Wednesday, June 18, 2008

There are huge positive externalities to serious, in-depth, investigative reporting. So should the government subsidize it?

With regard to Paul Krugman's June 17th post, "Nothing has been learned":

In the Bloomberg article it states, "He said Obama's plans would subject 21.6 million small- business owners to income-tax increases.". Note the "He said", with the "he" being McCain.

It's just another example of the media's bias against reporting important truths in a non-misleading way and towards being "even -handed", i.e. We'll report the Republicans say, "The Earth is flat", and the Democrats say, "The Earth is round", but we'll never tell you that scientists have conclusively proven it's round.

Part of it, though, is just that the media is under-resourced. They often don't have the time to check with experts. And it's hard for reporters and editors to verify economics facts because they usually have little or no economics expertise themselves.

It's important to note the absolutely enormous externalities associated with the media product -- for good if they do it well, and for bad if they do it badly. In such a case, it can greatly add to efficiency (if it can be done well) for the government to subsidize or otherwise encourage the positive externality creating activity, which in this case is quality reporting. Clearly, the government must be careful about favoring any specific media company, but perhaps some kind of tax credit scheme for non-entertainment news reporting might enhance societal efficiency and welfare.

If structured well, it could give serious news media a lot more resources to check facts with experts, investigate in depth, and just do their job better, leading to a better informed public, which hopefully will elect less W.s. There's no way you can tell me that won't increase efficiency. It also might make it economical to spend the money to hire reporters and editors with greater expertise, like degrees in both journalism and economics.

An excellent example of the great inefficiency that comes from the private sector not taking into account the media's great externalities is what's happening right now at the Los Angeles Times. The new owner, Sam Zell, appears to only care about maximizing his profits, and so is gutting the serious news reporting. This may be ok with the people who buy and read the paper, and with Zell if it increases his profits, but it really harms others not involved in the newspaper buying/reading transaction (that is others who are external to that transaction -- thus you can see why economists coined the term externality).

And those who are external to the transaction are the rest of the country and the rest of the world. Everyone is affected when out of ignorance conservative Republicans are elected, and the costs are great. A good article on the gutting of the L.A.Times serious news reporting is by Washington Post columnist Harold Myerson, "The L.A. Times Human Wrecking Ball".