Media Economics and Media Policy: The Good and the Bad

The increase in attention is likely due in large part to the wide range of economic questions raised by both the changing media technology environment, the adoption of new regulatory philosophies in many nations around the world, and the consequent efforts to effectively impose these new philosophies. Overall, however, media economics remains a very small – and even somewhat obscure – specialization within the economics field, with relatively few media-oriented research articles being published annually in traditional economics journals and the only journal devoted specifically to media economics.

What can explain this general pattern of neglect of this increasingly significant component of the global economy?

The neglect may be due in part to, as one economist has studied media industries has noted, the belief within the economics community that “frivolous activities can hardly exert the intellectual pull of serious industries such as steel, pharmaceuticals, and computer chips” This assessment is somewhat troubling, as it seems particularly narrow-minded – and even dangerous – to consider those industries and institutions engaged in the process of influencing cultural and political attitudes, beliefs, values, and behaviors as engaged in “frivolous activities,” even through the somewhat narrow lens of economics.

It is this question of the appropriate scope and influence of economic analysis in media policy making that forms the crux of this paper. In addressing this question, this paper begins with an overview of some of the defining economic characteristics of the media marketplace. In particular, this first section explicates the dual-product nature of most media markets, as well as the distinctive characteristics of these two products. This section also will highlight some of the distinctive externalities associated with the output of media industries. The goal of this overview is to illustrate the importance of media economics as a distinct subfield within the broader economics field, but also to illustrate the non-economic concerns that must inevitably be brought to bear on media policy decisions. This paper will then provide an historical overview of the place of economics in U.S. media policy making, in an effort to illustrate how the role and function of economics in media policy making has evolved over time, particularly in terms of how economics has become increasingly central to media policy making.