Public Choice 53:79-95 H987). © 1987 Martinus Nijhoff Publishers, Dordrecht - Printed in the Netherlands

Notes on the mass media as an e c o n o m i c inst i tut ion

DANIEL ORR Department o f Economics, Virginia Polytechnic Institute and State University, Blacksburg, VA 24061

1. Introduction

As perceptions of an elephant by blind men differed in the Sufi legend, the media of mass communication have been variously described by social scientists. Sociologists, psychologists and political scientists have defined a number of functions fulfilled by the media, including socializing and en- culturating, guiding voter choice, and helping to shape individual personali- ty and self-image. Among the social sciences, only economics has been silent concerning the impact of these important institutions. 1

Reasons for silence are easy to find. Several long-standing conventional elements of mainstream neoclassical economic analysis have conditioned expectations among economists as to whether a topic may be interesting, and have affected standards within the profession regarding the proper for- mulation of specific questions in topic areas that are seen to be potentially interesting. Those same conventions have imposed standards regarding the validity of approaches taken in answering those questions, and have shaped the professional judgment of the economist regarding the value of analysis. Important among those conventional elements are (1) the focus on in- dividual rational choice as first premise of the analysis (2) the assignment of a central role to the market as allocative mechanism, and as provider of sufficient price-signal information to decision makers and (3) the treatment of preferences and technology as exogenous. In particular, there are three salient aspects of technology that usually are not examined as a part of the working of the economic system: methods of production exist ab initio or develop according to their own laws; the markets through which goods are allocated and exchange takes place are seen to work well, regardless of events in the economy; and information about exchange opportunities is transmitted truthfully and cheaply, as a byproduct or consequence of the working of markets.

One important function of the media is to convey information, and until recently, economic analysis has viewed information as not scarce. More recently, in analysis which has acknowledged limitations on information,

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the process of information gathering has been viewed as a costly integral part of private individual maximization, but information production has continued to be viewed mainly as a byproduct of market exchange. These views of information transmission and information processing have made

it possible to ignore the media as institutions. The media have been examin- ed by economists, but as industries, and from the same perspective as any industry is treated: is the product produced efficiently? Are there pockets

of market power that are susceptible to abuse? Is there unmet need for regulation of production or terms of sale?

The media are not the only social institutions that have at one time or another been downplayed in economics. Largely because of those same analytical conventions, it was customary in economics until about twenty

years ago to portray government as an agency that intervenes in response to problems that may arise from, or be poorly handled in, the usual course of market action. The structure or internal working of government was seldom a topic of analysis or speculation among economists; it was taken for granted that the tasks of government could be clearly identified, and once they were appropriately identified, those tasks would be carried out without hitch or flaw. More recently, however, government has come to be seen by economists as another allocative system. It is one which takes priori- ty over the market system, and has an important role in allocating resources

and resolving conflict among individuals' objectives. Public choice analysis examines transfers of wealth and power by government as it supersedes the market, and treats politicians and bureaucrats as self-interested participants in the allocative process of politics. Rents are created or restructured when market exchange is supplanted or regulated by governmental allocation; and control of those rents is seen as an important element of the power of politicians or civil servants.

As with government, the structural implications of other important in- stitutions peripheral to the market have begun to receive analytical attention from economists. 2 Examples include racial discrimination; crime and punishment; the family and marriage; labor unions; and the laws of proper-

ty, agency, contract and tort. And as with public choice analysis of govern- ment, those analyses all begin with the view that institutional structure helps to shape personal gain incentives, which in turn determine individual deci- sions and allocative outcomes. Each of these institutions so analyzed sup- plants or supplements the market as an allocative arena (except for property and contract law, which underpin the market), to the advantage of an iden- tifiable clientele or group of advocates. Some of these market-supplanting institutions serve to increase wealth in the aggregate; but most of them are more concerned with its distribution than its creation.

None of those recent efforts to comprehend extra-market allocation have examined the media of mass communication, and this paper is intended as

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a first step in filling that gap. As in those other analyses, the perspective will

be that the media are institutions which create opportunities to transfer or enlarge wealth and power, and the consequences of the self interested pur- suit of those opportunities by affected individuals will be explored. This in-

formal essay offers first, a sketch of the economic role of the media of mass communication and entertainment; and second, an assessment o f how those institutions affect the relative importance of markets vs. governments as allocators of resources. At the level of this discussion, there is little to distinguish among the media: what follows is intended to apply, in some

degree, to newspapers, TV, and large-circulation news and opinion magazines in the United States. This is not to suggest that important dif- ferences may not exist among the mass media; it only asserts that early at- tempts at analysis can with benefit examine common effects.

Two major questions emerge. First, how do the media affect the working of the market system? Second, how do they influence our views regarding the efficacy and desirability of market action compared to government

action in the allocation of resources? In developing an answer to the second and more interesting of those two questions, we will examine the incentive effects and opportunity consequences of two very different types of adver- tising that sustain the media: commercial market advertising, and non- commercial political advertising. These forms of advertising will be seen to differ in the way they are produced, the criteria according to which they are accepted or selected for presentation, and the bases on which they are validated or rejected by consumers. Those differences, it will be argued, are crucial.

2. The media in the marketplace

A long standing and inconclusive argument over the welfare consequences of commercial market advertising is the closest that economists have come to analyzing the media, and it can serve as a point of embarkation here. Ear- ly critics, exemplified by Kaldor (1950), conceded that advertising can serve in the dissemination of information about exchange opportunities, but com- plained nonetheless that it must be possible to find more efficient means of conveying information about the availability of goods and terms of ex- change (without describing those means). Later critics, exemplified by Com- anor and Wilson (1967), held that advertising serves as a barrier to entry, and conduces to monopolization. That view is in rebuttal to the earlier sug- gestion of Telser (1964) and others, that advertising may serve to create awareness of and foster demand for classes of goods ('generics'), and thereby help to create markets sufficient in size to support division of labor production, and hence to make available economies of large-scale

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production.3, 4 Another tradition holds that advertising affects the demand for branded goods in a prisoners' dilemma sense: advertisers would all be better off if they could agree not to advertise, since one advertiser's message only offsets another's. By this argument (which I have not found carefully developed anywhere, but which at first glance seems to be contradicted by experience with the ban on TV advertising of cigarettes and distilled spirits)

advertising is a deadweight loss. Much of the critical literature on the economics of advertising has a flavor

of legal argument: advocacy in support of a desired verdict. Advertising is seen as dystopian and reasons are sought to control or diminish it. The inef- ficiency of advertising is asserted relative to a nonexistent and incompletely

envisioned alternative system for the transmission of offers of exchange; and the complaint that advertising causes industrial concentration is seldom

tempered by appreciation of the social benefits that attend the extension of the market which makes large-scale production possible. It does not appear that any reliable conclusions have been reached regarding the welfare effects of advertising; certainly none that can be used to appraise the welfare effects

of the media. The media help to extend the market in ways other than through advertis-

ing messages. Advertising is jointly produced and consumed with 'content', the entertainment and journalism in which advertising comes embedded. Other social scientists have explored the ways that media content serves to

focus, homogenize and introduce innovations into political discourse and social behavior; but economists have largely brushed aside an important analogical role in the economy, namely, the establishment of mass markets. To illustrate with an elaboration of Abba Lerner's (1961) example, advertis- ing dollars create brand recognition for Right Guard, and thereby increase the demand for that brand of underarm deodorant. In addition the enter- tainment (and to a lesser extent the journalism) presented by the media serves to shape, and integrate individuals into, a culture within which cleanliness and grooming (and, presumably, freedom from natural aromas)

are positive attributes of center-stage figures. The social or welfare consequences of that market-extending aspect of the

media have not been analyzed. In the absence of transaction and informa- tion costs and scale economies in production, the ideal economic order might be 'everything custom made': a world of many pairwise bilateral monopoly transactions in which buyers and sellers negotiate and trade face to face. Economic analysis has been prone to overlook information costs, and to accept that perfect competition is the best response in a world in which there are transaction costs and weak scale economies in production. In the real world, advertising outlays, which are attempts to capture scale economies and arrange trades without face-to-face negotiation, have, in part through joint provision of media content, helped to create a context

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favorable to their own success, by idealized portrayal of the benfits stem-

ming from the use of advertised goods. Despite neglect in economic analysis, then, the media play a significant

role in the traditionally-defined economic life that centers on market ex- change. It is similiar to the socializing or enculturating role that is stressed by sociologists, or the issue-focusing role that political scientists see. These basic economic, social and political functions are not fulfilled through face to face or word of mouth communication and interaction among in- dividuals, but rather by creation of a mass audience whose awareness and attention is focused to a degree in common aspirations, concerns, con- troversies, interests or undertakings.

3. Market advertising vs. political advertising

Political advertising, in the form of paid commercials at election time, which resembles market advertising as we know it, is, arguably, a small and unimportant part of total political advertising. In the form important to the contrast to be drawn here, political advertising is presented as news. The direct analogy to be developed has the individual politician in the role of the producer-advertiser, and the policies or legislation expounded by the politi- cian are the products advertised. Voters or factions of voters are the customers of politicians in political exchange.

In the course of selling their programs, politicians are very much under

the scrutiny of journalists, as well as rival politicians, and consequently there are important differences among the influences that the media have on market exchange, political issue formation, and social behavior. Those differences arise in part out of differences in the extent to which principals are free to shape and transmit messages. In advertising directed at market exchange, the messages are determined for the most part by principals, and the media function, literally, as media - that through which the messages are conveyed. There is some constraint on market-directed advertising which stems from either legislation in defense of the public interest, as with ' truth in advertising' or the ban of liquor and cigarettes from television; or from a perception of community standards, as in the absence until recently of the advertising of contraceptives. But by and large, market advertisers have significant freedom in the way they present their products and their messages. They can choose their words and create their images (again, sub- ject to some constraint based on perception of what is clearly false or harm- ful) without interruption, editorial scrutiny or immediate rebuttal. The adversarial aspects of market advertising may be either implicit or central, as a matter of advertiser strategy.

However, political advertising c u m news appears to be more constrained.

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Journalists are trained to report all political news in a balanced way, and

the law may require of some of the media that in any controversy both sides be represented, out of concern for comprehensiveness and fairness. In con- sequence, the media apply several levels of filtering or 'gatekeeping'. But

it cannot be concluded that gatekeeping necessarily diminishes the effec- tiveness of political advertising. For in addition to balance and fairness, another important concern helps to shape the gatekeeping decisions of jour- nalists, editors and producers. They must ask at every stage whether a par- ticular item of news is of sufficient impact to warrant reporting. The news

is a commodity marketed by the medium, and it must sell. Hence, an impor- tant set of gatekeeping decisions are made on the basis of newsworthiness,

or marketability to readers and viewers, or equivalently, entertainment value. What political messages get reported, and how they are reported, are to a much smaller extent under control of the advertisers - the contending politicians - than is true in the case of market advertising. But fortunately for the politician, political advertising (particularly on television) always in- volves sale of the firm as a primary consideration, with sale of the product

being joint or incidental; and an advertising message delivered in person and focused on the self is the usual mode. The entertainment value can be enhanced by focusing on the politician's role in controversy or conflict. Suc- cessful politicians learn what gets space or time in the media; and that which

satisfies the gatekeepers is also that which serves the career. So the gatekeep- ing role of journalists is seldom a very important expropriation of control or influence over advertising messages in the political arena, at least insofar as established and recognized politicians are concerned.

Journalists can and occasionally do in fact introduce an issue as an item on the political agenda, even when there is no important public figure who

acts as a speaker on either side of the issue. If a reader/viewer response is forthcoming in those instances, then politicians become involved as prin- cipals. These cases are probably the most important contributions by the media to the shaping of political attitudes and awareness. By contrast, the media are more or less constantly involved in shaping social attitudes and

behavior. This probably occurs most importantly through entertainment content, as for example, in the attitude changes toward various patterns of sexual behavior that were abetted by portrayal on television, and by analysis in the print media and on television news. In the entertainment based under- takings of the electronic media, the writers and producers control the con- tent, subject to whatever constraints are deemed necessary by network censors.

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4. Impact on the ailocative role of government

Political advertising as it is manifested in news reporting has affected the organization and structure of the economy itself. In all western economies since the 1930's depression, there has been a strong impetus to transfer the control o f resource use into the hands of government. That movement in part is due to a broadening of the concept of 'social problem' (Douglas, 1974), with rejection of solution approaches that are decentralized and incremental or gradualist, in favor of ones that are legislated and categorical. The growth of the media as an industry has clearly been accompanied by a heavier reliance on collective decisions and categorical solutions. Should we suspect on that ground that the media have caused the move toward centralization? There would be an element of irony if that suspicion could be established as fact. The media are mainly private, profit-seeking firms. There are clear reasons why they should be anxious to protect a high degree of autonomy, and wide scope, for private decision-making. They vigorously uphold the constitutional rights of a free press. But there is little public recognition among them that the philosophical and pragmatic defenses of a free press can be extrapolated to cover freedom from restraint on a wide range of economic activity. The main argument for unregulated economic activity as a norm (for a heavy burden of proof to be imposed on anyone who seeks to regulate economic activity) is that individuals are the best final sources of reliable knowledge and information (however incomplete it might be) about what is best for themselves as individuals. That knowledge is privately formed and is subject to constant informal revision or update. It can be used to best effect in a decentralized system of voluntary interaction. This is a broader and much subtler argument that any mounted on behalf of a free press of free speech; indeed, freedom of communication can be defended as a second- order corollary argument dealing with the need for uncontrolled sources of information. The full analysis originates with Hayek (1945) and still is not widely understood among social scientists and intellectuals. H ayek's analysis has been extended into other social disciplines by Sowell (1980).

A secondary and partial analogy between a free press and free markets can be based on the role of competition in upgrading product quality. Stylized representations of journalistic scoops characterize the competitive process in information-gathering.

As Hayek later noted (1960), society has, by sanction or legislation, set constraints on some forms of exchange. In instances where those constraints withstand the society's customary tests of legitimacy, they are usually justified on the ground that the circumscribed activity (a) entails risks that are hard to assess by or may be unknown to the individual, or (b) is in viola- tion of moral standards. In this context, the legitimacy of control is reflected in a high degree of acceptance or compliance. Freedom of communication at various times has helped to establish or overthrow compliance regarding

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sanctions of long standing. The media are always near the center of any con- troversy regarding the legitimacy of restraints. It may be the case that the media show far greater sympathy to individualized patterns of social behavior than they show to unregulated exchange on markets.

Indeed, content analysis has been invoked to support the contention that there is an anti-capitalist (or anti-unregulated marked exchange) bias in the media. 5 Private business is frequently portrayed as a source of ethico-legal and social problems, and government is looked toward as the source of solu- tions for such problems. Examples include the routine reporting of oil prices; the routine reporting of corporate profits (with implications of ex- tortion or exploitation when profits are high, and implications of in- competence or threat to employment and economic stability when they are

low); the reporting of adverse impact of business on the environment; and the reporting of international bribery by American firms.

In the corporate sector, routine operation is not newsworthy. A useful corporate innovation may attract journalistic attention, but for the most part such innovations are publicized by paid advertising: the attention of news reporters is most heavily focused when something goes sour (as recent- ly, in the deLorean fiasco). By contrast, news reporting closely follows and idealizes the routine operation of the activist politician. Presidents like Eisenhower and Reagan, who are cut from 'business as usual' cloth, are

chided for inactivity, passivity, or lack of grasp or control. The ideal type is Rooseveltian" seeking out and able to meet all needs, attend to all prob-

lems. The sense conveyed in media commentary is that a passive politician is callous or irresponsible; and that applies to all politicians, not just to

presidents. The politician who does 'nothing' makes news, just as does the politician who is busy doing 'something'. Thus there is an asymmetry in the view of what is newsworthy. Corporate activity makes the news when it is seen as going awry. Political office holders are seen as going awry and they are publicly chided when they fail to speak or act so as to make news.

This asymmetry of treatment is the product of a subtle but strong incen- tive system that operates on journalists and editors, and which leads them to create opportunities for politicians to advertise by making news. The growth of that form of political advertising is a major element in the growth of government. The incentives to expand political advertising are principally a product of the competitive structure of the media as an industry, and secondarily, a consequence of lobbying.

The media are constrained by competition. 6 With unimportant exceptions, they are motivated by financial profit. Even the ones like public broadcasting which do not compete for the expenditures of advertisers, are in rivalry for the time and subscription of viewers and readers. In large part, the success of a medium depends on the size, wealth and stability through time of its audience. An effective way for journalism or entertainment to

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hold an audience is to present social problems vividly and compellingly. In

packaging a social problem for presentation, newspapers and television fre- quently respond to or seek out as principal speaker a politicia n who appears to have wide-ranging knowledge of the problem's scope, and who has a pro- gram for its rectification. 7 As personifier of the problem, the politician engages in political advertising and attains greater visibility.

Moreover, the competitive structure of their industry constrains media firms to be entertaining at as low a cost as is possible. Hence the media - especially television - rely heavily on politicians to monitor or assess their own and each others' program proposals and performance. By this process, politicians are pitted against each other, and the element of competition be- tween them becomes similar to game shows and athletic contests, which are other vehicles supposed to be of high entertainment content.

Hence, in the political arena, political advertising messages become con- sumption goods in their own right. Consumers of the messages signal their

support to the producers by the votes they cast, and they also signal to the media, through subscription or watching, that they want the messages to

continue. Votes are interpreted as a judgment on the quality of the legislated product, but that interpretation is certainly an oversimplification, if not an outright error. There is in fact very little in the way of publicly available monitoring of the success or effect of legislation, in the media or elsewhere.

In the media, the mode of political advertising is predominantly forward looking, always focusing on the new. It heavily emphasizes the processes of policy adoption, and downplays or ignores the consequences of previously adopted policies.

The role of the lobbyist in the political advertising process is to expedite new faces and new voices as those are deemed desirable by the media; in the metaphor of the politician as a firm, the lobbyist is a consultant to or agent

of a faction, and the faction is a venture capitalist or source of seed money to back new entrants, who are expected to produce in accord with the objec-

tives of the faction. It is an open (or perhaps an unstudied) question whether lobbyists have significant impact on the gatekeeping decisions of jour- nalists, editors or producers.

Thus we are portraying a clear, though somewhat convoluted, symbiotic relation between the media and individual politicians, and that relationship is the major element in the media's contribution to a more important economic role for government. A larger government role is not cultivated for its own sake, or out of ideological belief in its desirability or inevitabili- ty. Rather, decision-makers in the media take those actions in large part out of a fully conscientious and competition-constrained effort to be cheaply, responsibly, and entertainingly informative to the largest possible clientele (with some smaller shaping effect perhaps arising out of direct contact with persuasive lobbyists).

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A second reason why the media have contributed to the growth of govern- ment lies in the kinds of programs that politicians invariably offer as remedies for social problems. Political remedies nearly always call for in- come transfer or some form of legislated regulation: in effect, every pro- gram is structured as a response to market failure, even when the problem which impels the program is most plausibly a consequence of some past pro- gram. And it is not surprising that legislation should accumulate in this piecemeal and uncoordinated way. A clear lesson from such efforts as tax, welfare or military spending reform is that once a program is in place, it quickly attracts a beneficiary group which becomes a strong lobby for its continuance and growth. In some instances, the administrative bureaucracy

is the strongest and most conspicuous part of the beneficiary group. An ad-

ministrative bureaucracy invariably portrays any success of its program as evidence in favor of expansion, and any failure as evidence of

underfunding. Once a program has been initiated it holds little further interest for the

media. The routine workings of bureaucracy are the antithesis of 'news', almost without regard to how the job is being done; and only a small number of issues can be monitored at any time by the media, so the em- phasis is always forward-directed: on to new problems: rather than

retrospective. Powerful economic incentives act on both the media and the politician to

strengthen their synergic relationship. It is a peculiarity of journalism tha~ problems or issues have only very tenuous standing in their own right. TO the media, a disembodied problem is far less compelling and vivid than one that has been uncovered and studied by an articulate, concerned and in-

formed politician. Thus it is often in the interest of the politician to do a careful and convincing job of defining a problem and proposing a solution; and the politician thereby becomes a low-cost supplier of media content. Even in instances when a problem is uncovered by investigative reporting, the reporter will usually seek corroboration from a politician who is prepared to lead the legislative fight against it. The politician's involvement validates the existence of the problem, confirms its gravity, underlines the positive contribution of the media or the specific media firm in uncovering it, and offers the hope of a program to attack it (compare Fishman, 1980).

On the other side of the exchange, a politician can proclaim a problem after considering possible solutions, secure in the anticipation of media coverage, and knowing that subsequent discussion and debate will in large measure be directed by those first perceptions and proposals if they are suf- ficiently compelling. The politician gets media exposure, media exposure means recognition, recognition means votes and career growth. The loftier the ambition, the wider the degree of exposure that the politician seeks. The traditional pattern of political career growth through service to and cultiva-

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tion within a party no longer is the main path of choice for those with statewide or national ambitions; in the era of television, operation within the party in large part has been supplanted by development of a media per- sonality role, in which protestation of independent judgment and freedom from party control enhances credibility (which in turn enhances exposure, and reduces actual dependence on party affiliation for success).

When the party system was strong, and the synergy between politicians and the media was weaker, the parties, acting through direct voter contact as well as through the media, could choose from among a broad range of potential issues, narrowing to a list that was manageable within the legislative and administrative processes. Today, because politicians have significant direct access to media coverage, the issue base has been broaden- ed considerably. The number and range of issues is limited now by the capacity of the media to cover crises and urgent pronouncements; and while that capacity is by no means large, it appears to be larger than the capacity needed to legislate and administer systematically, and far larger than the

capacity needed to legislate and administer within the constraints of bal- anced budgets, constraints which once were powerful but which no longer are binding at most levels of government.

Notice that an important constraint on the carrying capacity of a pro- grammatic governmment is imposed if budgets are required to be in balance. Legislators c u r e media figures, who seek career growth through vigorous and well-publicized efforts directed at social problems, are also custodians of the budget. In administrations beginning with Kennedy, budget balance has been a second or third-order concern; only the remarkable deficits of the past six years have reestablished it as a centerpiece of political discourse. The ability to run deficits without political penalty has been an important element in the growth of programmatic government and the perfection of political advertising as an instrument for enhancing political careers and media profitability.

5. The polit ic ian as a f irm

The foregoing portrays the politician as a firm; a producer and advertiser of services that are provided through legislation and government programs. Issue awareness on the part of the public is similar to awareness of generic market-traded products; and awareness of a particular politician's involve- ment is comparable to brand awareness. In politics there is a dimension closely analogous to brand-name capital. Kellogg's can more easily market a new breakfast cereal than could a new firm; and by direct analogy a Ken- nedy can more easily gain attention for nostrums directed against a social problem than could a new politician. The frequent introduction of a new

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brand is an important dimension of market share maintenance by many suc- cessful business firms; and to elevate a social problem to the forefront of public attention, and propose a solution for it, contributes to the power base (the ability to raise money and to gain access to the public through the media) of the politician. In both cases, repeated messages are the key to recognition.

In the formation and accumulation of brand name capital, we can find important differences, as well as similarities, between the political process on the one hand and the market process on the other. Customers pay for a firm's advertising when they buy its product; but they also simultaneously pay (in effect) some of the politician's advertising cost with that same prod- uct purchase, because the media use commercial advertising revenues for their coverage of legislative action and debate, and thereby furnish politi- cians with their most important advertising vehicles. Three products thus are tied to the sale of a tube of toothpaste: the dentifrice, dentifrice advertis- ing, and the media content that the advertising pays for. Perceived product quality and commercial advertising effectiveness strongly affect the repeat purchase behavior of customers; in lesser degree, so does the entertainment value of the media content. But when we attempt to assess the importance of the entertainment value of political advertising, we are examining something that is unlikely to be specific to any one media firm, and which almost certainly is not specific to any one advertised product that under- writes the content of that media firm. Hence, there is very little if any feed- back whereby the market success of a commercially advertised product con- trols the level of political advertising; and the volume or content of political advertising has very little directly measurable influence upon the market success of the underwriting commercial advertiser. Moreover, there is vir- tually no tie between the news coverage granted to an individual politician and the perceived quality of the program or legislation provided by that politician; and certainly no perceptible linkage between the quality of the product that the politician delivers, and the level of market advertising which goes to sponsor news coverage, the vehicle of the politician's ads. Thus, while repeat purchases and growth of the customer pool can reinforce and extend the advertising of marketed products, the level of subsidy granted to the coverage of political debate and legislative action is virtually independent of any similar reinforcing behavior by the subsidy-paying public. Short of mass refusal to watch television news or buy the print media, there is probably no significant market channel whereby the existing coverage of political debate and legislative action can be altered; and so long as actions covered have the capacity to entertain, such boycotts or refusals are highly unlikely.

When the dimension of political advertising as news is considered explicit- ly, a straightforward analogy between political competition and market

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competition disappears. Without that form of advertising considered, the appealing parallel would hold that politicians provide political services and public goods through government in exchange for votes, while firms pro- vide marketed private goods or services in exchange for dollars. What can be imagined by way of market analogy when political advertising in the news is considered? Suppose firms arose in large numbers whose sole purpose it was to participate in contests to create cuter or catchier advertisements. The winning ads would be printed or broadcast free of charge to a wide audience. There would be no marketed product linked directly to the ads. Instead, those who watched the ads would be given products whose quality and function would be only partially determinable, whose origin is casually publicized, and which are distributed at an unspecified price, with collection coming at specified future times.

So a major argument in favor of a market system: that it contains feed- back mechanisms by which consumers inform producers whether they should increase, reduce or terminate their level of production activity: fails in the political system. Market advertising and production can continue only so long as the advertised good is accepted by purchasers. There is no feedback mechanism of comparable strength, which involves the entire pur- chasing public, and which governs the type or level of activity, in political firms. In the political market, the activities of individual politicians are closely monitored by factions or interest groups, which contribute to the wealth and power of the politicians through direct financial contribution and electoral support. Factions are formed to generate or impose programs or legislation that would, if left to the collective judgment of the electorate, be unlikely to find adequate or timely voter support. The comparatively small and carefully targeted financial outlays of factions swing the much larger political advertising outlays. Those faction outlays are the seed money or venture capital used in the establishment of individual politicians; once established, the successful among those politicians tap into the much larger advertising resources available through media content.

There is no market analog to factionalism, because market firms are judged on their product by the economy at large. The market can and will support a variety and diversity of products so long as customer support suf- fices to cover cost. Factionalism also achieves diversity, but through logroll- ing; and although budget constraints do not always immediately bind the size of the total offering by politician suppliers, sooner or later there must be some reckoning on the total activity level, as in the current debate over total federal spending and discussion of balanced budget amendments.

The advertising of marketed goods has been accompanied by a higher degree of industrial concentration, and is thought by some observers to have played an important causal role in the observable fact that nearly everything is produced by fewer manufacturers with larger market shares than was true

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in (e.g.) 1928. In politics, by contrast, the growth of political advertising has been accompanied by decentralization (stemming from the diminution of party control) and the proliferation of firms; there are many more politi- cians per capita distinguishable today than was true fifty years ago, reflec- ting the ability and willingness of politicians to offer legislation outside the control of party. The consequences are evident, as in the number of can- didates already actively in pursuit of the 1988 presidential nomination in both parties.

Although market advertising may have abetted or engendered concentra- tion, and political advertising seems to have contributed to decentralization in politicial markets, both advertising forms have contributed to a reduction of competition in the economic welfare-connotative sense of the word. Market concentration fosters the opportunity to fix prices, either through leadership based on a dominant position, or through collusion. Political decentralization spreads the opportunity to logroll, and logrolling is a form of price fixing; from a consumer's point of view it is almost the same thing

as a tie-in sale.

6. The value of media-provided political information

The irrationality of becoming highly informed in order to vote responsibly has been identified as the source of a major free rider problem of in a democratic society (Downs, 1957). The demand for information about the prospective political performance of candidates is limited by the intrinsical- ly low utility of such information. That low utility stems from the fact that the act of voting, as well as the choice of the voter, has little bearing on the mix of legislation or political advertising that the individual voter consumes: the individual voter is 'never' decisive in maintaining a beloved political advertiser as a media figure, or casting out one who is odious. To a naive observer, the problem in uninformed voters is due to underprovision of in- formation about political performance. The same naive observer has long optimistically seen that the media, as purveyors of information, can and ideally should offer a remedy to the problem, while condemning actual media coverage of political issues and potential candidate performance as little better than no information at all. Media coverage, which by tradition and sometimes by legislation must attempt to be fair or non-partisan, has a least-common-denominator quality. Why don't the media live up to the ideal, by conscientiously illumining the most important issues, and investing heavily in comprehensive and sophisticated analysis of those issues? Perhaps they are daunted by complexity, the brute difficulty of 'getting it right'; or perhaps they are concerned that they might circulate information that would raise charges of partisanship. But even if media coverage were

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comprehensive, sophisticated and non-partisan, the free-rider problem would remain. Voters, as readers and viewers, still would lack incentive to digest and act upon media-provided information. They would have to work to absorb the available edification, and as a consequence might feel less well entertained. And as we have seen, the media must entertain to survive; and so they make the news interesting by simplifying, and playing up elements of conflict in many reported situations.

This focus on conflict enforces and exaggerates a prevailing zero-sum view of political issues (Wood, 1985); in which the distributive element of political conflict is highlighted, and issues of efficiency, particularly in- tertemporal efficiency, are ignored or glossed over. The forceful portrayal of distributive concerns must focus on how things are right now, and ignore potential changes or trends. The perspective is that the economy is in an 'end state', in which allotments are permanently fixed unless there is redistributive intervention. The heightened concern over distribution and attendant redistributive activity in turn increases the strength of factions and the necessity to form defensive factions.

7. Consequential responses or remedies?

Few if any scholars would be willing today to defend the optimistic premises about the disinterested functioning of government that were current in the economic analysis of the 1940's and evident in numerous important works (exemplified by Baumol, 1949). A similarly based skepticism about media journalism, when it is portrayed by tradition-minded theoreticians as defender of truth and shaper of the good society, may be overdue. The media are institutions whose structures imply opportunities for rent transfers, and it is too much to suppose that such opportunities might be systematically ignored.

If there is widespread concern about the media-politics synergy portrayed here, that concern will almost certainly be accompanied by, or be an outgrowth of, a concern over the size of government. Judging from the literature of public choice analysis, which has traced the growth of govern- ment through the incentive implications of institutional structures, constitu- tional reform is the promising avenue of remedy open to those who oppose that growth (Brennan and Buchanan, 1981). Should any constitutional reform movement pay concurrent attention to reform of the mechanisms of mass information transmission? The question has Orwellian overtones, and it is probably unnecessary as well as potentially dangerous to contemplate any reform undertaking directed at the media. If it is true, as accepted here, that deficits are a significant element in the growth of government, then any remedial action effective in reducing the size and acceptability of deficits will almost surely be effective in blunting the consequences of synergy.

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Whether a balanced budget amendment can (or should) find effective form remains an open question. But no separate effort directed specifically at controlling the media appears presently to be well conceived.

On a net weighing, past attempts to enforce impartiality in coverage of public discussion may have been constructive, but for reasons not an- ticipated by proponents of those efforts. A strong tradition or requirement of coverage of both sides of political debate has been a continual reminder of how little is understood, and to what degree conviction rather than infor- mation underlies most political actions, even ones of great moment. Coverage shaped by traditions and doctrines of fairness may have had some salutary tempering effect on peoples' willingness to rush down every new programmatic avenue opened by factional interest or candidate imagina- tion. Legislated measures designed to enhance fairness and hence credibility may have instead nurtured a greater skepticism, which has been con- structive.

ACKNOWLEDGEMENT

I am grateful to Richard Ashley, Jack Douglas, Paul Hammond, William Wood, Sam Riley and especially Thomas Borcherding for critical comment on earlier drafts. Work on this project was initiated with the support of the Foundation for Research in Economics and Education, UCLA.

NOTES

1. The absence of attention by economists is asserted despite (or perhaps better, because of) a lengthy bibliography (Owen, 1973) compiled for the Center for Research in Economic Growth at Stanford University. Perusal of titles contained in it, and pursuit of promising leads, failed to uncover anything recognizable as economic analysis in this domain. Nor does the Journal o f Economic Literature or Social Sciences Citation Index disclose anything subsequent of interest along the lines explored herein.

2. On the extension of economic analysis into traditional domains of other social disciplines, see Hirshleifer (1985).

3. Ashley, Granger and Schmalensee (1980) found that aggregate levels of advertising cannot be said to 'cause' aggregate levels of consumption.

4. Non-economists have investigated the response to advertising. Some of the investigation by psychologists has concluded that advertising dertermines brand choice, but doesn't conspicuously alter the demand for classes of good (generics). Much of this work is due to Lazarsfeld and his followers; see Lazarsfeld and Katz (1965) for one exemplification. Jacques Ellul (1965) dissents vigorously with respect to Lazardsfeld's and similar approaches, and criticizes the social scientific tradition in dealing with such questions. 'Casual empiricism' (as we apologetically call our introspections based on experience) tends to support the Ellul position. Some of his criticisms (that the time frame considered is structured incorrectly, with excessive emphasis on short range behavior, in particular) can be leveled against Ashley et al. (1980).

5. For one example, see Effron (1971).

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6. Metropolitan dailies do frequently have a newspaper monopoly. But in news reporting, they compete with television and the major weekly magazines for the time and attention of an audience; and in local advertising (of such highly-specialized and fast-decaying information as special food prices) they compete with neighborhood newspapers, radio, and mailbox stuffers. Their content and behavior is definitely constrained by the necessity to compete.

7. Individuals in other roles also occasionally serve the media as personifiers or encapsulators of social problems. Victims are routinely portrayed and interviewed; and litigants occa- sionally are used to present a point of view. Academics and intellectuals also from time to time have served in this role, particularly since the Kennedy administration. (On the involve- ment of social scientists in the processes of policy formation, see Spengler, 1972. Also recall Bundy, Rostow et al. in the Viet Nam context.) But alone on this list of potential personifiers of issues, the politician is a specialist - an entrepreneur whose product is proposals for the solution of social problems, whose livelihood depends on success in packaging and advertis- ing that product. Through repeated exposure in personifying issues, the politician achieves recognition; and recognition, more than past success, fosters continued exposure.

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