Michael C. Jensen
Social Science Electronic Publishing (SSEP), Inc.; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
ECONOMICS AND SOCIAL INSTITUTIONS, Karl Brunner, ed., Martinus Nijhoff Publishing Company, 1979
Controlling the political process that threatens the free enterprise market system is a major social problem. This problem will not be solved until we develop a viable positive theory of the political process. Such a political theory will not be complete until we also have a theory that explains why we get the results we do out of the mass media.
This paper is a first step in the development of a formal analysis of the behavior of the press (a term I use as a shorthand reference to all the mass media, including not only newspapers but news magazines, magazines, radio, and television).
I argue that the mass media is best understood as producers of entertainment, not information, and that the theories and facts that people absorb from the media are a by-product of their consumption of the entertainment value of the news. In addition, peoples’ intolerance of ambiguity causes them to demand answers to questions; including those that are unanswerable. As a result the media is generally in the business of providing simple answers to complex problems whose answers are unknown, and it must do so in an entertaining way. Complex answers, even if correct are not acceptable to consumers of the media, and therefore are seldom provided.
To explain the anti-market bias of the media I argue that we must understand the family environment in which people are raised. I outline a theory of the family that is based on the notion that all exchanges must be balanced if two or more parties are to continue in relationship. The family is characterized by the absence of quid pro quo exchanges, and I argue that this occurs because it is inefficient in such relationships to keep the books balanced on a transaction by transaction basis. As a result, the family is organized around non quid pro quo exchanges, and this causes people to erroneously believe that such exchanges are the appropriate way to organize large groups or even societies. This element of consumer demand helps explain why the press is generally biased in its presentation of market vs. collectivist solutions to problems faced in modern societies.
I examine the rewards and penalties that the media and its sources can impose on each other to explain why and when the media will protect some sources of information and why they attack others. Finally I analyze the entrepreneurial aspects of journalism, including the media’s interest in helping to manufacture crises.