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The costs of media bias
A majority of Americans view news organizations as politically biased, creating a strong incentive for firms to try to present themselves as impartial. This paper argues that the desire to appear unbiased leads to information loss. In the formal model, firms withhold information in an effort to appear neutral. It is shown that information loss is exacerbated by competition, policies that regulate content are welfare reducing, and that regulating the size of the market can increase the amount of information revealed. Finally, the introduction of imperfectly informed sources of news, such as blogs, can decrease the incentives for traditional news outlets to provide information, yet they may also enhance welfare when information is being suppressed.
That's from Jeremy Burke of Duke, who is on the job market this year. Paul Krugman often makes this complaint, namely that newspapers often prefer a "He said, he said" story over simply telling the truth. One message of this paper is that the problem isn't so easy to stop. Newspapers aren't just being lax, rather they are maximizing their profits and reputation. The discussion of blogs starts on p.22 of the paper; it is basically pro-blog but the ability of the blogosphere to speak truth can substitute for the requirement that newspapers do so, rather than forcing newspapers into truth.
Posted by Tyler Cowen on December 29, 2007 at 06:10 AM in Economics | Permalink
Comments
regulating the size of the market can increase the amount of information revealed
Right thinking (but not right-wing!) observers have been saying this for years with respect to Rupert Murdoch's News Corp. Now I'm going to duck and cover because I'm sure the readership of this blog is going to go nuclear when they read that an economist has a good model for how media consolidation leads to a market failure. I hope we don't hear: "Consumers want to choose among strongly biased news organizations."
Posted by: MostlyAPragmatist at Dec 29, 2007 7:38:10 AM
Oh and Marginal Revolution exemplifies what can be good about blogs. Tyler brings to our attention many well-supported, well-thought out, contrarian viewpoints that never make it into broadcast media.
Posted by: MostlyAPragmatist at Dec 29, 2007 7:42:47 AM
Hmm, "newspapers often prefer a 'He said, he said' story over simply telling the truth."
That's because different people have different ideas about what the truth is
and a "side1 said, side2 said" gives some view of those differences and leaves it to the reader to sort out "truth."
see Maybe Media Bias Has Become a Dumb Debate , part one from 2003
http://journalism.nyu.edu/pubzone/weblogs/pressthink/2003/10/24/bias_questions.html
(media bias is an ever present debate - & it should be)
the tricky part is that there are usually more than two sides
which can muddle a story
Posted by: at Dec 29, 2007 7:55:14 AM
Why does the antecedent necessarily follow in the first statement? People crave the solidarity that openly partisan news organizations provide, only paying the slightest lip service to whether or not they are "impartial" or not. They prefer to use "impartiality" as a rhetorical tool, rather than any revealed preference. The blogosphere's fractured nature illustrates this much better. Fox News doesn't suffer business from its thinly veiled conservative advocacy.
Posted by: Billare at Dec 29, 2007 8:38:10 AM
I strongly think American commercial news is much worse than NPR/PBS news. At least as far as accurately informing people of information with policy implications. Its a paternalist view but I think in this case the market fails by giving people exactly what they want.
Posted by: Michael Foody at Dec 29, 2007 9:50:20 AM
The "news" reported by the news media is almost always fact-driven. But a good deal of space and airtime is given over to interpreting the news -- its significance, whether it's good, bad or indifferent. News reporters attempt to convey a narrow range of opinion that battles for something like majority or consensus acceptance among the relevant stakeholders in a story.
For news reporters to declare one opinion "true" and another "false" when in fact it is widely debated among the relevant experts would be to inject their personal opinions into the story. That's great, but it is not news reporting. It is something else. That something else may be more entertaining or in its own way more informative. But it is not news reporting.
Posted by: Kevin B. O'Reilly at Dec 29, 2007 10:40:11 AM
It bears repeating that up until about the second quarter of the 20th century, all newspapers were highly, openly partisan. "Unbiased" papers are a relatively recent (and short-lived) phenomenon.
In any event, I'm expecting the news industry to change dramatically over the next 10-20 years. More and more people will piece together their daily news intake from a multitude of (mostly online, mostly "free") sources. One development I foresee is a combination newspaper-blog, in which news stories are coupled with informal comments by a vetted group of posters.
Posted by: jp at Dec 29, 2007 10:47:59 AM
As a naive layman just initiated to the beauty of economic thought, here's a dilemma that often bothers me:
Let's say I make a hypothesis. "Media is biased" or "Human life is overvalued" or "CEO salaries are inflated"
There always comes along someone who says: "Hey! Those values or wages are market determined! How can you call them overvalued? Who are you to make ad hoc prescriptions to the market"
How does one counter that kind of reasoning, in general? Further, if that is valid reasoning then it is depressing since it renders most policy-making and debate irrelevant....
Any advice for this economic novice?
Posted by: Raul at Dec 29, 2007 10:51:59 AM
"Its a paternalist view but I think in this case the market fails by giving people exactly what they want."
I think that's correct. Most people, especially in politics, suffer from heavy confirmation bias. They demand news that confirms their priors.
But those who prefer accuracy can (and do) demand it directly, and can also put the different biased sources together to form a relatively accurate picture.
Posted by: Keith at Dec 29, 2007 11:41:50 AM
I, for one, would much prefer "he said, he said" to Krugman's "truth" pretty much any day of the week.
Posted by: Kieffer at Dec 29, 2007 12:44:35 PM
"How does one counter that kind of reasoning, in general? "
Market's don't always generate socially optimal outcomes, they just usually do. In the presence of taxes, externalities, transaction costs, distorting laws, lack of information, and game theoretic concerns stemming from a small number of competitors, markets can fail to converge to optimal resource allocations. See the General Welfare Theorem(Coase's theorem is a good read too).
So when faced with an argument like "The values of a biased media are determined by the market", you could counter with "The economies of scale and network effects inherent in the reputation market prevalent in the media industry create enormous transaction costs that may lead to socially undesirable resource allocations"
Solutions to this problem are rather complicated, and more research along the lines of this paper are necessary for us to come up with a real fix. Beware feel good common sense approaches to fixing market failures, they often have unintended consequences.
"if that is valid reasoning then it is depressing since it renders most policy-making and debate irrelevant...."
Why is that depressing to you? Public choice and decision making is fraught with game theoretic issues, and I find it very fortunate that very few things need to be determined democratically.
Posted by: David Shor at Dec 29, 2007 1:21:16 PM
Thanks David: Depressing, in the sense: If markets are efficient, players are rational, and have acted in their best interests; then that leaves very little to debates on public policy like this blog....or did I miss something?
Posted by: anon at Dec 29, 2007 1:54:29 PM
"I strongly think American commercial news is much worse than NPR/PBS news."
That may be, but it does not follow that NPR/PBS is acceptable.
Someday maybe I will hear an NPR report that doesn't carry the same message as a DNC press release. Maybe.
Posted by: RJ at Dec 29, 2007 6:52:33 PM
"Its a paternalist view but I think in this case the market fails by giving people exactly what they want."
The "market" is between the news/entertainment companies and advertisers. They may be giving advertisers what they want but it does not necessarily follow that they are giving people what they want. Change everything to pay per view -- let the market be between consumers and producers and see what happens.
Posted by: Jim at Dec 29, 2007 6:53:54 PM
I am just still getting over Krugman having the nerve to refer to any news media as "biased." What a guy! If only everyone were as unbiased as Paul.
Posted by: Linda at Dec 29, 2007 11:26:23 PM
Is one network especially fair and balanced?
Roger Eugene Ailes (born May 15, 1940) is the president of Fox News Channel and chairman of the Fox Television Stations Group. He was a media consultant for Richard Nixon, Ronald Reagan, and George H. W. Bush, as well as for presidential candidate Rudy Giuliani’s first mayoral campaign...
'nuff said.
Posted by: A student of economics at Dec 30, 2007 1:28:00 AM
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