Bastiat's Bastions

I recently read an editorial from the Nicholls Worth titled, “Media should cover news that matters.”

In essence, the article argues that there should be more news coverage of “current events” and less coverage of Paris Hilton. It further discusses a proposed boycott of Paris Hilton stories.

At some level, this editorial suggests changing the behavior of the news media, while providing no incentive to do so. I give it absolutely no chance of impacting anything. If the same article appeared in the Wall Street Journal, I would give it slightly higher chance, but still I would put the chance of an impact as vanishingly small. Why?

As you already know, and will be reminded of approximately 200 times throughout the semester, economics is about incentives. If you want to try and learn about the behavior of people, a fine start is to look at the incentives they have. If you want to try and change their behavior, a fine start is to chance the incentives of those people. People respond to incentives; their behavior is typically not “accidental”, it is purposeful.

For example, imagine being the producer of soft drinks. You are considering which flavors to produce. The first option is orange soda, which seems to be pretty popular with your customers. On the other hand, your mother is a big fan of liver and onion soda, which seems to be not so popular with your customers. If you produce the liver and onion soda, how do you expect to do? Would it be correct to say that a firm producing orange soda could be easily persuaded to switch to liver and onion soda?

What does this have to do with Paris Hilton, you ask?

How do you think a newspaper will do if it covers stories that its readers do not wish to learn more about (liver and onion soda). Or if it does not cover stories its readers do wish to learn more about (orange soda)? Is it then an “accident” that the news media is covering Paris Hilton? Would media outlets be willing to stop providing it?

What then is the point of this editorial? If anything, what should the editorial be complaining about?

–CT

Do a Google search of “Adam Smith” and “Invisible Hand” and see what you come up with.

One of the first things that students are taught in beginning economics
class is about scarcity.   Scarcity is not about something being rare,
rather, scarcity is about there being less of something good that people
want.  

New York City has long been noted for its traffic jams.   There is
just not as much space on the streets as people would like to use,
causing the city’s well-known traffic gridlock.   Space on the streets is
scarce.A good clue that something is scarce is that people are willing to pay
some price (but not necessarily any price) for it.   Do you think that
New York City streets are scarce?

Mayor Bloomberg is proposing a hefty fee to use the streets in NYC, $8
per day for cars and $21 a day for trucks, during the city’s worse traffic
times,from 6 AM to 6 PM.   While this is a heavy cost, is use of the streets
in New York City free now, without the fee?

Without fees, those who value the streets less may replace those who
value the streets by a lot.   But the fee, no matter where it is set,
will split people into two groups, those who value the streets more than
the fee and those who value them less than the fees.   Why do you think
that this is so?

Can you think of any other place where a price or a fee might be useful
to ration something scarce among different users that is not currently
being used?   Can you think of some place where the price of some good
is too low, or in other words, does not do a very complete job of rationing
the good among the competing users?   What is the evidence that the good
is scarce?   Do you think that it is currently worthwhile to charge a price
for the good or service?   In other words, will the collections from the price
outweigh the cost of collections and enforcement?   Remember, to collect a fee
or price, something must be done to keep the non-payers from using the good.

-MC