Fake News and the Market for Lemons
Since the election, there has been criticism of leading tech companies about the dissemination of fake news articles concerning the democratic and republican parties. Google and Facebook are under fire for allowing these erroneous articles to appear in people’s newsfeeds unchecked and unverified. These news stories can become viral and people will believe them just as a virtue of their virality (which relates back to information cascades as we learned in class). But when thinking about these articles as a market, the fake news epidemic poses a serious problem to the future of news.
Harvard Law professor Noah Feldman posits a scenario related to what we’ve learned in class. Consider the sellers in this market as content producers, who can either produce high-quality, fact-checked articles or fake news that will at the very least generate buzz. Buyers are the people reading these articles. This is essentially Akerlof’s Market for Lemons, as we see in class, the lemons being the fake news. The readers know that real and fake news is out there, but they don’t know what articles are real and what are fake. If we look at articles from the more reputable sites, such as the Washington Post or the New York Times, these articles cost a lot more money to the sellers, as they have to manage the fact-checkers, the editors, investigators, reporters, travel, even printing costs, which impacts their readers and makes the cost greater to the reader. The less reputable sites that produce fake news really only need be concerned about how their articles sound plausible enough, and do not require as large an infrastructure as the real articles, thus the cost to produce fake news is much lower and the cost to the reader lower still. From studying these markets, we know that readers will be willing to pay the average expected cost for all their news, which means that depending on where that average lies, the real news won’t be worth the higher price to the readers. This could lead to a spiraling failure of this news market altogether.
Though the problem of market collapse is a possibility, we also know from this class how to solve the lemons problem, which is to provide some way of verifying that news is real or not. People have started working on this exact verification, and there is a lot of pressure for the news platforms like Facebook and Google to solve this problem themselves, instead of relying on the market to do it. Feldman also mentions that government regulation of fake news could also be a possibility, but that would not be allowed by the constitution’s free speech amendment.
I contend we do not know the values an individual would place on real vs. fake news, though. On one hand, people should value real news more just because it is objectively true. But fake news offers the possibility for people’s fears, beliefs, suspicions, etc. to be completely validated, so in some ways fake news might be even more valuable, and real news less so. That’s also what I think is very scary about this idea.
Source: https://www.bloomberg.com/view/articles/2016-11-23/fake-news-may-not-be-protected-speech