A Voucher System for Investigative Reporting

Dozens of proposals are floating around suggesting different ways to fix what seems to be the broken business model for newspapers. Michael Kinsley‘s Op-Ed, working backwards from the gross numbers, provides a devastating critique of the claim that micropayments on the Internet could save the industry:

Micropayment advocates imagine extracting as much as $2 a month from readers. The Times sells just over a million daily papers. If every one of those million buyers went online and paid $2 a month, that would be $24 million a year. Even with the economic crisis, paper and digital advertising in The Times brought in about $1 billion last year. Circulation brought in $668 million. Two bucks per reader per month is not going to save newspapers.

But the same result is strongly suggested by theory.

There’s no guarantee that private demand will produce the socially optimal quantity of investigative political reporting. Muckraking is a public good, and rational consumers would rather benefit from having the other guy pay for it. The same impulse that underlies the “rational ignorance” of voters may undercut the private market’s provision of political information.

Investigative reporting in the old days seemed like it was a loss-leader in the information bundle to which we subscribed. As a kid, I read the newspaper for the funnies, movie times, the sports scores, and for the classified ads. I still value this info, but I never get it from the printed page. Even a few years ago, I can remember feeding money into New Haven Register newspaper dispensers to learn the local movie times. But with an Internet-enabled cell phone, I almost never buy the Register anymore.

The bottom line is that we may need to publicly subsidize investigative reporting if we’re going to get enough of it. But the problem with subsidies lies in this question: who is going to decide what kinds of issues get investigated? It’s scary to think of having politicians decide the targets of journalism.

Bruce Ackerman and I have a solution (just published in the Guardian):

We urge democracies throughout the world to consider the creation of national endowments for journalism that are carefully designed to confront the impending collapse of investigative reporting.

The real concern is not the newspaper, but news coverage. It’s not clear that print news is a viable technology. Classified ads are more efficiently delivered by websites. Nobody under 50 waits to read all about stock prices or scores in the morning edition. The government should sit back and let the market decide the right way to distribute the news.

But there are huge costs to losing a vibrant core of investigative reporters covering local, national, and international stories. The Internet is well suited to detect scandals that require lots of bloggers to spend a little bit of time searching for bits of incriminating evidence. But it’s no substitute for serious investigative reporting that requires weeks of intelligent inquiry to get to the heart of the problem. Without Woodwards and Bernsteins, there will be even more Nixons and Madoffs raining mayhem and destruction.

It will take decades to revitalise investigative journalism if we allow the present corps of reporters to disintegrate. This is happening at an alarming rate. …

The problem with a BBC-style solution is clear enough. It is one thing for government to serve as one source of investigation, but quite another for it to dominate the field. A near-monopoly would mean the death of critical inquiry.

There are serious problems with private endowments as well. For starters, there is the matter of scale. Pro Publica, an innovative private foundation for investigative reporting, is currently funding 28 journalists. It is hard to make the case for a massive increase in private funding when university endowments are crashing throughout the world, imperiling basic research. More fundamentally, a system of private endowments creates perverse incentives. Insulated from the profit motive, the endowments will pursue their own agendas without paying much attention to the issues that the public really cares about.

Here is where our system of national endowments enters the argument. In contrast to current proposals, we do not rely on public or private do-gooders to dole out money to their favorite journalists. Each national endowment would subsidize investigations on a strict mathematical formula based on the number of citizens who actually read their reports on news sites.

Some might find this prospect daunting. Readers may flock to sensationalist tabloids that will also qualify for grants for their “investigations”. But common sense, as well as fundamental liberal values, counsels against any governmental effort to regulate the quality of news. So long as the endowment only subsidizes investigative expenditures, in-depth reporting will get a large share of the fund — provided that it generates important stories that generate broad interest.

The government provides the subsidy, but “the people” decide how it will be distributed. You vote with your eyes and ears. Bruce and I, in Voting With Dollars, suggest an analogous system called “Patriot Dollars” that would allow individual voters to decide how campaign-finance subsidies would be distributed. But here the voucher scheme is implemented by a less obtrusive choice architecture. The ordinary act of reading or listening to a piece of journalism tells government that this is the organization that should be subsidized.

The endowment must monitor media hits and circulation counts. This is doable. Advertisers already rely on independent audits. So can the government. Some governmental monitoring of financial matters is also necessary. News organizations would otherwise be tempted to obtain subsidies for marketing and business operations. Without minimizing the problems involved in institutional design, the creation of an effective and disciplined national endowment seems entirely realistic.

Instead of influencing the content of what will be reported on, government can empower readers by subsidizing the news organizations that have succeeded in the past.

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  1. Tim H says:

    Rational customers will also never be interested in micropayment systems, as the defining trait of such a practice is that the real transaction costs outweigh the value received. “Real” transaction costs must include the time and hassle imposed upon the customer, who must join the micropayment system, manage their accounts, etc.

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  2. Peter says:

    Kinsley’s numbers are ridiculous. He suggests the Times’ readership is 1 million, which is true for print. But the Times’ monthly online readership is somewhere in the neighborhood of 40 million. So, micropayments at $2/mo per reader would yield $960 million for the year. That’s not counting ad revenue. Nor does it take into account the lower overhead of producing digital content instead of print. So by his weird construction, micropayments for online content would actually bring in more revenue than print circulation. Not that I believe that would be true in the real world, necessarily, but it shows how goofy his construct is here.

    There’s a case to be made against micropayments out there, but this isn’t it. Kinsley’s fudging the numbers.

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  3. Gary says:

    If they want to establish a private foundation receiving funds which are used to fund investigative journalism, that’s fine.

    If they want to establish a line item in the federal budget, I say let the papers go under.

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  4. Mark says:

    I cannot see this going anywhere but getting us the latest news on Angelina’s newest adoption.

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  5. frankenduf says:

    let the government fund PBS- frontline is da bomb

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  6. KB says:

    I agree with Peter, there are many readers who have never and would never pay for a print edition. Micropayments seem like a good way to capture that market.

    I’ve haven’t bought a print copy of a news paper since I was compeled to subscribe to the WSJ in college. But I would certainly pay a small amount for each article I read online.

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  7. MikeM says:

    Why should the delivery medium of the news matter that much to the quality of investigative journalism? There’s no evidence of such a strong link.

    In fact, why do major newspapers need to be the source? Why can’t the Woodwards and the Bernsteins work on their own? In the internet age, where self-publishing is a reality, there’s no need to package up journalism with classifieds, movie listings, stock quotes, etc. The only reason this was done is that there was no way a journalist could publish daily on her own, so she had to work for a newspaper. Those days are over – move on.

    If a top-notch journalist hired an editor, a fact-checker, and posted on the internet, they could devise a business model. No newspaper required. That’s why the newspapers can’t find internet business models – they’re not needed for the model that will work.

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  8. MPD says:

    I think you underestimate the tenacity of bloggers to get to the bottom of things. It’s much easier for a Nixon or a Madoff to misdirect and stall a single Woodward or Bernstein, but when there’s hundreds of eyes, it’s harder to hide.

    Here’s a recent case that I found really interesting. A blog I spend (way too much) time on is http://www.thetruthaboutcars.com. It started out as a blog about the truth about cars (i.e., reliable reviews), but because of the whole collapse of the auto industry, it’s sort-of transformed into a watchdog-like website. One recent thing that they wanted to find was “Who own Chrysler?”. It’s owned privately by Cerberus which basically manages a hedge fund. But they wanted to know who actually owns Chrysler (and hence, who is getting the bail out bucks). No one was talking:

    http://www.thetruthaboutcars.com/who-owns-chrysler/

    But about three weeks later, the truth came out:

    http://www.thetruthaboutcars.com/ttac-outs-chrysler-investors-for-real/

    No need for investigative journalists, everyone can be one. Just find a cause you care about and start publishing. There will always be someone who cares about an issue and willing to put the time in to find the truth.

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