Misleading Digital Giant Claims About The Economic Impact Of Their Cable Investments

Digital Giants regularly boast about the impact of their network investments on humanity's welfare. Undoubtedly, good Internet infrastructure leads to new services and raises productivity. It is essential to a modern society. But quantifying how much subsea cables boost real GDP is a hopeless statistical task because economic models often struggle to explain growth and economic development. For example, more Internet services is both a cause and also an effect of economic growth. As incomes rise, demand for Internet services increase in terms of news consumption, entertainment, and the general quest for information. Give a poor African nation better cellular coverage and higher data throughput and TikTok consumption rises. But it would be a stretch to claim TikTok generates net economic growth. Furthermore, most Internet services cannibalize at least to some extent their non-Internet counterparts such as newspapers, book sales, phone calls, library visits, etc. Disentangling cause and effect is a huge statistical challenge. Statistics is fundamentally about finding correlations that agree with a theory's predictions. 

A factor being both cause and effect is so common in economics as to have bedeviled the profession for the last several hundred years. An example is money supply growth. In many economic models money supply is an exogenous variable that drives the business cycle. But it also true that banks create money via lending and hence money is also endogenous. As incomes rise, people hold more highly liquid assets like money. In this case income is the cause and money holding is the consequence. 

The Digital Giants would do themselves a favor by stopping the practice of providing flimsy estimates that have no real foundation or accuracy.  The case for subsea investments is clear without rigged consulting group forecasts. I know these consultants are just coming up with estimates based on their judgment and when the reward for a high estimate is a good payout and future business, the estimates will be biased upward. 

https://tech.facebook.com/engineering/2022/2/economic-impact-subsea-cables/



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