Lemons: Creature from the Blog Lagoon

Steven Taylor writes an interesting piece combining quotes, and analysis, on blogging and credibility.

Excerpt:
If a major blogger had circulated false documents to damage either the Kerry or Bush campaigns in a manner similar to Rather, there is no doubt that they would have suffered the same kind of scrutiny and criticism (had a minor blogger done it, no one would have noticed–maybe. Of course, had a cable access tv show in Austin, TX aired the fake TANG documents, I am guessing they wouldn’t have gotten much scrutiny, either).

The Eason Jordan situation is harder to analogize, because there is no one to “fire” a blogger who made such comments, except in terms of losing readership.

And in terms of corrections: on balance, bloggers’ corrections are easier to see than those of major papers. If I find an error I usually go back and correct it within the post in question, and mark said correction with bold “Updates” and strikthroughs. Does the NYT go back into ita archives and makes actual changes in the text that clearly show a corrected error? I think not.

Another blogger technique in issuing corrections is to post a new story–which is the same thing as the NYT placing their corrections on the front page–something that they aren’t prone to doing.

My own view is that Akerlof tells us much of what we need to know about the problem. The reason that CBS, and the NYTimes, have value as brand names is that they trade on their credibility. But they suffer from the problem that they sell ads, and therefore have reason to distort and embellish and sell more copies (however you want to define eyeballs looking at content, those are "copies"). (Interesting analysis by Steckbeck and Boettke)

Bloggers potentially suffer from the "lemons" problem: no monitoring mechanism, so no reason to be honest, fair, or accurate. But (and here's the thing) bloggers don't charge, and most don't sell many ads. More technically, most bloggers have no profit motive, and so the incentive link necessary for adverse selection to operate is severed. I think Taylor has it exactly right when he talks about the means for showing corrections and updates.

So, you heard it here first: Blogs are a better news source, as a group, than the NYTimes. But, if you are only going to read one thing and act on that first reading, read the Times, because they have the clearest financial incentive to get it right, fastest. Because that is how the market for information works.