Blog on the Run: Reloaded

Monday, October 24, 2016 7:19 pm

Accountability journalism, how to make a profit, and the free-rider problem


This is a fascinating Q&A with James T. Hamilton, whose book “Democracy’s Detectives: The Economics of Investigative Journalism” comes out this month. He talks about how he found that investigative reporting provides a public good worth $100 or more for every dollar invested — and how a news outlet’s inability to recover some of that value keeps the market undersupplied with good investigative stories.

We wrestled with this problem at the News & Record when I worked there, and every news outlet that produces accountability journalism wrestles with it, too. The reasons are pretty simple. Accountability journalism is time- and labor-intensive, and it pretty much never earns back its production costs, let alone anything like a return on investment. (I say “pretty much never” because it’s possible that a series like Barlett & Steele’s “America: What Went Wrong” for the Philadelphia Inquirer, which was so popular it was adapted into a best-selling book, might have generated a real return for Barlett & Steele, if not for the Inquirer.)

In economic terms, accountability journalism is a “public good,” meaning that while private, for-profit interests produce it, they almost always do so at a loss because the economic good is socialized — people and institutions benefit from it without paying for it and in many cases without ever buying the newspaper or watching the TV broadcast that produces that public good. Economists call that they free-rider problem.

Economists have pretty decent ways of estimating the value of public goods — they can tell you, for example, roughly how much a saved life is worth. What they haven’t come up with (and to be fair, neither has anyone else) is a reliable way of ensuring that private interests that produce public goods can recapture some of their investment — if not enough to profit, at least enough to recover the direct costs.

(My favorite example of this is the series “Bitter Blood,” which my former co-worker Jerry Bledsoe published in the Greensboro paper back in the 1980s. It sold roughly 10,000 copies of the paper per day over and above what the paper otherwise would have expected to sell. That sounds like a lot of extra papers, and it is. But each paper produced only 25 cents of revenue, so each day’s added sales yielded gross revenue of only about $2,500 — less than a 1-day, 1-page, black and white advertisement would have yielded. And that’s before you figure in the additional paper, ink and labor costs of printing and distributing those extra copies.)

How valuable is the public good produced by accountability journalism? Pretty valuable. Hamilton estimates that value at $143 for every dollar invested by The Washington Post in one of its projects, on police shootings, and $287 for every dollar invested by The News & Observer in a series on the state’s system of parole, in the first year following policy changes. In the case of the N&O, he says, that would have been enough money to hire 90 additional reporters for that year. He adds:

For comparison, when the Office of Management and Budget looked at the total ratio of annual benefits to annual costs of some regulations, the ratios were 3.0 for a Department of Labor rule on hazard communication and 5.5 for a Department of Energy conservation standard. Investing in investigative work appears like a relatively good investment from society’s perspective.

Ya think? Yeah, I’d say investing a buck and getting $287 or even $143 back is a “relatively good investment” compared to getting back three bucks or $5.50.

But the question remains: How can news outlets recapture some of that value? Hamilton offers some logical solutions, but I question whether the solutions would work, much as I want them to. For example, he suggests foundation funding. Most foundations would look askance at giving money to a for-profit news outlet, particularly when that outlet has been skimping on acountability journalism to support an artificially high profit margin, as many have. And for a news outlet to seek large donations from a single donor means adopting that donor’s charitable and political baggage, which almost all large charitable donors have. That can damage the outlet’s reputation for independence, which in turn harms its credibility, which could lessen the impact of its reporting and thus the value of the public good it produces.

I suppose it might be barely possible to give news outlets tax credits based on a small percentage of the public good their accountability journalism supplies. But as a practical matter, those benefits might take years to realize, and as a political matter, I don’t know of a politician alive or dead who would vote to give tax breaks to news outlets for investigative work.

Here’s the thing: Accountability journalism has NEVER paid for itself. It has always been subsidized, either by other, more profitable things that news outlets do (advertising, the comics, the horoscope, etc.) or by outside funding (as in the case of the investigative nonprofit Pro Publica). Hamilton has helped quantify the economic value of this problem, but at least based on this Q&A, he brings us no closer to the solution. Still, I plan to read the book and hope it will be more encouraging.

(h/t: John Robinson)

Updated 10/25 to fix the stupid paragraph breaks.

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1 Comment »

  1. […] SOURCE […]

    Pingback by Accountability journalism, how to make a profit, and the free-rider problem | Greensboro 101 — Monday, October 24, 2016 8:09 pm @ 8:09 pm | Reply


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