The economics of news: Should news agencies be funded from taxation?

Abstract

Accurate news reporting is essential for a well-functioning democracy and can be classified as a quasi-public good due to its non-rivalrous and non-excludable nature. This paper explores whether such reporting should be funded through taxation, analyzing both the potential benefits and drawbacks. The media industry faces significant challenges, evidenced by declining readership and job losses, particularly in traditional outlets. Despite its limited direct contribution to GDP, the media plays a crucial role in informing the public about economic trends, policies, and societal issues, thereby influencing consumer decisions and fostering economic growth. The paper argues that accurate news reporting is a merit good, often under consumed due to the proliferation of misinformation and preference for indirect news sources, particularly among younger generations. Government intervention through subsidies could mitigate market failures by supporting news agencies that prioritize quality journalism over sensationalism. However, concerns about government influence on media independence necessitate strict oversight and transparency in subsidy allocation to maintain journalistic integrity. By addressing these challenges, the paper posits that taxpayer funding of news agencies could enhance the quality of journalism, reduce unemployment in the sector, and ultimately contribute to a more informed citizenry. The conclusion emphasizes the need for a balanced approach that safeguards media independence while ensuring the provision of accurate news, essential for the health of democratic societies.