Wednesday, February 25, 2009

A Voucher System for Investigative Reporting

Ian Ayres

Crosspost from Freakonomics:

Dozens of proposals are floating around suggesting different ways to fix what seems to be the broken business model for newspapers. Michael Kinsley’s Op-Ed, working backwards from the gross numbers, provides a devastating critique of the claim that micropayments on the Internet could save the industry:

Micropayment advocates imagine extracting as much as $2 a month from readers. The Times sells just over a million daily papers. If every one of those million buyers went online and paid $2 a month, that would be $24 million a year. Even with the economic crisis, paper and digital advertising in The Times brought in about $1 billion last year. Circulation brought in $668 million. Two bucks per reader per month is not going to save newspapers.

But the same result is strongly suggested by theory.

There’s no guarantee that private demand will produce the socially optimal quantity of investigative political reporting. Muckraking is a public good, and rational consumers would rather benefit from having the other guy pay for it. The same impulse that underlies the “rational ignorance” of voters may undercut the private market’s provision of political information.

Investigative reporting in the old days seemed like it was a loss-leader in the information bundle to which we subscribed. As a kid, I read the newspaper for the funnies, movie times, the sports scores, and for the classified ads. I still value this info, but I never get it from the printed page. Even a few years ago, I can remember feeding money into New Haven Register newspaper dispensers to learn the local movie times. But with an Internet-enabled cell phone, I almost never buy the Register anymore.

The bottom line is that we may need to publicly subsidize investigative reporting if we’re going to get enough of it. But the problem with subsidies lies in this question: who is going to decide what kinds of issues get investigated? It’s scary to think of having politicians decide the targets of journalism.

Bruce Ackerman and I have a solution (just published in the Guardian):

We urge democracies throughout the world to consider the creation of national endowments for journalism that are carefully designed to confront the impending collapse of investigative reporting.

The real concern is not the newspaper, but news coverage. It’s not clear that print news is a viable technology. Classified ads are more efficiently delivered by websites. Nobody under 50 waits to read all about stock prices or scores in the morning edition. The government should sit back and let the market decide the right way to distribute the news.

But there are huge costs to losing a vibrant core of investigative reporters covering local, national, and international stories. The Internet is well suited to detect scandals that require lots of bloggers to spend a little bit of time searching for bits of incriminating evidence. But it’s no substitute for serious investigative reporting that requires weeks of intelligent inquiry to get to the heart of the problem. Without Woodwards and Bernsteins, there will be even more Nixons and Madoffs raining mayhem and destruction.

It will take decades to revitalise investigative journalism if we allow the present corps of reporters to disintegrate. This is happening at an alarming rate. …

The problem with a BBC-style solution is clear enough. It is one thing for government to serve as one source of investigation, but quite another for it to dominate the field. A near-monopoly would mean the death of critical inquiry.

There are serious problems with private endowments as well. For starters, there is the matter of scale. Pro Publica, an innovative private foundation for investigative reporting, is currently funding 28 journalists. It is hard to make the case for a massive increase in private funding when university endowments are crashing throughout the world, imperiling basic research. More fundamentally, a system of private endowments creates perverse incentives. Insulated from the profit motive, the endowments will pursue their own agendas without paying much attention to the issues that the public really cares about.

Here is where our system of national endowments enters the argument. In contrast to current proposals, we do not rely on public or private do-gooders to dole out money to their favorite journalists. Each national endowment would subsidize investigations on a strict mathematical formula based on the number of citizens who actually read their reports on news sites.

Some might find this prospect daunting. Readers may flock to sensationalist tabloids that will also qualify for grants for their “investigations”. But common sense, as well as fundamental liberal values, counsels against any governmental effort to regulate the quality of news. So long as the endowment only subsidizes investigative expenditures, in-depth reporting will get a large share of the fund — provided that it generates important stories that generate broad interest.

The government provides the subsidy, but “the people” decide how it will be distributed. You vote with your eyes and ears. Bruce and I, in Voting With Dollars, suggest an analogous system called “Patriot Dollars” that would allow individual voters to decide how campaign-finance subsidies would be distributed. But here the voucher scheme is implemented by a less obtrusive choice architecture. The ordinary act of reading or listening to a piece of journalism tells government that this is the organization that should be subsidized.

The endowment must monitor media hits and circulation counts. This is doable. Advertisers already rely on independent audits. So can the government. Some governmental monitoring of financial matters is also necessary. News organizations would otherwise be tempted to obtain subsidies for marketing and business operations. Without minimizing the problems involved in institutional design, the creation of an effective and disciplined national endowment seems entirely realistic.

Instead of influencing the content of what will be reported on, government can empower readers by subsidizing the news organizations that have succeeded in the past.


Here is an alternate suggestion that does not require yet another looting of the public treasury - news services should stop providing free use of their content on the web and make boggers pay for the news stories to which they link and quote

A standard method for solving seemingly intractable problems is to start with apparently sound analyses which "prove" how intractable the problems are and figure out how to falsify the assumptions which drive those results.

In this case we note that:
1. The assumption of 1 million subscribers who would pay micro-payments could be far too low.
2. Advertising is simply not going to work anymore. Search engines, the ability to control input, and the inoculation, over the last fifty years, of the consumer base means that advertising, as we know it, is dying.
3. Charging for content, as Bart suggests, has been tried, and it doesn't work, or more people would do it. The WSJ has managed, thus far, to withstand the trend because of heavy corporate support. I notice in passing, in fact, that more and more WSJ content is available without payment on-line.

It is quite obvious that some kind of public support is going to be necessary if we want to have anything resembling the newspaper scene we have today.

I'm no economist, but the mathematics of the situation are pretty obvious. When you can get the material for free, nobody is going to willingly pay for it. When your competition is giving it away, you aren't going to make a success at charging for it unless you can make a "micropayment" or "hidden tax" system (like the "Microsoft tax" linux users all pay) get built into the business.

What I wonder is why we have to have either public support or micropayments but not both. These two methods do not appear to me to be mutually exclusive.

For my part, I've offered to pay an on-line subscription charge to three of the papers I regularly read. They don't have the mechanism to do that, which is their loss.

How about the I.F. Stone newsletter model integrated with the Internet by subscription? Or is this being done?

Government subsidized reporting? No, no, a thousand times no! Government ALWAYS ends up controlling what it pays for.

It's quite obvious that there are interested parties willing to pay for investigative reporting of politicians: The Democrats of Republican politicians, and the Republicans of Democratic politicians.

Back when publishing was fairly expensive compared to standards of living, newspapers succeeded because they were the mouthpieces of political parties. That's the news media the 1st amendment was crafted to protect, not a bunch of professionals engaging in faux objectivity while secretly (They think; Everybody does notice!) exploiting their position to advance their favorite causes.

It's a model for the news media which can work again.

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"Back when publishing was fairly expensive compared to standards of living, newspapers succeeded because they were the mouthpieces of political parties. That's the news media the 1st amendment was crafted to protect, not a bunch of professionals engaging in faux objectivity while secretly (They think; Everybody does notice!) exploiting their position to advance their favorite causes."

Back when the Bill of Rights was being crafted, what is the proof that "publishing was fairly expensive compared to the standards of living"? Wasn't this prior to political parties coming into prominence in American politics? And the protection of the first amendment "was crafted to protect" expensive publishing? And shouldn't the first amendment protect faux journalism aka Fox? Let's hear from originalists and legal historians on this.

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