Murdoch, the WSJ and the Sopranos

6 May 2007
It sounds like the beginning of a bad joke: a Cato institute libertarian, a black American Clintonite and an MBA-strategy highflyer all meet in a BBC studio to talk  about Murdoch's bid for the Wall Street Journal ... It didn't continue as a joke, because no one in the anti-Murdoch camp aligned a credible argument against Wayne Crews, the libertarian. The argument went (I paraphrase):

Morris (the Clintonite): "I am for the free market, but would encourage the Democrat establishment to get a friendly billionaire to buy the Wall Street Journal (WSJ), because it is so influential. Murdoch has no track record for objectivity --- look at Fox --- and the WSJ should not fall into those hands for political reasons."
Claire (the high-flyer): "The Sunday Times never covers anti-Murdoch news. The WSJ is worth so much to Murdoch because he'll use it to move stock markets. This kind of behaviour is bad for the integrity of world business."
Wayne (the Libertarian): "You are all ignoring simple competitive truths of free-speech, free-enterprise America. If Murdoch destroys the editorial credibility of the WSJ, readers will move to the FT, capital markets will punish NewsCorp, and, even if investors and Murdoch Inc. suffer, news and analysis will not."

Claire and Morris ignored Wayne a few times. He kept saying it. Eventually, they said: "We understand the theory, we're talking about what happens everyday in NewsCorp practice."

Limp. If the anti-libertarians can't marshal an argument here, we're in trouble. Here is what someone should have said to Wayne:

"The competitive process you place such faith in needs a number of well-known preconditions in order to operate. There are basic ones, like a framework that establishes and protects property rights - we have the legal system for that. But there are an important set of knowledge-based conditions too: there must be common knowledge about alternatives for competition to work. With unequal distribution of knowledge, a group of informed insiders will gain power over the excluded outsiders. Once common knowledge goes, the whole process of market accountability goes.

The ideological underpinnings of Wayne's vision now get less attractive. Murdoch, as activist proprietor, is a big cog in the world knowledge economy. What he does at the WSJ will influence the distribution of knowledge throughout the world. He can avoid the strictures of the market precisely because he has his hand on one of the levers that determines market outcomes.

There are some libertarians who go so far as to adopt the paradoxical position that the production of property rights should be left to a competitive process. We can all see the lunacy of that position: it says that a world in which Tony Soprano, Vito Corleone and the State of New Jersey are all competing to dispense justice is the kind of world we want.

The position that hands the production of knowledge over to the market is just as paradoxical - giving Murdoch that much turf is, from the point of view of market economics, the same as giving the Godfather the keys to the courthouse."

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