Media Economics: Concepts and Issues

Robert G. Picard

Let me stoop to a favourite line of book reviewers: This is a very uneven book.

Parts of it hint at sophisticated economic analysis, while other parts of the book, roughly half, are taken up with the graph-clotted elementary analysis that has driven more students from the study of economics than any other factor. There are also important omissions.

The uneven economics, I fear, will put off two potential groups of readers. Economists will end up ignoring it; non-economists, who hope to learn something about the economics of media, will get bogged down by the middle of Chapter 4 and never finish the book. Neither group will appreciate the talent -- and a very rare talent it is -- that Professor Picard has for surveying previous work in the field, showing how some of that work fits together and pinpointing where there are still gaps.

This is a short book, just over a hundred pages of text, divided into eight chapters: (1) Introduction to the Study of Media Economics, (2) The Concept and Role of the Market, (3) Consumer Choices and Market Responses, (4) Producer Choices and Market Responses, (5) Monopoly and Competition in the Market, (6) Media Performance and Capital Markets, (7) Government Intervention in the Market, and (8) Labor in the Market.

The introductory chapter sets an idiosyncratic tone. This book deals primarily with traditional microeconomics (the examination of how prices help allocate scarce resources among producers and consumers) but starts by distinguishing needs and wants as economic goals. Non-economists will probably find this unobjectionable, but economists will recoil at the thought of trying to incorporate needs (however they are defined) into the familiar textbook model of microeconomics.

The final section in the introduction correctly emphasizes the importance of scarcity as a constraint on economic behaviour and notes--also correctly -- that time is a scarce resource of importance when analysing the media. (What, after all, is the price to a consumer of a "free" community newspaper?) Once we leave the first chapter, however, time vanishes from the analysis.

What remains in Media Economics resembles, at first glance, an elementary economics text, with the graphs labeled to reflect the concern with media and the analysis couched in terms of newspapers, videos, and television stations instead of guns, butter, and widgets. Throughout the book, Picard cites the findings of relevant work, generally by professional economists and often too technical to be accessible to the general reader.

Unfortunately, the pieces don't fit together. A closer look at the figures and accompanying text shows that this is not simply an elementary textbook adapted to the study of media. Even the basic material is treated in such a way that it is often misleading and occasionally wrong. The reader of Media Economics will think that economists rely on cardinal utility and calculations of "utils per dollar of expenditure" to map out a demand curve. Not only is this misleading, but it misses the chance to introduce the reader, by the use of indifference curves and a budget line given by income and relative prices, to constrained maximization.

The discussion of cost is misleading and wrong. Figure 4.3, which purports to show the relationship between marginal and average cost curves, is a mess. The labels for the average variable and average total curves have been reversed, these curves are shown intersecting and the marginal curve does not intersect them at their minimum. The correct, but terse, discussion in the text refers the reader to the figure. At this point, diligent readers will give up, unless they are already familiar with the economics.

All this may sound like technical nit-picking. It is, but it highlights the major problem with the book. There are good reasons why an economist should know that the marginal cost curve goes through the minimum of the average cost curve, and even better reasons why an economist should understand constrained maximization. But the potential reader of Media Economics, the one who wants a good introduction to economics, will get bogged down in technique, and not develop an understanding of the importance of opportunity cost, relative prices and profit. Nor will this reader have much appreciation for how market forces work.

An exception, which proves my point, is Chapter 2. Here, without the squiggles of algebra or geometry, Professor Picard shows how difficult it is to define the market for a media product -- how one must look closely to see what is being sold (say, advertising, news or both in the case of newspapers); where it is being sold; and what substitutes exist (other newspapers, magazines, radio, television, advertising flyers, billboards, etc.). The chapter ends with a section on market structure and market power, which gives the impression that figuring out the extent of market power involves simply counting the number of firms in the market, an impression that neglects recent developments in the theory of contestable markets. The chapter is far from perfect, but the reader who finishes it will be able to make sense of many policy debates involving the media.

This book should have been shorter or longer. Either all the graphs and tables should have been left out and the book reduced to a survey article of work on the economics of media, or each chapter should have been expanded (and corrected) so a student could work through the book and see how each tool in economics was forged and how these tools are used. As it stands, Media Economics is not a useful book. Given the importance of the topic, this is a pity.



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