The “information explosion” in the digital era has made attention a relatively scarce resource. Image generated by AI

---

In daily life, as children are drawn to shiny colors, so too are consumers drawn to product reviews posted on e-commerce platforms—both instances of attention allocation. The “information explosion” in the digital era has made attention a relatively scarce resource, rendering the attention economy exceptionally important. The question of how to allocate scarce attention effectively has emerged as a new challenge in the digital age. Economics, a discipline primarily focused on the allocation of scarce resources, has broadened its scope to encompass the efficient allocation of scarce attention to related information processing tasks, thus giving rise to the field of attention economics.

Allocation mechanism of attention

Attention economics posits that attention is a psychological resource characterized by scarcity and competitiveness. When confronted with multiple information processing tasks, individuals must consider how to effectively allocate their attention to improve decision-making efficiency. Attention, originally a term from cognitive psychology, refers to a cognitive process that spans all psychological activities, including sensation, perception, and memory, involving the focus and concentration of mental activity on specific objects. People instinctively allocate their attention based on the principle of efficiency because attention is scarce, or more precisely, cognitive capacity is limited. Faced with an infinite array of choices, it is impossible to attend to everything simultaneously; thus, attention must be allocated judiciously. It is evident that in cognitive psychology, the process of attention allocation reflects the brain’s processes of selection, judgment, and decision-making.

Psychologists have long recognized the scarce nature of attention and the importance of its rational allocation. American psychologist and philosopher William James defined attention in his book The Principles of Psychology, stating: “It is the taking possession by the mind, in clear and vivid form, of one out of what seem several simultaneously possible objects or trains of thought. Focalization, concentration, of consciousness are of its essence.” By the 1950s, psychologists had developed a range of theories concerning attention. According to the filter theory, proposed in 1958 by British psychologist D. E. Broadbent, the capacity of the human brain’s nervous system to process information is limited. Through the mechanism of attention, the brain filters and selects information first, then proceeds to subsequent processing. Psychological research on attention has yielded several key conclusions: attention is limited; the mechanism of attention is subjective, with the brain selectively filtering information according to specific criteria; the cognitive processes of the brain manifest as the rational allocation of attention, reflecting the efficiency with which the brain manages and processes information.

Psychological research on attention has inevitably influenced economic studies, with Herbert A. Simon in particular playing a pivotal role. A cognitive scientist, psychologist, economist, and management scientist, Simon also demonstrated expertise in fields such as computer science. In examining the issue of attention, Simon realized that economics might be heading down an erroneous path in terms of its view of resources. While economics traditionally considers resources, including information, as scarce, Simon raised a crucial question: What if information itself is not scarce? What if we are, in fact, living in a world of information abundance? In his 1971 article “Designing Organizations for an Information-Rich World,” Simon stated: “Hence a wealth of information creates a poverty of attention and the need to allocate that attention efficiently among the overabundance of information sources that might consume it.” In other words, in an information-rich world, information is no longer a scarce resource; instead, the capacity to process information—our attention—becomes the true scarcity. At this point, economics should concentrate on the rational distribution of the capacity to process information (i.e., attention), instead of its traditional preoccupation with the allocation of resources, including information.

Subsequently, Daniel Kahneman, another founding father of behavioral economics, conducted an in-depth and meticulous study on attention. In his 1973 book Attention and Effort, Kahneman found that attention is scarce and the brain rationally coordinates and allocates attention through two cognitive systems: System 1 and System 2. When faced with multiple options, the brain tends to allocate attention to the opportunities perceived as having the highest risk or the greatest returns, which maximizes efficiency. Properly allocating attention enables continuous progress. However, achieving effective attention allocation—such as controlling and maintaining attention, and allocating it to acquire new knowledge and skills in response to new emergencies or uncertainties, requires great efforts. Observing the direction and extent of this effort can provide insights into how attention is allocated. Due to the high cost of deliberate thought, people often rely more on intuition and emotion. Kahneman, together with Amos Tversky, later expanded on this with their development of the Prospect Theory, attributing people’s economic decisions to heuristics and framing effects. This implies that because proper attention allocation involves effort and costs, people often sacrifice some rationality, opting for heuristic and framed decision-making to improve efficiency. This provides a deeper interpretation of Simon’s theory of bounded rationality.

However, the work of Simon and Kahneman did not receive widespread attention initially. In the 1980s, when information economics was at its peak, the focus in economics at the time was the design of mechanisms under conditions of incomplete and asymmetric information. The new economic era facilitated by the internet had not yet begun to significantly influence the perspectives of economists. 

By the 1990s, as the internet increasingly influenced socio-economic landscapes, certain researchers began to keenly observe that the early concerns about attention allocation proposed by Simon, Kahneman, and others could be crucial for understanding this new economic paradigm: the internet economy. 

In a historical study on the concept of the attention economy, Agnès Festré and Pierre Garrouste noted that the term “economics of attention” was first introduced by American researcher Richard Lanham as early as 1994. Lanham later published The Economics of Attention: Style and Substance in the Age of Information in 2006, which is likely the earliest work dedicated to the economics of attention. 

In 1997, another American scholar, Michael Goldhaber, published an article entitled “The Attention Economy and the Net,” in which he similarly introduced the concept of attention economics. Although neither Lanham nor Goldhaber developed formal theories of attention economics, their ideas were rooted in Simon’s theory and focused on how, in the internet era, information itself was no longer scarce, but attention had become the scarce resource. These ideas gained traction and helped popularize attention economics, making it one of the key highlights of the early internet economy. 

In the digital age, the core of algorithms and artificial intelligence is the design and optimization of attention allocation mechanisms. Despite the rapid development of the attention economy in the real world, theoretical research has remained relatively stagnant and underdeveloped. As a result, attention economics, as a theoretical companion to the practical field, has not achieved the prominence and impact it deserves. Recently, however, the field gained renewed attention when George Loewenstein and Zachary Wojtowicz published an authoritative review article titled “The Economics of Attention” which comprehensively summarized and outlined the development of attention economics, marking the entry of the theory into the research horizons of many economists.

Important theories in digital era

Attention economics studies the optimal allocation of attention, a psychological resource. In information-rich environments, information processing tasks become highly complex. According to Kahneman’s dual-cognitive-systems theory, individuals under these circumstances allocate attention through System 1 and System 2. 

System 1 operates on intuitive, perceptual, and emotional mechanisms, driving attention allocation through heuristics and framing effects as discussed by Kahneman and Tversky. System 2, on the other hand, is deliberative, with attention allocation driven by the careful calculation of trade-offs faced by the so-called “homo economicus” commonly mentioned in economics. 

The operation of these psychological mechanisms entails the consumption of resources, i.e., attention allocation incurs costs, and individuals must exert commensurate efforts to do so effectively. These costs are still applicable under those environmental conditions where information is not abundant or even scarce, given that attention itself is inherently scarce. Constrained by these costs, individuals often rely on System 1. System 2 is only engaged in response to complex tasks. The regular switching between System 1 and System 2 mainly serves the purpose of economizing the scarce resource of attention.

Mainstream theories of attention economics inherit Simon’s theory of bounded rationality and Kahneman’s theory of dual cognitive systems. Kahneman extended the scope of his theory to economic decision analysis for the purpose of exploring the cognitive foundation of economic behaviors of members of society. On the basis of the decision-making theories proposed by Kahneman et al., Xavier Gabaix et al. have established and refined the attention allocation theory under the framework of bounded rationality, for instance, the development of the oriented cognitive model. This theory holds that attention is a scarce resource, and although individuals attempt to allocate it rationally, the inherent limitations of rationality often lead to its suboptimal allocation. 

From the perspective of the development of mainstream theories, attention economics is gradually coming to resemble modern behavioral economics. Attention economics posits that social preferences, risk preferences, and time preferences are all outcomes of how individuals allocate their attention. When individuals allocate more attention to social aspects, they exhibit stronger social preferences. If they focus more on potential losses, they tend to exhibit loss aversion. Allocating more attention to the near term results in a preference for certainty, while focusing on the long term leads to the formation of approximately rational expectations. 

Bounded rationality-based attention economics could be extensively applied in a wide range of micro and macro subfields, such as consumer behavior, mechanism design, labor economics, contract and the theory of the firm, welfare economics, industrial organization, finance, education and health, medical care, public economics, public policy, macroeconomics, among others. It can be said that not only has attention economics significantly advanced the various branches of modern behavioral economics in theory but also made its micro-foundations more robust and explicit. Especially in the digital age, whether it is algorithms, machine learning, or large language models, the core of these modern information technologies lies in the design of attention allocation. To a certain extent, the digital economy manifests as an attention economy, and attention economics is bound to grow into an important economic theory in the digital era.

Zhou Ye’an is a professor from the School of Economics at Renmin University of China; Sun Yufan is from the Department of Strategy and Policy Coordination at China Construction Bank. 

Edited by REN GUANHONG