24 Aug 2011

Fairness, agency and bias

Economists often talk about the tension between efficiency and equity (aka, the size of the pie vs. how it's divided), and the topic is complex.

I recommend these Econtalk podcasts for a useful discussion of "fairness" in markets and the tension between freedom to trade and burdensome restrictions on trade:

Munger on Exchange, Exploitation and Euvoluntary Transactions

Satz on Markets

The Satz talk was particularly interesting in the idea of "agency," i.e., the freedom to participate and control that one has in a market. She uses the example of a child labor market as one in which children have very little agency -- in contrast with a market for apples in which both sides tend to have equal power.

This concept of agency is part of a much larger discussion of "principal-agent" problems that are very central to the management of water (are managers -- as agents -- working hard for customers who are their principals?), politics (politicians and voters), and so on.

One category that is not often seen as having strong principal-agent dynamics is the media in a country with free speech. We tend to believe, I think, that competition in the media will expose rights and wrongs and give us a broadly correct view of the world.

There are several problems with this rose-tinted narrative:
  • The media doesn't work when lazy "customers" merely want to be entertained and/or have their biases confirmed.
  • The media doesn't work when money (advertisements) changes opinions (editorial) -- as we see in beauty magazines.
  • The media doesn't work when the "news" contradicts their fundamental views (we understand what's going on and you are ignorant until we explain it) and/or conduct (certain institutions are PART of the media experience).
Thus, we see heavy media coverage of a guy who was eaten by a shark on his honeymoon but not of the other 75,000 men who die every day.

Even worse, we get the current, you must be kidding me, media blackout on Ron Paul as a Republican candidate for US President. Watch this amazing clip in which a media pundit speculates that the lack of reporting can be traced to reporters' need to have friends in government and dislike of Paul's libertarian (small state = less demand for media) views.

Bottom Line: Freedom, knowledge and the good life don't just to you. You have to work within the system to get them and work the system to improve what you're able to get!