Clay Shirky recently published an article on his blog about the impact of information technology on news publishing. As is often the case with Shirky’s writings, it’s been causing considerable waves on the Internet. Basically, Shirky’s point is that there is a need for competing methods of publishing and disseminating news to allow for best practices to emerge under new circumstances. He defines news as a “public good”, both “colloquially and economically”, and suggests, on this basis, that subsidies are needed to support news services. Shirky’s reason for addressing the issue is that he’s preparing to teach in a journalism department, but I think it’s a very important issue that affects more than just the news industry (and that may be why the article is getting so much attention). As information technology becomes more accessible and integrated into individuals’ daily lives, issues regarding information publishing become a concern for everyone. This is not least the case in education where there is a trend toward encouraging students to be active online as information creators and disseminaters.
My intention here is to point out two weaknesses or oversights in Shirky’s article. The first is relatively minor and concerns how news publishers are supported by public funds, i.e. I believe that news publishers receive far more subsidies than Shirky suggests. The second has to do with Shirky’s definition of the economic concept of a “public good” and how that affects the news industry. In the latter case my criticism is this; Shirky’s definition of the economic concept of a “public good” is unclear. A proper understanding of what a public good is and how public goods affect markets reveals that there are examples of news organizations that demonstrate that private organizations can successfully provide a public good without subsidies or public involvement.
Subsidies for news services
Shirky mentions that there are some not-so-obvious subsidies that benefit the news industry, such as reduced postal rates, that are probably a fairly minor blip on news organizations’ accounting books. He goes on to say, “Contemplating what I should tell [my journalism students], there are only three things I’m sure of: News has to be subsidized, and it has to be cheap, and it has to be free.” The gist is that Shirky is suggesting that news has to have some substantial subsidies that go beyond mere reduced postal rates. However, Shirky seems to overlook the extent to which news organizations are subsidized with public funds. Among some of the ways that news organizations are subsidized are:
Government offices’ and institutions’ subscriptions to news services – Although considerable portions of the general public may not be very interested in real news, as Shirky suggests, public officials certainly are. For them it is an important window on the constituencies that they seek to represent. Therefore, governments tend to ensure that officials have immediate access to a range of news outlets by purchasing numerous and multiple subscriptions to news services and publications that are made available to public officials in their workplaces.
Reimbursements for public officials’ and employees’ subscriptions to news services at their homes – This is essentially an extension of the above. Considering that governments are often among the largest employers in any given region, the number of reimbursed subscriptions can be significant. At least significant enough that news services would see reason to raise a ruckus if reimbursements were discontinued.
Legal requirements to publish public notices in newspapers – In many places, public offices and institutions are required by law to publish any public notices in products produced by privately operated news services – and they pay for it. This article cites a study that claims that local governments in Pennsylvania could save $70 million over 3 years if they were not legally required to publish public notices in or on privately operated news outlets. That makes for a very handsome subsidy for news organizations that they will not let go without a fight, as is revealed in the linked article.
With some digging, we could probably find several other ways that news organizations are subsidized with public funds. My point is that it is already certainly more substantial than mere reduced postal rates.
News as a public good
The more significant oversight in Shirky’s article concerns his discussion of news as a “public good” in the economic sense. He defines the economic concept of a “public good” as “best provisioned for a whole group at once.” Shirky provides no source for this definition and it’s not one that I am familiar with. The problem with it is that it misses the defining characteristics of the economic concept of a public good, i.e. that public goods are non-rival and non-excludable. I’m guessing that Shirky thinks that his definition somehow captures these characteristics, but I don’t think it does. Goods are not deemed public goods because of how, or to whom, they are “provisioned”, they are public goods because of the nature of the goods themselves. That public goods are non-rival means that they are not diminished by consumption. Once one individual has consumed a non-rival good, it can still be consumed by someone else. Consider the classic example of a non-rival good, a lighthouse. A lighthouse provides, as a good, a guiding light for passing ships. Consumption by one passing ship does not diminish the light for later passing ships. That public goods are non-excludable means that no individual can be kept from consuming the good – or, which is the more common case, making them excludable would not be cost effective. Again, the lighthouse provides a classic example. The guiding light from the lighthouse cannot be directed only at those ships that have exclusive permission to use it – it is always visible to all passing ships. The classic example of the opposite, a private good, is a loaf of bread. Consumers purchase bread from a baker. Consumers who don’t have the money to buy the bread are excluded from consuming it. Once a consumer has purchased a loaf of bread and consumed it, it can no longer be consumed by anyone else. Thus, the bread is rival and excludable.
News is a public good, not because it is “provisioned for a whole group at once”, as Shirky suggests. Rather, it is a public good because it is not diminished by consumption and individuals cannot be kept from consuming it. When I buy and read a newspaper it is just as capable of performing its intended function after I have read it. Furthermore, the producer of the newspaper cannot keep me from passing whatever news is contained in the paper on to other consumers, either verbally, in writing, or by giving them my copy of the newspaper.
Here’s the problem with news as a public good: Because public goods are non-rival and non-excludable, they are not considered attractive as products in a market economy. Therefore, where public goods are necessary, they are often provided by public authorities. However, there are some public goods that markets would like to make viable for private companies, news being one example, because it is considered necessary and requires considerable capital to produce. The primary issue in those cases is how private companies can make the good excludable to ensure that they receive a fair price for it based on true consumption. This issue of excludability of public goods is an old and ongoing discussion in economics.
News is one of those public goods that is provided by private companies and excludability has been an issue in the industry since at least the 19th century when organizations started competing to quickly and reliably communicate news between Europe and the United States. Perhaps the most successful and enduring solution to the problem of excludability in the news agency is the Associated Press (AP). The AP is operated as a non-profit partnership by numerous news services that agree to share news that they themselves generate in exchange for access to the AP news pool. AP also sells news to non-members, the profits of which are fed back into the organization. Many news services have attempted to compete with AP but few have succeeded. Most have closed shop after a few years.
Wrapping things up
What the AP has accomplished is to formulate a model for making news, as a public good, excludable by doing away with the profit motive in exchange for convenience and exclusivity within a participating network.
What the AP has demonstrated is that there are ways to address the issue of excludability in the private provision of public goods. Therefore, Shirky’s suggestion that the fact that news is a public good is an argument for subsidizing news is not entirely convincing. However, news services are supported in many ways with public funds that are not very obvious and, therefore, it is somewhat difficult to gauge how important such subsidies are for the industry. If such subsidies were eliminated entirely it would certainly affect the industry but I doubt that it would kill it.