The Press: Institution or Industry?
The First Amendment of the United States Constitution prohibits Congress from abridging the freedom of the press. No reason is provided for the protection of this freedom but the intent is clear. A functioning democracy requires that facts are widely understood because voters must be well informed if they are to vote according to their interests. For this reason, a free press is a necessary institution. However, in the marketplace any firm which is free from government intervention will ultimately be bound by the motive of profit. With this in mind, it is important to ask whether granting the press absolute freedom is the right approach to ensure it fulfills its institutional duty.
In good faith and bad, the idea that the press isn’t working as it should is a widespread one. US President Donald Trump frequently takes to Twitter to rebuke “The Fake News Media”, at one point going so far as to brand it “the true Enemy of the People”. On the other end of the ideological spectrum, comedian Jon Stewart used his self-described fake news channel The Daily Show to mock outlets like Fox and CNN for what he saw as alarmist and misrepresentative news coverage, describing the news media as “the country’s 24-hour politico pundit perpetual panic conflictinator”. A common perception is that the faults of the press stem from the corruption of executives such as Rupert Murdoch and George Soros who try to exercise political control through biased news coverage. By this logic, it follows that putting the various news media factions into more honest ownership would largely solve problem. Unfortunately, the problem with the press is much more fundamental.
To understand why this is the case, it is necessary to analyze the news media from an economic perspective. News outlets such as CNN, Fox News, and the Huffington Post are producers, while anyone who spends time tuning in or reading their articles is a consumer. As in many markets, the consumer has greater power over the characteristics of the news product because unlike the supplier, the consumer is irreplaceable. There has been a lot of talk lately about how Fox News has transitioned from a conservative outlet to Trump’s megaphone during the president’s tenure. However, considering Trump’s high approval rating among Fox’s viewers, it is unlikely that they would be pleased if the network criticized Trump whenever he deviated from conservative values and policy. If pushed too far, the audience would change the channel and leave Fox out of business. By this process, the consumer unknowingly decides what narrative will air. If news consumers were an unbiased group, we would expect consumer power to push the news media to accurately represent the truth because any network that started pushing a false narrative would be quickly identified and replaced. In reality, this is not so.
Consumers in the news market are highly differentiated. Different people are likely to be interested in learning about different types of stories conditional on their race, gender, age, education, place of residence, political preference, and much else. For instance, if you come from the Rust Belt you are more likely to be interested in an article about how America’s manufacturing industry is going into a recession than you are in an article about California’s wildfires. While this may seem intuitive, it is important to remember that the institutional duty of the press is to provide the entire citizenry with a comprehensive rundown of topical issues so that people can come to their own conclusions. Instead, the implication of news consumer heterogeneity is that the viewer chooses their own reality. If a conservative or a liberal doesn’t like what a given news network has to say then all they have to do is switch to Fox News or MSNBC and their preference will be satisfied. This phenomenon is called the “filter bubble” and it is the primary feature of a capitalist press (for reference, only 13% of Fox news viewers check out MSNBC for more than 10 minutes). Because of this phenomenon the news market cannot be supplied by a single firm. Instead, niche outlets that are capable of catering to people’s biases have flourished and misinformation is running rampant. While it is common knowledge that dictatorships like the Soviet Union push propaganda on their citizens, perhaps the defining quality of the free press is that it grants us the freedom to self-propagandize.
Despite the First Amendment, there are some restrictions on the stories a news network may run. US federal law prohibits “obscene, indecent, and profane content” from being broadcast and the Federal Communications Commission polices against intentional distortion of the news. However, the FCC’s authority to respond to such complaints is narrow and these guidelines are often up to interpretation. There are three ways in which a news broadcaster can skirt the legal boundaries of intentional news distortion. First, with over seven billion people on Earth there are limitless potentially “newsworthy” stories. A story can be an outlier without being false and news organizations can pick and choose among these to promote their chosen narrative, even if it misrepresents reality. Second, broadcasters can squash relevant stories which don’t suit their audience. Third, while a broadcaster is not permitted to intentionally distort the truth, pundits like Sean Hannity have made fortunes spinning it, apparently unimpeded. The result is that the news industry is fully capable of confirming consumers’ chosen narratives, nearly independent of where the truth may stand. It is worth noting that even if news consumers were not differentiated, consumer bias towards interesting stories would taint the narrative. For example, in 2016 Americans had a 30.2% chance of dying from heart disease and a less than .01% chance of dying from terrorism. That year the New York Times wrote 2.5% of its articles for causes of death on heart disease while 35.6% were about terrorism.
The consequence of the press’s fragmentation has been staggering. Slightly more than a month after the news broke about Trump’s Ukraine scandal, the news a person would learn about the impeachment proceedings would depend almost entirely on the site they had chosen to learn it from. On October 24th, CNN, a consistently Trump-critical outlet, ran a live blog providing updates on the inquiry with headers like “Democrats have begun discussing the scope and scale of potential articles of impeachment”. The same day, Fox News ran the headline “Could Pelosi abandon impeachment effort? Legal analyst predicts she may.” Hypothetically, both statements could be true, but if the consumer only listened to one perspective they would likely be misinformed. This phenomenon has exposed Americans to such divergent information that people belonging to the country’s two main parties often cannot agree on reality itself.
With this in mind, it is valuable to consider the concept of incentive compatibility. In economics, a strategy or mechanism design is said to be incentive compatible if it leads agents to the desired outcome. For example, economists endorse markets because in theory markets grant the largest profits to companies that do the most good for people at the lowest cost. In other words, economists love markets because profits are incentive compatible with social benefit. The problem is that what the consumer wants in the media market is not aligned with the output that the press is institutionally intended to provide. The press is supposed to inform voters of reality so that they can accurately represent their interests on election day, but the media consumer treats truth like a commodity and is frequently driven to confirm their predetermined beliefs. That being the case, the profits that shape the news media market are not incentive compatible with maintaining the objective and informative institution that democracy requires.
The solution to this problem is not obvious. Granting the state control of the press is a proven method of substituting market-propaganda for that of Uncle Sam. On the other hand, if the industry is allowed to persist then it will only get worse. News outlets will further tailor their product to suit their audiences and will thus reinforce the existing filter bubbles. However, in trying to reform the press, we have clear outcomes that the system must be incentive compatible with: news must be representative of reality and it must not be selectively divided among the country’s constituents. To achieve such an outcome, it may be necessary for the press to abandon the profit motive. That may seem drastic but democracy must come first.
While understandable, exposing the press to the free market has been so problematic that it has resulted in people asking whether the press is fake news or an institution to be protected. Realistically, capitalism has broken the institution and it must be fixed if democracy is to survive.