Instrumentally, in our market-based capitalistic economy if a supplier that sells a poor-quality product (say, a car) then market forces will put that supplier out of business as customers will find alternate higher quality products. Quality is a discernible attribute on which consumers discriminate and suppliers compete. So, why is it that poor quality information (or misinformation) is not subject to the same competitive forces – that puts the suppliers of this poor-quality product out of business?
In the market economy, there is consumer need that suppliers compete to fulfill. The need could be real (e.g., basic like food or transportation) but it is often “perceived” (consumers believe they need something). Consumers then have a reservation price, i.e., the price they would pay to have that perceived need filled. If a supplier can do this competitively at a price below the reservation price, the transaction goes through. If the product is information (which usually envelopes any product or service) then markets can vie to fulfill the information need. The higher the quality of the product (in this case, information) the better it will do in the market.
But what if the perceived need is for misinformation? People may have a desperate need to believe that something is not true (for instance the truth conflicts with their politics or identity). Then in our market-based economy, suppliers can vie to fulfill this misinformation need. In a free market system, the “quality” of the information will be grounds for competition, where higher quality information is considered the superior product. And yet, poor quality information (or misinformation) still survives. Why? Some reasons for this are: (a) veracity is not a parameter of quality, and (b) consumers do not demand veracity. Even worse, consumers judge the quality of information (c) based on other suppliers that are supplying similar misinformation or (d) the information may be judged as high quality not based on its truth but based on its alignment with the consumer’s belief system. Further, algorithms and news feeds are geared to make such information accessible, by continuing to supply the product below the consumer’s reservation price. For suppliers of misinformation, it is a lucrative enterprise spawned by ad money tied to eyeballs from big tech. Welcome to the information bubble – a segmented market for misinformation where veracity is not a basis for competition.
The prevalence of misinformation does not reflect market failure, but on the contrary, it reflects market success. Just like there is a market for illegal drugs that are bad for you, but they make a segment of consumers feel good and dependent – so does misinformation.
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