Does fake news demand a response from government?

Gigi Foster

Associate Professor Gigi Foster

By Gigi Foster, Associate Professor, University of New South Wales Australia Business School

This month’s poll asked the economists of the National Economic Panel to consider separately two propositions about the role of public resources in subsidising quality journalism. The first proposition was worded broadly, querying whether quality journalism has a public-good dimension, while the second asked panellists to weigh in on whether the Australian government’s subsidisation of journalism should be increased, implicitly as a prudent response to the phenomenon of fake news.

To understand the first question, it’s helpful to quickly revise the definition of a public good.  Wikipedia defines a public good as “a good that is both non-excludable and non-rivalrous in that individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others.”  

The characteristics of excludability and non-rivalry imply that the good in question will be produced by profit-seeking entities (i.e., the private sector) at a level below what is socially optimal.  Intuitively, the reason for this result is that the aggregate benefit that all consumers obtain from consuming the good cannot be re-couped by the producer through price or any other means – once the good is out there, anyone can access it and enjoy its benefits for free – and so producers cannot be compensated through market means at a level sufficient for them to be willing to produce “enough” of the good.

Is quality journalism in the same camp as other public goods, such as public parks or public defence, where the government can – and economists often advocate that it should – step in to increase production above the level that would be observed if profit-seekers were the sole producers?  If so, should Australia’s subsidisation of the production of quality journalism be increased?

The Panel was strikingly united in regard to Proposition 1, with 81% of panellists (83% when weighted by level of confidence) agreeing or strongly agreeing with the claim that quality journalism has a public-good dimension.  The modal response to this proposition, with over 40% of panellists selecting it, was Strongly Agree, and no panellist selected Disagree.  

Of the roughly 14% who were uncertain, one (Geoffrey Kingston) noted that some journalism was fee-based, violating the criterion of non-excludability; one (Paul Frijters) took umbrage at the implication of the proposition’s first-sentence set-up that fake news was a recent phenomenon; and one (Lin Crase) was hamstrung by the word “quality”, a matter discussed in more detail below.  The sole panellist who strongly disagreed and commented upon that answer (Tony Makin) nevertheless stated that “there may well be a case for enforcing truth in news across the spectrum”.

On Proposition 2, a weaker majority of 53% (56% when weighted by level of confidence) of panellists agreed or strongly agreed that the Australian government should increase its financial support of quality journalism.  The modal response to this proposition, capturing 36% of all responses, was Agree.

While conceding that unbiased reporting in theory has a public-good aspect, a large number of respondents (Paul Frijters, Michael Knoxville, Tony Makin, Joaquin Vespignani, Hugh Sibly, Peter Abelson) stated in their comments that it was unclear whether a government could or should provide unbiased reporting, due mainly to the danger of political influence.  Michael Knoxville states, for example, that “[t]here is no evidence that public broadcasters are less biased than private broadcasters.” Tony Makin opines more forcefully that “Publicly supported journalism…tends to be pro-big government, … pro-tax and pre-occupied with equity over efficiency issues.”  Paul Frijters suggests that philanthropic funding might be preferable to government funding for delivering high-quality, independent reporting.  Some panellists took the opportunity of the comment section to discourse on what fake news really was, and what institutional settings nurtured its spread. Panellists’ musings on the latter question included some ideas about how to stem the tide of fake news, ranging from penalties for generating it (Joaquin Vespignani) to regulation in the area of media ownership and control (Janine Dixon).

This month’s poll has a deeper political-philosophy dimension, which was not lost on panellists. Typically, the benefit gained by an individual from a public good is thought of as an immediate personal consumer surplus:  individual utility from consuming it, in the moment.  Yet with regard to news, consumers arguably benefit more in an immediate consumptive sense from sensationalist reports that entertain them than from “the truth,” which at times can be boring, disheartening, or otherwise unenjoyable.  Indeed, the “benefit” that materialises when consumers access quality journalism is at least partly mediated through the roles they play as members of society:  equipped with accurate information about the world and independent interpretations of it, rather than stories intended primarily to entertain or persuade, consumers would be expected to make different choices.  

As Julie Toth states, “Information deficits and/or asymmetry are well-recognised sources of market failure [that affect] economy, society, politics, etc.” Margaret Nowak similarly opines that fake news “has the potential to be very damaging to our democracy. The need for quality information for our democracy to be able to operate and make determinations on social and economic issues…is the basis on which to attribute public-good status to quality journalism.”  

The claim here is that to the extent that the voting, buying, moving, and other resource-allocation decisions of the consumers of quality journalism are more grounded in fact than in fiction, the development of their societies will be better aligned with actual needs and constraints.  Through this lens, the primary benefit of quality journalism is social and long-run, rather than private, consumptive, and immediate, as in the case of the archetypal public good of economic textbooks.

Deeper still, what is truth?  As Uwe Dulleck states, “Unfortunately the consumer prefers his/her own reality”.  The definition of quality in journalism is “problematic” (Lin Crase), hampered by the absence of objective reality, with any headline merely an interpretation of sensory data filtered through the brain of a journalist.  As Fabrizio Carmignani muses, “who establishes what quality/good journalism is?  How do we guarantee the plurality of views?”  

Carmignani’s second rhetorical question implies that rather than advising the government to find and subsidise an unproducible product (i.e., truth in journalism), economists could more feasibly define and advise the government to target as “quality journalism” some measure of journalistic diversity.  Yet would this approach of letting a hundred flowers bloom support the generation of a “common reality”, flagged by Uwe Dulleck as a necessary pre-cursor to the policy discussions that cannot be avoided if we want our country to keep running?  

Are our societies held together by freely-accessible, objective information, or by powerful shared illusions – or both?  Perhaps we should debate this question, and invite the press.

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