The Social Media Externality

We develop an evolutionary-inspired theory of how social media affects motivation and well-being when individuals evaluate success relative to an endogenously set reference point. In the baseline, the reference point is chosen to maximize the marginal return to effort and learning about one’s productivity is correctly specified. Social media introduces two departures: it artificially raises the reference point by a bias (curated comparisons) and it partially shifts perceived productivity (misleading inferences about one’s potential). These two channels jointly generate a motivation trap: lower perceived success depresses effort, which weakens the informational content of outcomes and pushes beliefs about productivity further down.