I Do Not Think Those Words Mean What You Think They Mean

Cite this Article
Joshua D. Wright, I Do Not Think Those Words Mean What You Think They Mean, Truth on the Market (December 04, 2009), https://truthonthemarket.com/2009/12/04/i-do-not-think-those-words-mean-what-you-think-they-mean/

Here’s Henry Waxman on the federal government saving the newspapers from failing:

“The newspapers my generation has taken for granted are facing a structural threat to the business model that has sustained them,” said Representative Henry Waxman, a Democrat from California.

The loss of revenue has spurred a vicious cycle with thousands of journalists losing their jobs,” he told a meeting on journalism in the Internet age hosted by the Federal Trade Commission (FTC).

“We cannot risk the loss of an informed public and all that means because of this market failure,” he said.

Market failure.”  Here is the definition in my Carlton & Perloff textbook: “distortions or inefficient production due to improper pricing.”  So, what are the distortions here?  Or inefficient production?   Professor Bainbridge picks up on Waxman’s conflation of “market failure” with “failing in the market”:

I’m puzzled. What exactly is the market failure here? Welfare economics classically recognizes four basic sources of market failures: producer monopoly; externalities; the good to be produced is a public good; and informational asymmetry between producer and consumer.

I don’t see any of these as the newspaper industry’s problem. Instead, I see obsolete technology coupled to an antiquated business model.

I’m also a little bit disappointed to see the Federal Trade Commission join in the fray here in talking about “helping” to support news organizations and getting into the business of picking winners rather than enforcing competition law to ensure that the competitive process is fair and encourages encourages the marketplace to be “the decider” rather than Congress or federal agencies.  Congress is one thing.  And nothing new.  But one would hope that the federal agencies responsible for thinking rigorously about competition issues would refrain from discussing seriously the idea of regulatory subsidies for specific competitors that are losing the battle for consumer dollars in the marketplace to new technologies and innovation.