NBER WORKING PAPER SERIES MEDIA BIAS Sendhil Mullainathan Andrei Shleifer Working Paper 9295 http://www.nber.org/papers/w9295 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2002 We are extremely grateful to Alberto Alesina, Gene D'Avolio, Ed Glaeser, Simon Johnson, Larry Katz, and Richard Posner for comments. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. © 2002 by Sendhil Mullainathan and Andrei Shleifer. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Media Bias Sendhil Mullainathan and Andrei Shleifer NBER Working Paper No. 9295 October 2002 JEL No. D23, L82 ABSTRACT There are two different types of media bias. One bias, which we refer to as ideology, reflects a news outlet's desire to affect reader opinions in a particular direction. The second bias, which we refer to as spin, reflects the outlet's attempt to simply create a memorable story. We examine competition among media outlets in the presence of these biases. Whereas competition can eliminate the effect of ideological bias, it actually exaggerates the incentive to spin stories. Sendhil Mullainathan Andrei Shleifer MIT Harvard University Department of Economics Department of Economics 50 Memorial Drive, E52-251C M9 Littauer Center Cambridge, MA 02142 Cambridge, MA 02138 [email protected] [email protected] and NBER and NBER 1 Intro duction The descriptiveaccounts of the media industry (Mencken 1975, Goldb erg 2002), as well as journalism textb o oks (Jamieson and Campb ell 2002) recognize that media outlets do not just rep ort plain facts. One commonly noted bias in rep orting is ideological. During PresidentClinton's imp eachment trial, the right-leaning media supp orted im- peachment, arguing that even a small lie in a civil dep osition constitutes a ma jor crime. The left-leaning media, in contrast, saw the trial as a witch-hunt, treating the very same violations condemned by the conservative press as trivial. Another, p erhaps less com- monly noted, bias is not ideological at all, but rather results from the need to tell a memorable story. Thus b oth the conservative and the lib eral media condemned Wen Ho Lee as a Chinese spy, without entertaining the p ossibility that he was scap e-goated by dishonest ocials. The media were surely biased, and probably wrong. In this pap er, we draw a sharp analytical distinction between these two kinds of biased rep orting. We call the traditional left or right bias ideology, and the less tradi- tional bias - one based on the need to tell a story { spin. We see ideology as coming directly from the preferences of either editors or rep orters. For example, left wing newspap ers may simply prefer to rep ort news one way. We see spin, on the other hand, as coming from a newspap er's attempt to tell a simple and memorable story. The act of simplication leads to bias since some information is necessarily discarded. We examine the consequences of both ideology and spin for the accuracy of news re- porting. Our principal interest is how comp etition a ects accuracy. We show that, even with comp etition, the truth may not always come out, esp ecially when spin is imp ortant. We consider the case of private media outlets maximizing the welfare of their owners, which dep ends on ideology and pro ts. We b egin with the case of a monop oly news supplier. We establish that, with Bayesian readers, only the ideology of the media outlet is a source of bias in rep orting. But we also consider the case of readers who are categorical thinkers - have limited memory, and can only remember the \b ottom line." This psychological assumption allows us to analyze the commonly noted need 2 by media outlets to tell a memorable story, the so-called \narrative imp erative". With categorical readers, it pays the monop olist news supplier to spin the news in order to make them memorable even in the absence of any ideology. This spin - the need to tell the story - is also a source of rep orting bias. The more interesting issues arise when we consider comp etition among media out- lets. Such comp etition is an imp ortant argument for free press: despite the ideological biases of individual news suppliers, the truth comes out through comp etition. We show that, with Bayesian readers, this is indeed the case: comp etition undo es the biases from ideology. With readers who are categorical thinkers, however, the conse- quences of comp etition are more complex. We show that, in the absence of ideology, comp etition actually reinforces the adverse e ects of spin on accuracy. Not only do the media outlets bias news rep orting, but the stories reinforce eachother. As each pap er spins stories, it increases the incentives of later outlets to spin. This piling on of stories means non-ideological comp etition worsens the bias of spin. Moreover, spin can exac- erbate the in uence of one-sided ideology. When the rst news outlet that uncovers the story is ideological and later ones are not, the rst one sets the tone and later ones reinforce this spin. This can explain why and how inside sources leak information to news outlets: their principal motivation is to control how the story is eventually spun. Our theory of news rep orting falls between two extremes. The traditional view is that readers demand, and media outlets supply, pure information ab out p olitical and economic markets, and thereby facilitate b etter consumer and voter choice (Coase 1974, Besley and Burgess 2001, Besley and Prat 2002, Djankovetal. 2002, Stromb erg 1 2001, Dyck and Zingales 2002). The opp osite but also plausible view, pursued by Mencken (1920) and Jensen (1976), sees the media as entertainment, with no obvious grounding in reality. The p ersp ective of this pap er is that media outlets provide neither unadulterated information, nor pure entertainment. News outlets may be biased for ideological reasons. And consumers, while not desiring pure entertainment as mightbe the case with sensational or human interest stories, do indirectly a ect news content 1 Dyck and Zignales (2002) go further and examine how private incentives might bias corp orate news rep orting. 3 b ecause of how they pro cess information. So for reasons of ideology news outlets may bias information to please their owners, and for reasons of consumer psychology they may bias the information to please their readers. These results have signi cant implications for media accuracy. They explain, in particular, how the media in the aggregate are likely to get to the bottom of a news story with signi cant ideological dimension. Ideological diversityserves as a safeguard against spin. Our results are consistent with Richard Posner's (1999) highly favorable assessment of the press in the coverage of the Clinton a air. Our results also showwhy media bias is most severe in the cases where no or little ideological diversity b ears on the story, suchas the investigation of Wen Ho Lee. In this case, the bias comes from spin, and spin causes the followers to pile on. Comp etition among media outlets is not a solution to the problem of spin - indeed, it makes the problem worse. Our pap er makes the case for extreme ideological diversity in the media - in suchdiversityliesthe 2 b est hop e against spin. 2 Mo del Setup 3 There are two players: the newspap er and the reader. The newspap er is either go o d or bad. A go o d newspap er has access to some information that the reader wants. A 4 bad newspap er, on the other hand, has no useful information. The reader uses the newspap er to improve his estimate of some value t. We b egin by assuming that t is a single real numb er. This value could be many things: for example, the quality of a 2 p olitician or the nancial health of a rm. The common prior is t N (0; ), i.e. t is 2 normally distributed with variance . There are three p erio ds. In the rst p erio d, the reader receives a signal r ab out the truth. This signal re ects the reader's prejudice ab out the topic b efore he reads 2 At a more general level, this pap er is part of a broader literature on the interaction b etween comp etition and individual psychology, e.g. Russell and Thaler (1985), De Long et. al. (1990) and Camerer (1998). 3 For simplicity,we use this terminology of \newspap er" and \reader" but nothing we discuss is sp eci c to this medium. Our analysis applies to news outlets generally sp eaking. 4 A bad newspap er cannot manufacture stories to app ear go o d. We use these twotyp es merely as a way to mo del the incentives of the go o d newspap er to create memorable stories. If no stories are rememb ered the newspap er is p erceived to b e bad and loses subscrib ers. 4 the newspap er. This prejudice could b e shap ed by basic b eliefs ab out how the world op erates. For example, in the Wen Ho Lee case readers may have started with the presumption that the Chinese are likely to be spying on the U.S. Alternatively, this signal may itself be the result of other newspap er stories or rumors the person has 5 heard.