For the past few years, every time I find myself in the presence of someone who claims that markets are efficient I offer them a simple challenge: explain the media. Explain why the American media produces a torrent of raw sewage while the commie pinko government-funded media outlets in other countries produce something that approaches actual news.
If the speaker is a complete Randroid he'll sputter something about how the American media are too heavily regulated, at which point I realize that I'm dealing with the Washington Generals of logic and I lose interest in going any farther. That's actually too stupid (and demonstrably false) to even merit a response. A reasonably intelligent person will respond that the market gives American news consumers exactly what they want (crap) hence they are efficient.
This is not wrong, but it is a red herring. It replaces "Markets are efficient" with "Markets are responsive." No one would argue that markets do not give consumers what they want. But free markets are supposed to make things better, right? The best product at the best price? That's why free enterprise built Cadillacs and Rolls-Royces while behind the Iron Curtain they puttered around in Trabants, right? The market sifts out the crap and the strong rise to the top.
But the free market and the fight for ratings (and advertising dollars) doesn't give us the best news. It gives us the loudest. The most "entertaining". The most interesting to the lowest common denominator. The networks (or newspapers, or blogs, or anything else) don't attempt to compete by offering "better" news. They just do more to make their product less like news and more like entertainment, which is why more than half of the news is sports, celebrities, irrelevant human interest stories, and opinion. They never respond to a dip in the ratings with, "Let's win new viewers with some hard-hitting investigative journalism!"
Competition only encourages the arms race among networks – who can provide the loudest, brightest, edgiest, most pleasingly biased content – the same way that it encouraged 19th and early 20th Century newspapers to use ever-larger headlines, lead with the most salacious picture, and make wild-assed accusations to get attention in a crowded marketplace. At the individual level, the incentive is always to push the envelope – to say ever more shocking and controversial things, to be the most outrageous and aggressive, to do whatever it takes to get noticed and land increasingly lucrative jobs higher up the food chain. All of this is incompatible with providing accurate, careful journalism about the important issues of the day.
If American journalism has ever been close to decent, it was during the era when the number of choices was limited, not infinite. When the only options on TV were ABC, NBC, and CBS – each running a scant half-hour of national news per day – the result was sober, relatively dull news. Sure, they didn't cover every important story. Sure, if you thought they were biased you didn't have a ton of alternatives. But is the three-ring shit-circus we have today really an improvement? Now you get to pick from a dozen different TV networks and an infinite number of websites…and almost everything you'll get, regardless of source, is crap. And the Important stories get less coverage than ever before. I'll take the half hour of Cronkite, librul bias and all.
If markets are efficient and if markets make things better, then there is no explanation for why we have the worst media in the world rather than the best. The problem is that markets don't really make things better or more efficient. They make things cheaper and they're responsive. That's why we get the news we want rather than the news we need.