Masherg’s Law and Free News Market Failure (7 of 19)
Editor’s note: This is the 7th in a series of 19 installments about inter-related topics contributing to free news market failure.With thanks to George Akerlof’s retelling of a story from India 1932,[1] Sir Malcolm Darling describes a small village moneylender charging interest far above prime rate. The moneylender uses intimate knowledge of customers to provide loans to those who would otherwise get none. Here is Darling’s passage updated to reflect not money but information suppliers: “It is only fair to remember that in the villages, the information supplier is the one knowledgeable person amongst a generally unknowing people; and that those methods of business suit the happy-go-lucky ways of the people. The supplier is always accessible, even at night; dispenses with troublesome formalities, asks no inconvenient questions, gives promptly and, if personal data is shared, does not press for other payment. The supplier keeps in close personal touch with consumers, and in many villages shares their occasions of weal or woe. With intimate knowledge of these people, the supplier is able, without serious risk, to supply those who would otherwise get no information at all.”Similar to the moneylender, modern news suppliers invest in knowing their consumers very well.[2] There are few troublesome formalities, not even payments. And when the perceived price is zero, the only driver is the match between Qs and Qc. Modern media companies have substantial resources to make the match, leaving the consumer highly disadvantaged.
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