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Brooks Wilson's Economics Blog: None of Their Business

Thursday, December 3, 2009

None of Their Business

The executive and legislative branches of government have found yet another problem that they must tackle.  Consumers prefer the Internet to traditional news outlets to get their news.  Joelle Tessler of the AP describes Federal Trade Commission workshop designed to solve the problem in, "FTC explores future of journalism in Internet age."
WASHINGTON — The federal government is wading into deliberations over the future of journalism as Americans abandon printed newspapers, television stations and other traditional media outlets for the Internet.

With the media business in a state of economic distress as audiences and advertisers migrate online, the Federal Trade Commission began a two-day workshop Tuesday to examine the profound challenges facing media companies and explore ways the government can help them survive.

Media executives taking part are looking for a new business model for an industry that is watching traditional advertising revenue dry up, without online revenue growing quickly enough to replace it. Government officials want to protect a critical pillar of democracy — a free press.

"News is a public good," FTC Chairman Jon Leibowitz said. "We should be willing to take action if necessary to preserve the news that is vital to democracy."
The emphasis added is mine.  Public goods have two defining characteristics: they are nonrivalrous in consumption and nonexcludable.  Nonrivalrous means that my consumption of the good does not affect yours.  A firework display  is  an example.  Nonexcludable means that the person who provides the fireworks cannot exclude others from enjoying the display.  These conditions create free-riders, people who benefit from the provision of the public good without paying.  Economists have demonstrated that the free-rider problem results in under provision of the public good. 

News does not fit the description of a public good.  News papers can exclude people from enjoying their presentation of the news.  You have to subscribe to the paper or buy it on a daily basis.  If the paper is presented on the Internet, the owners can exclude readers from content by requiring subscription and excluding content from search engines line Bing, Google, and Yahoo.  To open their content, they must provide code for search engines to find their content, and allow nonsubscribers to view it.  Then news is a public good but the owners have made it so.  They have found that it is their best option to remain commercially viable.   

The problem faced by newspapers and traditional news outlets face is too much competition.  Subscriptions are falling because consumers can get news in a more timely manner with a greater variety of perspectives for free from the Internet.

Some scholars and politicians see a problem with the variety of news providers.  Cass Sunstein, a brilliant scholar whose work spans law and behavioral economics, believes that Internet provisions of the news can lead to systematic bias where people only read news that agrees with their opinions compounding confirmation bias as if their wasn't enough to go around already.  With liberals only reading the Daily Koss and the Huffington Post, and conservatives only listening to Rush Limbaugh and Sean Hannity, group polarization hardens. 

Ben Van Heuvelen of Salon summarizes the problem in the preamble for an interview with Sunstein in "The Internet is making us stupid."
Freedom of choice is not always good for democracy. This observation is at the heart of University of Chicago law professor Cass Sunstein's book " 2.0" (an update of "" in 2001), which argues that our country's political discourse is fracturing in the information age. Sure, the Internet has been a boon to democracy in all sorts of ways, Sunstein acknowledges -- but if new technology gives us unprecedented access to information, it also gives us more ways to avoid information we don't like. Conservatives are increasingly seeking only conservative views, liberals are seeking only liberal views, and never the twain shall meet...

What gets lost in these polarized times, Sunstein writes, are traditional civic virtues like civility, self-criticism and open-mindedness. He uses experiments and statistical analyses to back that up: One study of hyperlinking patterns on the Web shows that political bloggers rarely highlight opposing opinions -- of 1,400 blogs surveyed, 91 percent of links were to like-minded sites. A central problem, Sunstein argues, is that Americans now think of themselves more as consumers than as citizens. When it comes to the Internet, we demand the right to reinforce our own beliefs without embracing the responsibility to challenge them.
Attempting to read between the lines with a public interest perspective, perhaps supporters of tax subsidies believe that traditional news outlets provide more balanced news and thereby counter confirmation bias, fostering public civility, self-criticism and open-mindedness. 

I expressed my opinion in the title, but must acknowledge that my favorite news program is the NewsHour with Jim Lehrer precisely because it has the civic virtues lauded by Sunstein.  I do not worry as much about the described problems as Sunstein while acknowledging their existence.  My fear is that public subsidies will contaminate the news process and increase government oversight of another industry, one that is to act as a counter weight to government and requires independence from government to do so, and be yet another burden on the "forgotten man," the taxpayer.

What do you think?


  1. From what i have heard is that more people would rather read the facts online than listen to a newscasters ophinion..or at least thats my parents logic

  2. Janet Frei28/4/10 6:46 AM

    Until I got the internet at the surprising age of 27,(Yes, 27: Which is also when I got my first computer)I didn't even read the news. Any news I heard about came about by word of mouth from my parents or friends. Even the 9/11 attacks were told to me by my friends. However, since I get the internet online now, I read the news occasionally and see things I never would have seen otherwise. If the news organizations required subscriptions, I would probably just go without the news again. This is just the way I am.
    So, what the Congress and the different news organizations need to realize is that if they leave online news alone, they are actually doing more of a service to the people of the United States and less of a disservice to the United States of America.