Saving the Media
by Julia Cage
July 6, 2021
This interview with Julia Cage, a French economist specializing in development economics, political economy, and economic history, was conducted and condensed by franknews.
frank | Can you give us background on yourself — what do you study and how did you get interested in this line of work?
Julia | I am an Associate Professor of Economics in the Department of Economics at Sciences Po Paris, and a Research Fellow at the Center for Economic Policy Research (CEPR). I am also co-director of the Laboratory for Interdisciplinary Evaluation of Public Policies (LIEPP)’s “Evaluation of Democracy” research group and a Board member of the Agence France Presse, the third-largest international news agency in the world.
I completed my Ph.D. at Harvard University in 2014 on the economics of information. I am indeed particularly interested in media economics, political participation, and political attitudes, and have already authored three books on the subject: Saving the Media. Capitalism, Crowdfunding and Democracy, L’Information à tout prix, and L'information est un bien public: Refonder la propriété des médias.
In my academic research on the media, I try to understand the consequences of increasing media competition, not only on news consumption but also on news production, meaning not only on the way people consume news but also on the quality of the news that is produced and that they can consume.
Many news nonprofits and long-running newspapers are turning to philanthropy to sustain themselves. Do you see a concern in news being philanthropically funded?
A lot of people believe that philanthropically funded journalism is "the" solution to the media crisis. I think they are wrong. The main issue with philanthropy is the one of the governance of the media; if you look at the bylaws of new media outlets funded by out-of-market billionaires, you see that journalism independence is often not protected. Too often, media bylaws are ignored; media governance is key.
What's more, philanthropically funded journalism is in fact publicly funded journalism but only the rich enjoy the tax deductions.
I think it will be much better to have a system of publicly funded journalism where all the citizens can fund the media outlet(s) of their choice. It's why I think we should introduce media vouchers.
What are media vouchers? What is the difference between citizen vouchers and government subsidies?
I think government subsidies should be reformed and take the form in the future of citizen vouchers. This is a proposal I first developed with J. Gans, E. Goodman, B. Knight, A. Prat, G. Rolnik and A. Schiffrin as part of the ”Protecting Journalism in the Age of Digital Platforms” report, and that I also defend – and assess – in the French context in my new book, Information Is a Public Good (2021).
The idea is to give each adult a media voucher worth x euros per year from the Treasury, to donate to her favored media outlet(s) (50$ in the US context). It is in the spirit of the “democracy vouchers” first proposed by Larry Lessig in 2015 in the US, and that I defend in the Price of Democracy under the form of “democratic equality vouchers”. Concretely, every year, when filling her tax returns, each citizen will indicate to the tax administration the media outlet(s) to which she wants to allocate her media voucher. To preserve anonymity, each citizen will be provided with a token and the allocation choices won’t be linked to the addresses of the token holders (using protocols of anonymous voting on blockchain-based networks).
The main advantage of this model is to make sure to have public funding without government intervention. Hence there will be no risk for media independence!
What is the difference between how the government finances news in Europe versus the US?
The government does not finance news in the US! That's the problem!
There is nearly no public funding of private media in the US, and public media are underfunded. I am not claiming that France or the UK have a perfect model, but at least private media outlets do receive much more public support than in the US, and France Télévisions & Radio France / the BBC are well funded, which allow those media to produce high-quality information and reach a large share of the population.
In your book, you describe a new model of funding - an NMO. Can you describe what that is and what issues you think this model solves?
The type of nonprofit media organization I am proposing combines the virtues of different legal types. It enjoys the advantages of a foundation (stability of financing and ability to focus on information as a public good rather than on profit maximization at the expense of quality) and those of a joint-stock company (diversified ownership, replenishment of leadership ranks, and democratic decision making provided that the power of the largest shareholders is appropriately limited). The NMO I am proposing is a hybrid model. It is inspired in part by the model of the great international universities, which combine commercial and noncommercial activities.
The NMO model falls between the two extremes of a foundation and a joint-stock company. Like a foundation, it can accept unlimited gifts. In my model, such gifts are to be tax-deductible, as gifts to foundations currently are. Yet they are also to be compensated by voting rights in the firm: a gift to an NMO is a contribution to its capital and therefore brings "political" rights like any other investment.
In countries like the United States, where existing media subsidies are insufficient, the NMO model could also provide a novel and extremely efficient way for the government to increase its contribution to the health of the media.
The NMO model offers numerous advantages. It combines the benefits of the nonprofit model with democratized governance, bringing in more small shareholders while also allowing for the large investments that are often needed. Big investors give up some of their decision-making power but in return receive millions in tax breaks.
Tax relief in exchange for democratization and capital stabilization: this system resolves the inherent contradictions involved in giving subsidies to media owned by large profit-making corporations or in allowing the press to be controlled by individuals with deep pockets. The solution I am proposing may seem radical. But this new legal entity of an NMO is not all or nothing. Drastic simplification of the existing system of press subsidies in France, a more accommodating legal and fiscal framework for the media in the United States, extension of the VAT reduction to online newspapers in Europe (where the tax break is currently available only to print newspapers), and, more generally, granting media companies everywhere easier access to foundation status and the benefits of private contributions-all of these measures would help.
You looked at how the decline in local news results in a decrease in split-ticket voting in elections. Can you describe your findings?
In my research paper with Charles Angelucci and Michael Sinkinson, Media Competition and News Diets, we investigate how local newspapers adjust their provision of local news when the market for national news becomes more competitive. We then study whether the resulting changes in the amount of local versus national news that individuals are exposed to affect voting behaviour, particularly voters’ propensity to engage in straight-ticket voting across elections.
We use historical data to examine how the entry of television affected local newspapers and media consumption in the US from 1944 to 1964. Technological constraints at the time meant that television stations offered mostly national news and general entertainment programming, whereas virtually all newspapers bundled original local reporting with syndicated national news.
We find that the entry of television led to a 3.1% decrease in circulation and a 3.3% decrease in subscription price for newspapers in markets exposed to television. This suggests consumer substitution away from newspapers following the introduction of broadcast television. The entry of television was also a shock to the advertising side of the industry: it led to a 2% decrease in newspaper advertising rates and a 3.9% decrease in newspapers’ national advertising quantity.
Next, we investigate the extent to which the entry of television changed newspaper content and, in particular, the provision of local news. We find that following the entry of television, the total number of stories published decreased by 6.6%. The decrease in the number of stories is driven mainly by a 10.1% drop in original local news stories. By contrast, the drop in the number of (wire) national news is small and not statistically significant.
Taken together, the introduction of television with its primarily national focus in news, the fall in local newspapers’ readership, and the lower production of local news by newspapers point to a strong shift towards more national news diets.
The resulting change in voters’ news diets, in turn, offers a unique setting to test whether increasingly nationalized news diets lead to greater ‘nationalization’ of local politics, with potentially significant consequences for local government accountability.
We examine ‘ticket splitting’ in congressional and presidential elections by collecting county-level election data for the period 1932–1964. We document that the entry of television and the crowding out of local information led to less split-ticket voting, implying the nationalization of local politics.
And why does this all matter? In your opinion, why is it important to save the news?
When people live in news deserts, they are uninformed, they do not vote, there is much more corruption at the local level.
A well-working democracy needs high-quality independent news.