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Media Competition and Media Bias

- July 10, 2008

John’s recent post about political blogs reminded me of an analysis that appeared a couple of years ago in the American Economic Review, “The Market for News,” by Sendhil Mullainathan and Andrei Shleifer (AER 95, 4, September 2005, pp. 1031-1053).

Being economists, Mullainathan and Shleifer begin by distinguishing between supply-side and demand-side explanations of media bias. The former explanations attribute bias to the preferences of journalists, editors, or owners. The latter see bias as reflecting the news providers’ profit-maximizing choice to cater to consumers’ preferences. The focus of Mullainathan and Shleifer’s analysis is on the demand side.

A traditional economics-based account of news consumers’ motivations would center on their desire to get accurate information, which should force media outlets to deliver accurate information. An alternative account, however, would be that “audiences want their sources not only to inform but also to explain, interpret, persuade, and entertain.” And here’s where it gets interesting: “To meet this demand, media outlets do not provide unadulterated information, but rather tell stories that hang together and have a point of view.” On the former account, media reporting should be unbiased. On the latter, though, bias should be commonplace, on the assumptions that consumers of the news themselves hold biased beliefs and prefer to hear or read news that is consistent with their beliefs.

Applying this reasoning to the structure of media competition, Mullainathan and Shleifer establish that competition by itself should not be expected to eliminate or reduce the slanting of news. However, if we distinguish between an average reader, who reads only one source of news, and a conscientious reader, who reads several, then things begin to fall into place. In general, competition between outlets with readers whose biases are in different directions increases the slanting by individual media sources. But with heterogeneous readers, the biases of individual media sources tend to offset each other, so the beliefs of the conscientious reader become more accurate than they are with homogeneous readers. More broadly, reader heterogeneity plays a more important role for accuracy in media than does competition.

As sometimes happens when economists turn their attention to topics that have typically been the province of other disciplines, this account may contain more than a little wheel reinvention. But in contrast to a standard economic account, it’s off-beat enough to warrant consideration by economists and non-economists alike.