Media Scale Econ

On Friday I endorsed low-discretion subsidies of political investigative journalism, like the old postal subsidy.  This seems a good idea in general, but seems especially relevant given recent reduced demand for traditional journalists.

Now one might argue that even if traditional media is shrinking, total journalism effort is no less than before; journalism is just moving away from traditional professionals and toward amateurs like bloggers.  And I might even grant this point.  Traditionalists might respond that experienced professionals are more efficient investigators than amateurs, and while this is probably true, I don’t think it is an especially strong argument.

A much stronger argument, I think, centers on scale economies in media reputation.  Reader demand for small independent bloggers not doubt depends in part on their reputation for reliability, but the rate at which an individual blogger’s claims actually get checked is probably rather low.  Furthermore, an independent whistle-blower who claimed that a blogger was in error might itself have a questionable reliability.  These factors weaken the incentive for an independent blogger to avoid saying things that won’t check out.  Also if this blogger happened across something really big, where making a sloppy claim might bring him or her a huge bump in attention, that blogger might reasonably be tempted to lower his or her usual standards.

A large media organization, in contrast, makes many checkable claims on a daily basis, leading to a high rate at which claims actually get checked.  Claims that are checked by other large media organizations bring a more credible threat of embarrassment.  Furthermore, a topic has to be much bigger before it will substantially tempt a large media organization to lower its standards in order to gain more attention via sloppy reporting. Large media organizations hold their journalists to higher standards, and frequently monitor compliance with those standards, because they have less to gain and more to lose by saying something that checks out wrong.

In order for a free press to help discipline our political process we need more than a media able to investigate suspicious behavior, and allowed to tell the public when they make surprising discoveries.  We also need a media that the public can reasonably believe in such situations.  If the public only hears a cacophony of conflicting claims, they’ll tune it all out.

In the absence of robust media prediction markets, I don’t see an alternative to large media orgs to serve this crucial consensus function.  Perhaps amateurs will displace professionals in doing investigations, and perhaps amateurs will report first on important stories, but it will take endorsements by big orgs with big reputations to protect to make us believe those reports.

So we especially need whatever low-discretion journalism subsidies we adopt to encourage not just journalism in general, but large media brands in particular.  Reputation scale economies make them a crucial link in our political info chain.

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  • Jonathan


    I found this post somewhat disappointing, because I think you missed two critical aspects of accountability in the blogging world.

    First, like just about any writers, bloggers are always trying to get people to read what they have to say. Traffic being driven to their blog can bring direct financial benefits through advertisements, but more fundamentally, it leads to recognition and prestige as a “good blogger.” Over time, I’d expect that blog readers would develop trust in those sources that prove themselves reliable over time — like, say, Marginal Revolution or The Daily Dish. Knowing that to be the case, and knowing that bloggers dig prestige as much as the next guy, it seems that the incentives in the blogosphere are aligned to promote accuracy and trustworthiness in general.

    You note that competition in traditional media leads to fact checking and general accuracy, but I’m curious why it doesn’t seem obvious to you that the same outcome can and does exist with amateur journalists. This is particularly puzzling in light of the fact that the blogosphere has many more participants, and much more competition, than traditional media.

    Of course, like in any market, the drive for recognition can create perverse incentives as well. But I think that the blogosphere provides significant incentives for others to check potential abuses by bloggers. Suppose a well-read blog, we’ll call it Overcoming Bias says something that is factually incorrect or suspect. In addition to lay comments (which admittedly may or may not be read by readers of the blog), the prospect of “catching” the blog post’s author in his or her misstatement gives a reason for others to blog about the error. After all, catching somewhat prominent in an error or intentional falsehood would help drive more traffic to the fact-checker’s site, and his or her credibility. If the blogger who makes the error is well-known enough, sites like Digg can make commentary on even obscure blogs “go viral,” spreading news of the falsehood far and wide. Traditional media works similarly, I think — but again, the blogosphere is more competitive, and therefore we’d expect the incentives for error-catching by others to be greater.

    There may be no guarantee that all errors would pan out this way (just like there’s no guarantee that speculators would ameliorate mispricings among firms with differing numbers of female executives), but it seems to me that the blogosphere has far more checks than you’re willing to give it credit for. And if that weren’t true, I think it rather unlikely that so many people would be replacing the Big 3 nightly news channels for blogs as their main source of news.

    • I can easily imagine people replacing big media with fragmented media, even if the latter were less reliable; reliability isn’t really that important to most people. As you say, people have a stronger incentive to find errors in the more well-known, and the biggest media are the most well known. So as media fragments, incentives to catch errors are less.

      • Kenny Evitt

        Some bloggers / blogs seem pretty ‘big’ to me. And even when blogs publish less reliable information, it is so much more easily and quickly corrected thru the wider blogging community. [And even more easily corrected by the original publishing blog itself – something done badly by print media.] I don’t share your concern that we’re losing such an important public good – certainly large media organizations are more easily ‘captured’ in the same sense that regulated organizations ‘capture’ their political overseers.

  • There was a very interesting series of posts at Volokh on the postal subsidy for newspapers you mentioned.

    I think there are some problems with concentrated media. From what I’ve heard, the media sat on information about the ailments of FDR and JFK. Mickey Kaus kept banging the drum on bhtv about John Edwards, and it turned out he was right that the Times sat on the story until the Enquirer revealed it. One might argue that those stories weren’t important (or perhaps even harmful) for the public to hear, but that seems very subjective. It’s much harder to keep a lid on things if there are a proliferation of small media outlets.

    This issue was a particular obsession of Mencius Moldbug, who presented his Revipedia and Resartus ideas as destroyers of our small-c constitution. I thought the ideas were dumb, and anything that starts out with his motivation of countering Dem Ebil Media Libruls (apparently including Wikipedia) was doomed to a fate like Conservapedia. I’m a more indifferent laissez-faire sort. Perhaps the public doesn’t place a high value on being politically informed, as opposed to entertained, so how big a loss would it be if they just consumed unverified gossip and rumors? From what I’ve heard, publicizing “pork” just makes the congresscritters who dole it out more popular. Maybe if the public was more distracted unilateral free-trade and geo-engineering might be crammed through?

    On a somewhat related note, I recently preserved an old Radar article on how the media rewarded and punished pundits with different records on Iraq. It makes me more doubtful of the incentives regarding reputation in our media. Dan Froomkin’s recent firing is another data-point.

  • Constant

    I’m not sure I understand the argument. You’re arguing for subsidy, but then you talk about scale. What is the relationship between subsidy and scale? Are you saying that government should play favorites and throw money at big brands such as the New York Times, NBC, and Newsweek, while ignoring smaller brands?

    A subsidy to one producer artificially lowers his costs, creating a barrier to entry, giving him monopoly power. A monopolist’s product has lower quality than a competitive producer’s product.

    Also, a subsidy reduces a producer’s reliance on his customers and therefore reduces a producer’s reliance on public relations – specifically, on his own reputation. Reputation is what keeps a reporter from saying things that don’t check out. In essence, a subsidy can encourage incompetence. Furthermore, the more the producer needs the subsidy, the more perverse the effect of the subsidy will be on him because the greater the degree to which he will be freed from reliance on his customers. So we have a situation where, if the big media actually need the subsidy, then precisely because they need it, we should not give it to them.

    Also you don’t seem to have addressed the point, raised elsewhere, that any money the government doles out is likely to come with increasing strings attached which are likely to be captured by interests – for example, the dominant party can direct newspapers to investigate the opposition to death.

    Your analysis of the blogosphere is incomplete. While individual bloggers may be error-prone because of weak incentives, the blogosphere seems to police error – and it does this not only for itself but also for the big media, giving rise to a few famous scandals which left the big media red-faced. You seem to think the blogosphere produces a cacophony which never effectively arrives at a conclusion and which is therefore tuned out at a whole, but that is not my perception of it. I’m sure Dan Rather wishes that the blogs which supported him were able to indefinitely postpone his embarrassment, but that’s not so.

  • Nobody is collecting big media’s track records or anything like that. The worst punishment that seems to happen for mistakes or even outright lies is Jon Stewart and some bloggers making fun of them. There seem to be no other consequences.

    • Michael Bishop

      I agree we could benefit a lot from collecting track records, but the few reporters I have known well care a great deal about their accuracy and their reputation for accuracy.

      IOW, the consequences for mistakes and lies should be greater, but that doesn’t mean they are currently trivial.

  • David Leib

    The problem with this argument is that we already don’t believe big media. We see their important mistakes. We see the mistakes in areas that we know about personally. We read them because they are nearly the only game in town covering a particular story. Clearly they sit on stories and bury them as they choose. That is much harder to arrange in small media. The short term profit motive for big media drives them very strongly (at least at the moment).

  • josh


    Tell me how this gets implemented in the real world. Who gives out the subsidies? Who decides who is qualified to receive a subsidy? Does anyone evaluate the results?

  • LeBleu

    I’ve read this post, your Friday post, and Mr. Starr’s essay, and I’ve yet to see any solid evidence that funding of journalism is dropping below appropriate levels – all I see is that it is dropping from its previous level. The previous market for journalism was based on local monopolies, and the monopoly rents those generated. Wouldn’t the default economic assumption be that a collection of local monopolies would have been over-charging for its product, and diverting more than the appropriate level of funds to that industry? Do I misunderstand the standard economics, or are there additional facts I am not aware of that make you think this does not apply to the news industry?

    It’s seems more reasonable to claim that what we are seeing are the effects of suddenly taking hundreds of local monopolies and forcing them to compete with each other in the national market. Since we have an over-abundance of journalism suppliers, they are driving the prices down to unsustainable levels. Once the less efficient and lower quality news outlets go bankrupt, shouldn’t we expect the market to obtain a standard competitive equilibrium based on supply and demand?

    Please let me know if I have made any incorrect assumptions here.

    If you’re not already familiar with it, Mike Masnick has some pretty incisive commentary on the new economics of journalism and what the big media companies are doing wrong:

    Tehran Bureau Shows That If There’s A Need, Reporting Will Get Done
    But Who Will Cover City Council Meetings?
    Wait, Wasn’t The Internet Killing Journalism?
    The gap between the current news business’s conception of the economics of the news and the modern economics of the news.

  • Obama’s view on blogs vs. mainstream media.

    “One of the things that I know the blogs are best at is debunking myths that can slip through a lot of the traditional media outlets and a lot of the conventional wisdom,” he said, according to audio of the call posted on Web sites.”

    President Obama

    And I second Jonathan’s view.

  • I’m repeatedly amazed by how much higher the quality of blogger journalism is than the quality of print journalism. I mainly read science blogs, where the difference in quality is astounding. Science blogs are written by scientists who understand and are interested in what they’re writing about, while science articles in newspapers are written by journalists who neither understand nor are very interested in the topics.

    This blog is itself much more worthwhile reading than any newspaper column.

    If it were true that a large audience meant lots of fact-checking, Rush Limbaugh would be far more accurate than any newspaper, having (I have not fact-checked this) more listeners than any paper has readers. A media rises to the level of its audience. The internet has a smarter audience and hence produces better journalism.

    What intrigues me most about this is the lack of correlation between being a payed, trained, professional journalist, and writing good and accurate articles.