Ezra Klein wants a handout from big papa government. He promises in return that he and newspaper reporters would keep muckraking. Mark Hemingway points out good reason to doubt this: a major conflict of interest. Matt Welch notes how ridiculous the concept is, from start to finish. Klein has poor assumptions—particularly that news provision is a public good and that federal subsidization of news does not have a distortionary effect. For the first case, it’s obvious that reporting is a private good: you can exclude individuals from seeing your reports. And people are willing to pay money to procure news; they just aren’t willing to pay for 20th century style reporting institutions, and entities like CraigsList and eHarmony have broken the near-monopoly of classified and singles advertising, meaning that newspapers can’t charge high prices to groups of individuals desiring these services in order to subsidize newspaper readers any longer.
Michael Moynihan, as though the beatdown weren’t enough, gives a flying elbow by pointing out how absurd the claim is that the Swedish press is full of attack dogs is.
So to sum things up, people are still willing to pay for news, but they won’t pay enough to re-create the 1930s style. In fact, they never have been willing to do this; instead, they make up for losses on the news production side by charging extra for additional services and using advertisement. These additional services have been off-loaded to third parties which will specialize in these services either for free, or for a certain fee. People switch to the new services because they provide additional value (such as focusing on a particular subset of a market, creating a greater level of interaction between individuals, etc.) or come at a lower cost. Newspapers have been stuck in their 1930s style of news procurement and have not innovated. Many of these newspapers are now failing because they are losing revenue streams. Having the government make up for these lost revenue streams will create a greater conflict of interest between reporters and the federal government. Instead, news procurement agencies should modernize to reduce costs. One potential way to reduce costs is to, instead of printing out broadsheets daily, going to an electronic-only format. Alternatively, news procurement agencies could offer new services that people would like. But most importantly, we should leave the market open for innovators. The 1930s style of newspaper is not the end-all and be-all of news procurement; it is not the perfect measure toward which we must always steer ourselves. Innovation in news procurement and distribution will lead to new methods, some of which will be profitable. They may go in a strongly different direction than what we saw Back In The Day, but they will do a better job of satisfying the desires of the public than Klein’s suggestion. How do I know? Simple: because people are actually willing to pay news procurement and distribution agencies that satisfy their needs, whereas we know for a fact that they won’t with the current setup, seeing as how Klein’s begging the government to coerce people into paying his salary.
P.S. – I should also point out that there is a time inconsistency problem with Klein’s argument. He says that even after the government pays for his salary, he’ll promise that he and all the other folks in the industry will not be muzzled. The problem, however, is that even if we believe that he is truthful today, the incentives will change when it comes time to criticize the government. Say that Barney Frank is the chairman of the Congressional committee responsible for subsidizing newspapers. These newspapers are much less likely to run op-eds or stories critical of Frank because if they run them, Frank will not like this and will use his pull to cut funding for that critical newspaper. Even with “transparent rules,” Congressmen and bureaucrats know how to twist the rules (or how to write the rules with loopholes in place from the beginning). And if the newspaper is dependent on taxpayer largesse, cutting off funding at a future date would be even scarier than not having taxpayer funding today. The reason is that today, there is still the opportunity to innovate, whereas if you go down the federal funding path, the people in charge will specialize in soaking up as much federal funding as possible and will not be as strong in the realm of innovation. So when the federal government controls the pursestrings of news procurement, they own the news procurement, as even if reporters want to break an interesting story, the suits in the main office will look at the potential impact that will have on their bottom line. This is similar to the old story of how advertisers can kill or alter articles. To the extent that this is true now, it would certainly fit the case if the federal government is providing a great deal of the funding. C. Edwin Baker has more on a slightly different topic, but it applies very well to this.
