday, 2(4). doi:10.5210/fm.v2i4.519 https://doi.org/10.5210/fm.v2i4.519
Sims, C. A. (2003). “Implications of rational inattention.” Journal of Monetary Economics, 50(3), 665-690. doi:10.1016/S0304-3932(03)00029-1 https://doi.org/10.1016/S0304-3932(03)00029-1
Falkinger, J. (2008). “Limited attention as a scarce resource in information-rich economies.” Economic Journal, 118(532), 1596-1620. doi:10.1111/j.1468-0297.2008.02182.x https://doi.org/10.1111/j.1468-0297.2008.02182.x