The Market for Lemons and the Rise of Fake News
In the fast-paced, technology driven world that we live in today, the rise of fake news, or misinformation, is an issue that poses a major threat to society. Thousands of erroneous articles and posts on news outlets and social media platforms, that often remain unchecked and unverified, continue to be published and shared every day. Due to the virality of fake news, people begin to believe this false information. In the context of discussions surrounding major world issues, such as the Covid-19 pandemic, the spread of misinformation and fake news has, and will continue to have, profound, and even fatal, consequences. Additionally, in thinking about these articles and posts as a market, the issue of fake news also poses a serious problem.
In the article “Fake News May Not Be Protected Speech,” the author, Feldman compares the news market to Akerlof’s Market for Lemons. In this scenario, he considers the sellers in this market as content producers, who produce either high-quality, fact-checked articles or buzz-worthy fake news. On the other hand, he considers the buyers as the people reading these articles. Essentially, in this comparison, the fake news articles are the lemons. Readers know that both real and fake news articles are out there, however, they are unable to decipher which articles real or fake.
Articles from reputable sites, 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. Whereas, the less reputable sites that produce fake news are only concerned about whether their articles sound plausible, 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 know that the solution is to provide some way of verifying that news is real or not. There is a lot of pressure for media outlets 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.
Source: https://www.bloomberg.com/opinion/articles/2016-11-23/fake-news-may-not-be-protected-speech