This piece in BusinessWeek argues that social networking might be in a bubble state, ready to pop. That might very well be true. It also argues that it is a huge social waste for so many great minds to be so hard at work trying to figure out how to get people to click on ads.
That proposition seems more iffy. Granted certain malinvestments in every bubble, social networking, and the technology that goes into making it better, is not an economic waste. The first conditions for people to trade with other and expand the division of labor – institutions necessary for social progress – are to have the know-how and means to connect. In this sense, social networking is doing far more than merely allow teens to cultivate friendship networks. It is helping to organize human interests the world over in ways that permit people to discover the highest value uses of their talents.
It is also allowing business to find customers and customers to discover new venues for trading. In the mighty struggle of all of human history to overcome the perpetual problem of imperfect information, this is a wonderful contribution, and a better one than these quant-like minds would make if they were toiling away at government-funded labs doing politically driven research on, e.g. climate change.