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June 29, 2007

Simple Answers to Tough Questions

Paul Krugman asks a very tough question indeed:

So, does anyone think it’s O.K. if Rupert Murdoch’s News Corporation, which owns Fox News, buys The Wall Street Journal?

To which there is a very simple answer. Me*.

The Wall Street Journal is private property. Who the current owners wish to sell it to, who they do sell it to, whether they sell it or not, is bugger all to do with me, you or an economics Professor from New Jersey.

The money which would be spent on such a purchase is also private property, and is thus nothing to do with me, you or an economics Professor from New Jersey.

In fact, such voluntary transactions, the swapping of one piece of private property for another, to the  (perceived) mutual benefit of both sides of said transaction, are precisely what the economics Professor from New Jersey has spent his life studying and approving of. Indeed, they are known to be the cause of this cornucopia of wealth that showers down around me, you and the economics Professor from New Jersey, the moving of resources from lower to higher value uses.

*Please note that I occasionally write for The Times, a Murdoch newspaper: add your own estimate of my bias here.

June 29, 2007 in Economics | Permalink

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Comments

Simplistic answers to tough questions.

Posted by: chris | Jun 29, 2007 1:03:32 PM

naiive. You well know that Krugman's sentence is shorthand for something like "are there issues beyond the pure economic exchange of private property that give us cause to question whether Murdoch's acquisition of the WSJ is welfare enhancing when all concerns are considered". To which the anwer is 'yes'.

Of course, with an opening salvo like that, he may have a short tenure as an op-ed writer.

Though not relevant here, antitrust concerns can stop private exchange. More relevant to this case may be 'public interest.

Economics has a hard enough time dealing with trade-offs when numbers are plentiful, but when you're judging under vague criteria like 'public interest', then it only gets you so far.

Posted by: william | Jun 29, 2007 1:26:51 PM

It's not really a tough question at all, Chris.

Posted by: Blithering Bunny | Jun 29, 2007 1:27:36 PM

It's not a tough quesion and the answer is "Who cares?".

Nobody's forced to buy a copy of the WSJ, they can switch to another newspaper at the drop of a hat if they don't like Murdoch or they don't like the way the paper has changed*.

It's not comparable with changing mortgage lender, bank account or internet service provider; that is a bit of a faff.

*That said, Murdoch seems to be quite good at retaining newspapers' identities, The Times is still easily distinguishable from The Sun, and they are still largely rubbish.

Posted by: Mark Wadsworth | Jun 29, 2007 1:39:29 PM

I don't believe you're in Murdoch's pocket. The mean old bastard hasn't paid enough to buy you.

Tim adds: Well, not yet, but ever hopeful.

Posted by: Nick Cohen | Jun 29, 2007 1:42:44 PM

Yeh, shut up Krugman - Uncle Timmeh knows what's best for us.

Posted by: Neil | Jun 29, 2007 1:51:03 PM

It's debatable, I suppose, whether the prospect of monopoly considerations might apply in the case of this particular press merger sufficiently acutely but, as a generality, it is entirely proper IMO for competition policy authorities to share Adam Smith's concerns and act pre-emptively to prevent the possibility of monopolistic distortions from arising in the case of news media:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."
Adam Smith: Wealth of Nations (1776), Book 1, chapter 10.
http://www.econlib.org/LIBRARY/Smith/smWN.html

Posted by: Bob B | Jun 29, 2007 3:55:28 PM

Quite so, Bob.

Unfortunately Tim and his ilk strangely manage to miss the 'of Nations' part of that book's title.

Tim adds: Don't miss it at all. I note, for example, that it is plural, not singular.

Posted by: Neil | Jun 29, 2007 4:26:53 PM

Neil doesn't seem to realize that Bob B is a tedious loony who constantly posts large amounts of irrelevant quotes on this site. There is no thread so interesting that it cannot be turned into a yawnfest by a page of randomly-culled quotes from Bob B.

And neither Bob nor Neil seem to have realized that that quote from Smith says that the government should not be interfering in such matters, which is the very opposite of what they're saying.

Posted by: Adamski Smith | Jun 29, 2007 4:52:38 PM

I see the soviet republic of WSJ hacks has staged a one-day stay-at-home protest. Venceremos!

Posted by: windowlicker | Jun 29, 2007 6:02:25 PM

Adamski Smith: "And neither Bob nor Neil seem to have realized that that quote from Smith says that the government should not be interfering in such matters"

Your standard of scholarship is amazingly pathetic - Adam Smith didn't say that. What he said was: "the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies".

Quite so. Check it out. Besides, events have moved on since Adam Smith.
Anti-trust laws on both sides of the Atlantic recognise the potential threat of market dominance. And in Britain, we have special concerns over concentration in media ownership. The point of quoting Smith was to show that there is absolutely nothing new about concerns over the prospect of the abuse of market power.

Posted by: Bob B | Jun 29, 2007 8:30:54 PM

A response from Bob B! And there I was thinking that he was an automated software program that just churned out randomly-assembled quotes.

He can't understand his own quotes though, even when he quotes the exact relevant section *again*. Smith is saying that this sort of thing is not the government's business. (Strictly speaking the Smith quote concerns people of the same trade getting together, but Bob's the one who thought the quote was relevant in the first place).

The fact that Smith also says that the government should do nothing to help such a process is irrelevant, as no-one is proposing this in the case of Murdoch and the WSJ.

So quite where Bob gets his "Quite so" from is anyone's guess.

And then later on he pretends that the point of his quoting Smith was in fact to show that concerns over monopolies was nothing new, even though this was also never at issue! What he in fact said was "it is entirely proper IMO for competition policy authorities to share Adam Smith's concerns and act pre-emptively to prevent the possibility of monopolistic distortions from arising in the case of news media" -- followed by the quote from Smith which clearly says that this sort of thing is none of the government's business.

And then he concedes that things have moved on since Smith anyway (ie. he concedes that the Smith quote didn't show what he thought it showed). He may not be a 'bot, but he's a laugh-machine.

Posted by: Adamski Smith | Jun 29, 2007 11:16:39 PM

"Smith is saying that this sort of thing is not the government's business."

Rubbish - Smith is not saying that. There is in Smith a clear and unambiguous presumption against monopolies and the abuse of market power. He was opposed to monopolies ("a great enemy to good management"), particularly when created by Royal Charter or statute. Pitt, Britain's prime minister 1783-1801 and 1804-06, was at the time and since regarded as something of a disciple of Smith. He pushed the Combination Acts of 1799 and 1800 through Parliament to prevent and punish combinations (or conspiracies) between workers intending to push up wages. The courts c. 1800 were inclined to regard "engrossing" and "forestalling" as prohibited by English common law and to impose penalties accordingly.
http://www.1911encyclopedia.org/Engrossing

There was no presumption against government intervention and certainly a presumption against legislation which would create or foster opportunities for abuse of market power.

Posted by: Bob B | Jun 30, 2007 1:14:38 AM

For illumination on sentiments in America about the Murdoch bid to takeover the Wall Street Journal, try the Youtube video clip here of Keith Olberman on: F**k rupert murdoch!!! K.O.'d
http://video.google.co.uk/videoplay?docid=-4902305783156867336

Other relevant clips about the Murdoch-owned media are also on the menu. I've never seen anything so personal and targeted as this before.

Posted by: Bob B | Jun 30, 2007 4:30:10 AM

OK, here's a really tough question.

Imagine a country has a monopolies & mergers commission but no newspapers. When an entrepreneur wants to start the first newspaper, would the the commission automatically have to tell him "No", as by definition he would have a 100% monopoly?

Posted by: Mark Wadsworth | Jun 30, 2007 10:39:10 AM

Mark - Good question but - as they say - it's hypothetical. The special worry in Britain about concentration of media ownership is because so much of our media is London based whereas America has a widely dispersed and influential regional media with national readers and viewers.

By far and away the most illuminating insights about the mounting opposition in America to the takeover bid by the Murdoch media empire for the Wall Street Journal comes from the Google search facility on video clips. Try using these as key phrases in video searches: "Keith Olbermann" and "MSNBC Murdoch"

This is one instance of the output:

OUTFOXED: Rupert Murdoch's War on Journalism
http://video.google.co.uk/videoplay?docid=6737097743434902428&q=murdoch

The main objection on America is not that the takeover bid, if successful, would lead to unacceptable concentration in media ownership in America. The main objection is the way in which Rupert Murdoch has personally intervened in media owned by his company to impose a personal political agenda on editorial lines - to promote the Iraq war, for example, while being increasingly critical of the execution. In fact, there is video on record of Murdoch admitting as much.

Btw the bid price made for the company owning the Wall Street Journal was at a 50 per cent premium on the share price at the time of the bid so the chances of the bid succeeding are high.

Posted by: Bob B | Jun 30, 2007 12:59:43 PM