Google: Estate Agents or Auctioneers?

I did my first degree in Economics [at Leeds University] and before going on to study Political Economy I was, like all economics students, immersed in neo-classical economic thought from Adam Smith to Milton Friedman.   Economics was a pure, logical and  rational thought process.    That is until it came to explaining the irrational real world where you would have to put in place a series of caveats which amounted to saying "markets would work like this but there are impediments to it doing so because of x and y…".  The ideal upon which the world faltered was ‘Pareto Optimum‘ : a market where every buyer and ever seller has perfect knowledge and where maximum efficiencies are gained.  Traders meet at the point where the can maximise their own benefit at that point in time and space.  It’s analogous to the auction house where you know what is being sold and what  others are willing to pay.    

Pareto Optimum was an ideal, we all knew that.  But it was the premise upon which so much of economic theory, purporting to explain the world, revolved.  Having recently read John Batelle’s post on Google and Yahoo’s role in search media and beyond… it got me thinking about the role of search in society and in particular in relation to the idea of Pareto Optimum.   As real-time buying and selling is now commonplace amongst ‘ebayers’ online, kelkoo, froogle and dealtime offer searches for best prices on products to what extent are we closing the gap toward some sort of perfect knowledge of the marketplace?  Are these search tools our modern day  public service… helping us to find what we want, when we want it?  Aiding the market for the benefit of all? Google’s possible move toward a model of  uniting buyers and sellers of products only looks to reinforce this:

Google is clearly in the process of declaring its position relative
to the content industry, and from what I can tell it is this: We will
become your distribution sugar daddy. We’ll be Switzerland – allow us
to index your content, and when people find it through us, we’ll enable
you to sell it. This approach became more apparent with the discussion
and disclosure of a recent patent in Larry Page’s name that creates a system by which media is discovered and then paid for.   

In such a system, one can imagine that Google has cut deals with any
number of content owners and somehow incorporated that content into its
index. When you search for something, let’s say "usher," the actual
content that Usher has created will come up in the results, and thanks
to the distribution deals Google has cut, you can buy that content
right there on the spot. Everyone gets paid!

This certainly has ramifications for the idea of a digital divide –
knowledge is power.  However, as John alludes to, it is not that simple partly because the
means through which we are served  search results online is
never made explicit – the Google algorithm is Holy Grail protected by
the Google Knights Templar.  How are Google, being a technology led company, going to create an algorithm that will appeal to corporate big business and yet still be objective  is unclear.  Any messing with their results needs to be transparent but that idea is under threat. 

So what am I getting at?  Search is helping us to be better informed and to attaining ‘efficiency’ in the market but it is not perfect because the auctioneer, in this case Yahoo, Kelkoo, Dealtime and Google  are not transparently detailing how they derive the results.  In future search as the intersection of buyer and seller – as a means for transacting – is going to come under increasing pressure to make sure big business results are served up [e.g. Pixar’s official outlets for The Incredible’s [google search] rather than some unofficial source] without jeopardising the trust which is essential for people to use the service. They are treading on dangerous ground.  In playing with information which could be useful, not perhaps telling you the whole truth, they are in danger of becoming Estate Agents instead of Auctioneers.

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