Ideoblog

The Harriet Miers show

I see that Harriet Miers thinks that there such a thing as "the proportional representation requirement of the Equal Protection Clause." As in, the Constitution requires that ethnic and racial groups be “proportionally represented” in deliberative bodies?    Most educated people would say "huh?"  Of the group that wouldn't, how many are nominees for the Supreme Court?

Her hearings should be amusing, along the lines of a reality show.  I don’t watch those shows, but I do remember a very entertaining show from my youth called “The Gong Show.”  The point of those shows was that people came out, did stupid things, and were laughed off the stage.  The joke was that the “performers” seemed to be taking the whole thing seriously.

I have similar hopes and expectations for the Harriet Miers show.  I am now considering moving the Miers nomination off of my Supreme Court archive and into my Television archive.  For now it's in both categories.

And, no, I'm don't think I'm being elitist. I know some very bright people who didn't have an Ivy League education but who could handle the Supreme Court just fine.  I also know others who had essentially no formal education, and whose speech is not polished eastern liberal elite.  Part of what makes them bright is that they know what they can and can't do, just like I know better than to try to fix a car or to speak at a quantum physics conference.  They don't get themselves into situations where they look ludicrous.

The law and economics of wardrobe malfunction

Remember Janet Jackson and the 2004 Super Bowl half time show?  Well Brown and Candeub do, in The Law and Economics of Wardrobe Malfunction. Here’s the abstract:

This article examines the Federal Communication Commission's indecency regulation for television and radio. In recent years, the FCC has not only pursued high profile enforcements such as Janet Jackson's well-known Super Bowl half time show, but perhaps more important, has issued fines against broadcasters in record amounts totaling millions of dollars. Critics claim that these enforcements are politicized, arbitrary, and chilling of free speech.  This article proposes a new, market-based mechanism for indecency regulation that avoids the pitfalls of the FCC's current approach. The proposal focuses on the viewer - advertiser relationship, in distinction to the FCC's regulations, which concentrate solely on the broadcaster. Drawing on recent economic theory involving two sided markets, we argue that if the FCC required disclosure of all the programming that advertisers sponsor, consumers could more efficiently pressure advertisers directly, resulting in programs that better reflect community standards of indecency.

Interestingly, this proposal meshes with one I made at the time:

There’s obviously a role for viewer choice. That’s why sex is on particular channels (i.e., cable), often late at night, and we have channel-blocking devices. The stations, in effect, have contracts with their viewers as to the particular standards the viewers can expect when tuning in. Obviously this protection is porous, since female nipples are not supposed to be on the Super Bowl. One would expect the market to punish those who breach their implied contracts with viewers. But markets aren’t perfect, in part because of enforcement and agency problems. The networks have a self-interest in getting edgier to compete with the cable companies, even if this means irritating some of their viewers. . . . So who is minding the store? Answer: AOL, the sponsor of this halftime mess. One might view it as the “residual claimant” here – the one that has the most directly to lose if viewers are offended. . . . . In other words, we can see advertisers not just as the ones who are paying the bills, or as irritants, depending on your perspective, but as “monitors” of broadcasting standards.

The Patrick O'Connell show

Spent yesterday in DC.  First stop was the Smithsonian Folklife Festival, this year featuring Oman and cooking.  Oman seems like it’s worth a visit.  But  the highlight of the show was a much more local phenomenon – Patrick O’Connell of the Inn at Little Washington. 

I’m not a foodie, but we thought we drop into his talk because he and his inn are neighbors of ours out in Rappahannock county, and we had dropped a few hundred bucks there last month. 

I’ve always thought of O'Connell as probably a pretty good chef and a much better self-promoter.  But I had my eyes opened yesterday to the full dimensions of the man as he held forth delightfully, intelligently and articulately for 45 minutes (until they practically had to drag him off the stage), preparing watermelon soup and crab cakes, and sharing his opinions on many things. 

O'Connell brilliantly used the typical pedestrian questions from the large and reverential audience (most of whom, by a show of hands, had actually eaten at his restaurant) as triggers for impromptu discourses.  Asked what he thought about recent TV cooking shows, he launched into a tirade about these shameful farces.  What’s his favorite restaurant?  We got a treatise on what it means to be a good restaurant, and what kind of torture it is for somebody like him to dine in somebody else’s restaurant (he goes to Vietnamese restaurants with kids or innocents who know nothing about cooking). 

Most interestingly, O'Connell presented a theory of haute (or as he says “refined”) American cuisine, as well as a general theory of cooking and serving fine food.  He explained exactly  how he makes it worth it to drop hundreds of dollars on a meal – not in terms of his costs, but consumer value.

While O'Connell was talking, I reflected on the fact that for more than 30 years people have been hauling out to his place in the country and dropping ever escalating big bucks on his meals.  Every day he passes the sort of market test that few other firms have to pass. The vast majority of his customers don’t just drop in (as we did) to dinner.  They have to leave no later than early on the day of the dinner to avoid the crushing DC traffic, and probably stay overnight at his Inn or at some other expensive inn in the neighborhood to avoid the drunken ride 75 miles home.  The experience will run at least a grand for two people, and twice as much on weekends with a table in the kitchen. 

And O'Connell has to attract a workforce as well for a mammoth kitchen that runs 24 hours a day.  In a town with a total population of around 150, the Inn has at any one time around 30 people working in the kitchen.  This is the tip of the iceberg of the total workforce, which fills what looks like the largest parking lot in the county. 

I once talked to a pastry’s assistant at the Inn who was renting the house across the road from us.  He had come from a distant state, had worked in France, of course, and regarded this seeming rural backwater as a huge step up the ladder, and one that he felt extraordinarily lucky to make. (O’Connell, in condemning the “clowns” who do TV cooking shows, pointed out that his helpers could be doctors or lawyers, or anything else, but chose to try to be chefs.)

O’Connell spoke of his desire to have the right kind of cooking show – a serious show, where he would interview the great chefs of the world about what they do.  Don’t we need, at last, somebody to fill Julia Child’s shoes?  (In fact, don't we need all kinds of shows that actually explain what goes on inside business?) With cable, there’s no excuse for not giving the man the show he wants.

One from your show of shows

A great obit in today's WaPo for Howie Morris, one of Sid Caesar’s sidekicks.  This was the cast that also included Carl Reiner, Imogene Coca, and Pat Carroll, who were individually incredibly talented, and twice as talented in ensemble (Pat Carroll has had some great performances recently in Washington’s Shakespeare Theatre, including as Falstaff).

This may have been the funniest thing on television. Ever.  I remembered these shows from my youngest days, and thought it must have been a mirage.  Twenty years later they compiled some of the skits into a film (10 From Your Shows of Shows) and thought, at least at the time, that it was the funniest thing I have ever seen in a theatre.  Don’t try to eat popcorn while watching it because there’s a significant risk of a choking death. 

Although Howie Morris wasn’t the star, he was the most manic member of the cast.  There was some great physical humor -- he could attach himself like a bug to the hulking Caesar, dissolve in tears, bounce off walls.

The obit has some memorable quotes, but my favorite is this comment from his son of one of his five marriages: "Living with him, for me, was like having a cartoon character as a best friend."

Junior, do your videogame

Last month I wrote about how modern TV and other supposedly low culture aspects of modern life are making us smarter.  Malcolm Gladwell reviews this work, Steven Johnson’s Everything Bad Is Good for You, in this week’s New Yorker. Among other things, Gladwell puts this phenomenon in the perspective of modern education:

One of the ongoing debates in the educational community, similarly, is over the value of homework. Meta-analysis of hundreds of studies done on the effects of homework shows that the evidence supporting the practice is, at best, modest. Homework seems to be most useful in high school and for subjects like math. At the elementary-school level, homework seems to be of marginal or no academic value. Its effect on discipline and personal responsibility is unproved. And the causal relation between high-school homework and achievement is unclear: it hasn’t been firmly established whether spending more time on homework in high school makes you a better student or whether better students, finding homework more pleasurable, spend more time doing it. So why, as a society, are we so enamored of homework? Perhaps because we have so little faith in the value of the things that children would otherwise be doing with their time. They could go out for a walk, and get some exercise; they could spend time with their peers, and reap the rewards of friendship. Or, Johnson suggests, they could be playing a video game, and giving their minds a rigorous workout.

The making of the modern novel

This NYT article, linked by Marginal Revolution, suggests that more complex tv dramas are making us smarter.

This relates to thoughts I’ve had about the particular brand of drama that I believe has been pioneered and perfected by HBO in such shows as The Sopranos, The Wire, and Deadwood. I see these shows as akin to the development of the novel form through serialization of writers like Dickens. It might have been viewed as pop culture when it first appeared, but these are classics now.

The interweaving of plotlines and themes graphed in the NYT article show a complexity that is possible only when television can spread out without the constraints of commercial interruptions or sponsors through 13 hours a year over an openended number of years, yet with budgets formerly possible only for movies. The complexity, nuances, political and social perceptions, characterizations and acting of a show like Deadwood are not just good television. It may be a new art form.

Head-rolling time at CBS

The CBS report on Rathergate is out. 

As always I want to try to stay away from the politics and focus on the business angle.    I had said "expect heads to roll"  because the closely held firm that owns CBS has every incentive to get to the bottom of the story.  Now, as the W$J said, “heads rolled.”

The report seems thorough -- though Lindgren says it didn't make enough of the political bias angle, Powerline points out that the facts in the report make it obvious.

Clearly producer Mapes emerges in her full partisan glory, not only in the report, but in her incredible statement on the report, in which she still maintains that “it is noteworthy the panel did not conclude that these documents are false” – meaning that the contents mesh with what she is still convinced is the known reality.  But of course it was documents themselves that were the story. Amazingly, she still doesn’t get it.

WaPo suggests that because CBS News is such a small part of the Viacom empire, the impact was small. Maybe true, but that doesn’t mean that a profit-maximizing firm is going to leave money on the table by not dealing forcefully with a problem of trust that undercuts the viability of the news division. 

Mapes has it right when she says that CBS' actions against her "are motivated by corporate and political considerations – ratings rather than journalism.”  And a good thing, too. Because “journalism” apparently means a clubby atmosphere that tolerates disgraceful journalistic standards.  As I said in the previously linked post, "corporatization" of the news is not the problem, but a solution to the "clubby 'pre-corporate' world" that might have cared too much about loyalty to the fading Rather or politics.

That's not to say that the corporate incentives are perfect.  Maybe CBS did under-react because its parent is too big to care enough. But if the current owners are not maximizing CBS' value, they have every incentive to sell it to someone who will do so.

So I'm satisfied, at least for now, that glorious greed is prevailing over much more questionable motives.

The Wire

 The Wire is yet another outstanding HBO series, up there with The Sopranos and Deadwood.  I caught up with the show in its third season, which focuses on, as the website tells us, "the concept and nature of reform and the role of the political leadership in addressing a city's problems." 

The creator David Simon wrote about these issues in real-life Baltimore, where the show is set, in his book The Corner.  Add great acting and scripts by the likes of novelists Richard Price and George Pelecanos and you have easily the best television about urban problems ever (or at least since East Side West Side from another era).

The point of the show (at least in the third season) is that institutions are locked in place and end up serving their own ends and procedures rather than solving the real problems, which simply fester.  So the politicians are dedicated to a number, the homicide rate, which is salient in the media. This order comes down to the police.  They try to deal with this without addressing the important stuff. 

One individual, Major Bunny Colvin (Robert Wisdom) decides to break loose from the system to actually try to solve the problems.  As he says, he's going to "legalize drugs." This involves setting up an open air drug market that the police tolerate.  The dealers themselves stop killing each other, community leaders get health services to the addicts, and law-abiding residents aren't hassled. But this solution is so alien to the hard-wired law enforcement and anti-drug mentality in government (state, local and federal) that Colvin ends up taking the fall, fired in disgrace. 

Near the end of the last episode, an ambitious white mayoral candidate, Tommy Carcetti (Aiden Gillen), gives a stirring speech about how punishing Colvin won't solve the basic problems. The point is that government has to change and be concerned about those problems.

Carcetti doesn't say exactly how government is going to do this.  That's the more interesting point that's lurking in the show: Maybe the government should just get out of the way.  This is implicit not only in Colvin's story, but in the efforts of some would-be players in the non-profit and business sectors:

--Cutty Wise (Chad L. Coleman), just out of prison and trying to go straight, sets up a gym to teach the kids, mostly drug runners, how to box.  But he's stymied by permits and red tape until a community leader makes the right calls.

--Stringer Bell, an ambitious up and coming drug lord tries to break into business by getting into community rehabilitation. But he, too, is stymied by all the permits and red tape.  He tries to work through a crooked middleman but finds out too late that he was pulling the wrong strings. Stringer is murdered as payoff for some earlier moves.  When Jimmy McNulty (Dominic West) finally enters Stringer's apartment after trying for so long to nail him, McNulty sees the evidence of Stringer's taste, learning, and ambitions.  He goes into Stringer's library and pulls a book off the shelf -- Adam Smith's Wealth of Nations.  He mutters that he never knew who he was chasing.

This is reality television.

CBS news and story-telling

So CBS has decided to restore trust by removing Dan Rather as a news reader and focus on his role as an investigative reporter.  Sounds odd.  I had speculated that CBS news was trying to turn itself into a blog, but I now wonder how many people will tune to a blog that makes no attempt at accuracy. To compound my confusion, CBS also seems to be running way from the trend toward reality TV.

Maybe, I theorize, CBS news is pioneering a new trend toward TV news as "narrative." We know from critical legal studies and related academic writing that reality is constructed.  What we read and see are various "stories."   CBS news is trying to show us that the crits are right by giving up any pretense of capturing objective reality.

This came to me when I tuned in the end of the CBS nightly news yesterday (I wasn't going to take the chance of having to watch the whole thing) to see what Dan had to say about his departure.  I missed that story, but I did catch one about how religious right wing nut pharmacists won't fill birth control prescriptions.  The reporter was evidently appalled at this attempt to combine "morality and medicine" (these are supposed to be completely separate, right?).  Someone from Planned Parenthood explained the point of the narrative -- that this right-wing extremism was an example of what we can expect from the newly empowered Bush administration.  While one might wonder if this is a problem if it involves only a few religious nuts (if it's a lot of pharmacists doing this, maybe the pills really are a problem, right?). But the crack CBS news team found a woman who had to drive an extra 30 miles to get her pills.   So we have a story that's satisfying in the literary sense, and CBS has met its objective.

I know that "story-telling" is an odd explanation for what's going on at CBS news.  But can anyone find a more plausible one?

Disney and the problems of corporate governance

This W$J overview of the Disney case puts the Eisner/Ovitz affair into perspective: a strong CEO rendered his board practically irrelevant. Left on his own, he fumbled badly.  Shareholders suffered.

There are many interesting aspects of this case, including the limits of judicial supervision under the business judgment rule, as I recently wrote, and whether this case signals a new Delaware approach to governance post-Enron.

But I wonder whether something more basic is at stake -- the future of the corporate enterprise as we know it.  After all that we have seen in the last few years, can we really be optimistic that things are changing?  Consider:

--Boards will continue to be supine in the face of strong and apparently successful CEO's, who control the agenda and the information flow. 

--Judicial supervision is, at best, a blunt instrument.  This case is only now being tried, 8 years after Ovitz was fired.

--Disgruntled shareholders can sell -- but at a price determined by defective governance.

--Takeovers happen -- when all-powerful executives let them.

Is there a better way?  I've argued in Why Corporations? for the dismantling of the corporate entity and the greater use of partnership-type forms for publicly held business. This could be spurred by a change in the tax laws that puts more emphasis on distribution rather than retention of earnings.

Think about this in the Disney context.  Why do we need this Disney behemoth?  The brand?  Synergy? Michael Powell recently wondered "if Walt Disney would be proud," speculating on the disastrous cross-promotion of Disney's Desperate Housewives on Disney's Monday night football. Does this sort of thing make people want to go into Disney's family-oriented amusement parks?  Even the film business has gotten away from the Disney brand -- Pixar was providing the meat until Eisner chased it away.

How about spinning the amusement parks into a real estate limited partnership, divesting the television properties, and focusing on the movie business?  Aside from giving Eisner less to play with over his remaining two years, what would be lost?

Of course, we need a takeover market to engineer these changes. But possibly over time the market will see the light, particularly if encouraged by the tax code.

Do ads influence the media?

A recent paper suggests that ads might influence editorial content, at least regarding mutual fund, but that this is not necessarily a bad thing. Reuter and Zitzewitz, Do Ads Influence Editors? Advertising and Bias in the Financial Media.

ABSTRACT: We use mutual fund recommendations to test whether editorial content is independent from advertisers' influence in the financial media. We find that major personal finance magazines (Money, Kiplinger's Personal Finance, and SmartMoney) are more likely to recommend funds from families that have advertised within their pages in the past, controlling for fund characteristics like expenses, past returns and the overall levels of advertising. We find little evidence of a similar relationship for mentions in the New York Times or Wall Street Journal. Positive media mentions in both newspapers and magazines are associated with significant future inflows into the fund while advertising expenditures are not. Therefore, if we interpret our coefficients causally, a large share of the benefit of advertising in our sample of personal finance magazines comes via the apparent content bias. The welfare implications of this apparent bias are unclear, however, since our tests suggest that bias does not directly lead publications to recommend funds with significantly lower future returns than they might have recommended in the absence of any bias. In selecting funds to recommend, magazines overweight past returns relative to expenses, and as a group their recommendations do not outperform even an equal-weighted average of their peers. Nevertheless, this approach leaves magazines with large numbers of funds with high past returns from which to select, and so bias towards advertisers can be accommodated without significantly reducing readers' future returns. Interestingly, the recommendations of Consumer Reports, which does not accept advertising, have future returns comparable to or below those of the publications which accept do advertising.

Note the finding on Consumer Reports, a publication whose limited usefulness (particularly given the Internet) has long been outweiged by its over-reaching and political bias. 

This paper obviously has implications beyond mutual funds to all kinds of advertising. Moreover, there are other implications beyond this paper.  In particular, if ads do influence content, might they offset bias that would otherwise exist?  (Consumer Reports, for example, would probably be better off with advertising.) I have made this argument in my article, Film and Firms, in comparing how business is portrayed in movies, cable, and broadcast television.

Trust and the MSM

Dan Henninger says that the MSM was a big loser in this election, and the culprit is trust:

Authority can be a function of raw power, but among free people it is sustained by esteem and trust. Should esteem and trust falter, the public will start to contest an institution's authority. It happens all the time to political figures. It happened here to the American Catholic Church and to the legal profession, thanks to plaintiff-bar abuse. And now the public is beginning to contest the decades-old authority of the mainstream media.

So true that I said this a couple of months ago, about Rathergate:

In its broadest sense, trust results [as I have written] when "the probability-adjusted gain from relying exceeds the probability-adjusted loss from the breach by the one who is relied on--that is, if PG x G > PL x L." In securities markets the law tries to raise the probability of gain -- that is, of truth -- through liability and penalties for fraud. In journalism, the First Amendment ensures that the constraint will be mostly reputational. Think about how this works. . . . . If you "trust" CBS, you discount the probability that CBS is lying or hiding. The result of CBS' misdeeds is that the right side of the equation has risen. . . . It would be startling if CBS did not lose viewership. While some people will watch the show out of habit or whatever, surely a substantial portion of the viewership watches it for information, and that depends on trust.

Henninger points out that, indeed, "from January 2000, the percentage of people getting candidate and campaign news fell 9% for daily newspapers, 10% for network news and 5% for news magazines."

Watch for this to accelerate. Of course, CBS Evening News does have a future as a blog.

More on Disney

The Disney trial continued with testimony from Michael Ovitz. The WSJ description of yesterday's festivities paints a picture of Ovitz being undercut by Eisner from the day he walked on the job, making his position untenable. If true, this would seem to be precisely the risk Ovitz, who knew Eisner well, sought to protect himself from by the high-priced termination clause, particularly given Ovitz' high income at the job he had left to come to Disney.

It arguably follows that Disney would not have been able to prove cause for termination, and that Ovitz was entitled to the lavish payment he had negotiated for. As an Ovitz lawyer was quoted as saying:

The fact is, Michael Ovitz left the very successful company he founded and managed to go to Disney. . . He entered into a valid contract, and did not get a penny more than was provided by the contract when Disney terminated it. He did nothing wrong by accepting that payment.

Looking deeper, under this version of the facts, the real problem would seem to be Eisner, whose difficulties made it costly to hire the sort of high-end executive talent the Disney job required, and who ultimately was primarily responsible for Ovitz' departure. So then should the board be liable for not canning Eisner back in 1995? That would involve an overall assessment of Eisner's merit as Disney's guiding spirit for many years.

These are precisely the sorts of business judgments courts should not be making. The shareholders have had ample opportunity to call Eisner and the Disney board to account over the years.

If you want to see the trial, have a lot of cash to spend on this recreation, and don't want to go to scenic Delaware, here's where to go. In the meantime, I'll be reporting from time to time on my (limited) view of the trial.

Sinclair and social responsibility

When Sinclair Broadcasting decided to preempt programming to air the anti-Kerry film, Stolen Honor, a decision that sacrificed profits to present a program Sinclair's managers thought the public ought to see, I remarked

People wonder, can the shareholders sue the board. . . . [W]hy should they want to? After all, the managers are just being socially responsible. Isn't that what the shareholders want?

Apparently not. Sinclair has backed down in response to threatened litigation, notably including a possible suit by the notorious Bill Lerach, who said:

At a time when the company is experiencing troubles, the board and officers should be focused on creating shareholder value -- not pressing [a] controversial personal political agenda at shareholders' expense.

So, apparently the law says that managers must maximize shareholder value, and that managers who question this maxim will be challenged in court. In other words, lawyers are the new front line in corporate irresponsibility.

This could not be politically motivated, of course. Though Lerach, like much of the rest of the trial bar, is a Democrat, he insists in the article just quoted that "[w]e are equal-opportunity suers."

Or maybe this is somehow different from corporate social responsibility, as a commenter to my initial post suggested:

I think there is a real distinction here. Asking a corporation to act in a socially-responsible manner to limit its OWN negative externalities is one thing; taking sides in an independent political battle is something else. It is not that I necessarily mind the company taking sides -- Fox News does, The New York Times does -- but my difficulty is seeing how this falls under the rubric of corporate social responsibility.

But the press's freedom to "take sides" is a big part of what it's long viewed as its special responsibility. Thus, today's WSJ appropriately compares Sinclair's actions to the WaPo in Watergate. How can we forget Jason Robards, Jr. as Ben Bradlee in All the President's Men describing his paper's mission:

Nothing's riding on this except the first amendment to the Constitution, freedom of the press, and maybe the future of the country.

Well, apparently in the future, at least in Bill Lerach's view (who is, after all, an "equal opportunity suer") firms are going to have to stick closer to their knitting. Perhaps this will include keeping those sweatshops running full blast, clearcutting those forests, stopping those free drugs to the poor, or whatever constitutes "social responsibility" for the firm involved.

Unless this attack on Sinclair is not a matter of principle, but purely a partisan slam. But I won't even contemplate that possibility.

The new CBS: Dan Rather in pajamas?

When I last wrote on CBS I noted the need to restore trust, commenting:

It would be startling if CBS did not lose viewership. While some people will watch the show out of habit or whatever, surely a substantial portion of the viewership watches it for information, and that depends on trust.

Now there are more credibility problems at CBS, including this on its collaborating with a partisan blogger and this on sharply declining ratings and going with another partisan group's fantasy about reviving the draft.

So CBS still seems pretty oblivious to its serious trust problems and is suffering for it. What is going on? This does not seem like rational corporate behavior.

I have a theory: CBS News has decided that it cannot revive itself as a mainstream program. Moreover, why bother? After all, the market for mainstream news is declining sharply and, thanks partly to CBS, the alternative media, including bloggers, have new credibility. So if you can't lick em, join em --CBS has decided to join the bloggers!

Further evidence of this is that CBS has turned from conventional advertising to blogads. Witness its new sponsor: DANRATHERMUSTGO.COM, as reported and linked here. Presumably its conventional sponsors (which I believe are now limited to Viagra and Levitra) have converted their ads to blogads, with commensurate rates.

We'll have to watch Viacom's reports to see if the CBS investment in infrastructure has been written down to reflect its new business direction. This is obviously a sunk costs problem, and who is to say CBS is not doing the right thing? Sure it represents a comedown for the once "Tiffany network," but CBS will at least get a first mover advantage as against its network rivals.

Anyway, we'll know I'm right when Dan Rather appears one day in his pajamas.

Rathergate as a problem of trust

Rather's apology hasn't closed out Rathergate. CBS' sins needed stronger medicine, so we see continued suspicion. The media buzzes about the appointment of Thornburgh to investigate (thanks to Professor Bainbridge's alert reporting), and we'd still like to know whether and how the Kerry campaign was involved.

I see this as a problem of "trust," which I wrote about in Law v. Trust, 81 Boston University Law Review 553 (2001), draft here. In its broadest sense, trust results, as I write on p. 556 of the published article, when "the probability-adjusted gain from relying exceeds the probability-adjusted loss from the breach by the one who is relied on--that is, if PG x G > PL x L." In securities markets the law tries to raise the probability of gain -- that is, of truth -- through liability and penalties for fraud. In journalism, the First Amendment ensures that the constraint will be mostly reputational.

Think about how this works. You turn on 60 Minutes and there's a story, say, about new evidence on Bush's guard duty. In a few minutes the journalists can't tell you all the evidence they uncovered, pro and con. This is television, so they have to get to the point. Nor can they go through an explanation of why they went with this story now, instead of some other. If you "trust" CBS, you discount the probability that CBS is lying or hiding.

The result of CBS' misdeeds is that the right side of the equation has risen. Of course CBS might have thought that Thornburgh was the best man for the job, and a Republican to boot, so no bias issue. But they might also have thought that he was the best man for a coverup, given the grudge PB reports, and that viewers wouldn't suspect this because he was a Republican. Which to believe, now that CBS' reputation is shot.

It would be startling if CBS did not lose viewership. While some people will watch the show out of habit or whatever, surely a substantial portion of the viewership watches it for information, and that depends on trust.

A further note. Instapundit says "I don't think that corporatization was the only thing to hurt TV news, but I don't think it helped." This is misguided. Loss of trust affects the bottom line, which is what "corporatization" is said to focus on. The clubby "pre-corporate" world supposedly cared less about this, and therefore might have been expected to carry Rather longer out of loyalty or politics.

CBSTANGgate: What now?

This latest glum news from the mainstream press makes it even clearer that it's only a matter of time before CBS has to admit that it went with a major story on the basis of obviously forged documents. What then?

Answer: Rather has to go. Not because he's liberal, not because he acted out of politics, not because he made a bad mistake, but simply because of this: in his newscast last Friday, Rather simply restated the evidence, impugned the motives of the critics, and put his own integrity on the line. In other words: "Believe this story because I say so."

Any purveyor of news creates "reputational capital" through a lifetime of telling the truth. Everytime you tell a story, you stake your capital as a sort of bond. If the story is false, the bond gets depleted -- by how much depends on the circumstances.

In this case, Rather put all of his chips, already depleted by a reputation of politicizing the news, on the table. These chips are now gone.

CBS still has some chips. They can preserve and replenish them in the increasingly competitive news world only by replacing Rather.

The securities laws and CBSTANGgate

The fallout from what looks like CBS' use of obviously forged documents in a 60 Minutes segment may not include a shareholders' derivative suit. But will it include other federal securities law problems? Instapundit suggests it might.

I've said that the market should be allowed to work here. But it's fun to speculate whether the journalists, who love to report on corporate misconduct, might have to deal with their own problem of this sort, and even more fun if it arises out of their own zealous muckraking. I doubt CBS will have a lawsuit on their hands they have to report. Theoretically it could face a shareholder resolution concerning bias and sloppiness at the next annual meeting of Viacom, CBS' corporate parent.

But keep in mind that Viacom is not your typical widely held corporation -- as detailed here, it's controlled by National Amusements, a closely held corporation controlled by Sumner Redstone.

So theoretically we don't need all of these monitoring devices that are intended to deal with agency problems in dispersed-ownership corporations. If, as appears from much of evidence so far, CBS employees, possibly including Dan Rather, carelessly sacrificed the good name of the network fka the "Tiffany Network," we do not need the SEC to clean up the mess. Expect heads to roll.

George Bush and Tony Soprano

Professor Bainbridge criticizes comparisons between George and Tony. I agree with PB on the merits, but must point out that the show does, in fact, appear to be making the comparison. Christopher made that explicit in a previous episode with a comment about the US's use of its military might. Bush-bashing on TV is hardly an isolated phenomenon. And in the last Sopranos episode, among other things, much was made of the famous picture of Tony as a ludicrous-looking general. Obviously the image of Bush as a Mafia leader is too tempting for the liberal media to pass up. But it's worth noting that everything comes out ok for Tony in this episode, at least until well after November 2004.

Deadwood, continued

Deadwood continues to be interesting. In the most recent episode, the Sioux have made peace, which raises the question of the status of Deadwood, which moved in during the lawless interlude of Indian war. The territorial government will honor the claims of those inhabiting un-owned land, but Deadwood sits on land ceded to the Sioux. A territorial politician shows up to inform Swearengen that the territory might recognize the town's claim if it organizes a local government. The function of the government would appear to be to efficiently raise bribes (which will later be called taxes, I guess) to pay off the territorial government.

This leads to an organizational town meeting and to the election (without overt objection) of the slimy E.B. Farnum as mayor. Farnum observes that any organization, whether it be private club or government, exists for the purpose of extracting money from its members (or something like that; I'm remembering it from last night). Meanwhile, rough types are starting to dress up and open business establishments, while the more ornery types, like Calamity Jane, realize that Deadwood is not for them anymore. The preacher and the doctor continue their dialog about organic vs. spiritual sources of religious fervor. And so continues the process of private and public law creating order out of chaos that makes this show so fascinating.

Vivendi, NBC, Water, Whiskey, Airplanes, Movies, TV, and All That Jazz

This week NBC will buy Universal from Vivendi, as described in yesterday's WSJ $. So now NBC will be have access to Universal's old television shows for NBC's cable outlet, USA. This got me thinking about how Universal a long time ago greatly increased the value of its film library because of its access to this new-fangled television thing.

And then I thought some more. NBC is owned by GE (which also owns, through GE capital, 1200 airplanes). Of course Vivendi used to be a water company and a large engineering firm. Universal was owned by a talent agency (MCA) and a whiskey company (Seagram). All that and a lot more, including a bunch of record companies, is here.

Meanwhile, back in Washington, a couple of government agencies review mergers to determine what industry should look like.

Deadwood

This show hasn't gotten the buzz of the Sopranos, which it follows on HBO, but deserves more attention. Deadwood was an actual goldmining town that flourished around 1876. The inhabitants, arriving just after Little Big Horn, come in defiance both of the Sioux who control the area and the U.S. government. In this Hobbesian "state of nature," they must create their own property rights using violence, vigilante justice, and even reputational capital. The picture shows the two competing tavern owners. Check it out.

Politics and the Sopranos

Much as I like Steve Bainbridge, he's playing with fire by criticizing a Sopranos script.

Seriously, my issue is what ought to be done about television's liberal bias. Steve suggests, "[m]aybe a complaint to the FEC and FCC? Maybe a shareholder proposal at Time-Warner?" But I don't like censorship, and I don't like corporations being forced to subsidize public speech, even if it happens to be speech I might agree with.

As I commented a few days ago, the problem isn't necessarily with media firms themselves, but with artists using these firms' resources as a megaphone. I also suggested that maybe we would have a richer political debate if corporations were freer to engage in political speech and activity.

Bush-bashing on TV

For those seeking evidence of a liberal bias in the media, here it is, from the NY Times ($) of all places. The NYT reports that "Hollywood's more liberal producers and writers are increasingly expressing their displeasure with President Bush with not only their wallets, but also their scripts." The Times gives examples from shows such as "Whoopi" (she says a Bush-lookalike character is "doing to my bathroom what he's done to the economy!"), "Law and Order" (a character refers to the President as the "dude that lied to us") and "Curb Your Enthusiasm," where Larry David breaks up with a woman because she had a picture of President Bush on her dresser.

I find several aspects of this particularly interesting. The first is the dismissive attitude of the President that many of his opponents seem to share. The implication is that Bush is not only bad, but so obviously bad that anyone who supports him must be an idiot or socially unacceptable (as in the CYE episode). This is not just a Hollywood thing -- I've noticed this in my own daily interactions. There is no attempt to engage or convince, but only the syllogism, "You support Bush, therefore you are an idiot."

This is remarkable, in part, because Bush is supported by about half the country. This is a lot of people to completely dismiss. Calling somebody an idiot would also seem to be a dubious way to bring him over to your side.

It is also interesting that these views are being expressed on Big Media, not simply in student newspapers. Television networks and advertisers depend on large audiences. Suggesting that half your audience is a bunch of idiots does not seem to be a wise marketing move. People are unlikely to watch a situation comedy they otherwise don't like just because they agree with its political slant, but they might turn off a show they like if its politics are offensive.

Of course, it's unlikely these scripts represent a deliberate business strategy by networks or sponsors. Rather, they seem to reflect the views of the stars and the scriptwriters. For example, the Times quotes Laurie David, Larry's wife, as saying "Not a day goes by when I'm not getting a dozen calls from people saying to me, `What can I do?' And it's all with one goal: to change the course of what's going on in this country and get rid of this administration."

So this seems to be an example of what economists would call "agency costs." The stars and writers are not subject to perfect discipline by the networks and sponsors that employ them. Whoopi and Larry David are not going to be canned as long as lots of people are watching them, even if their politics alienate some potential viewers. The stars and writers use this "slack" to engage in personally satisfying political rhetoric.

I believe strongly in free speech, so I wouldn't favor even the hint or threat of government action against the media. But I wish the law would be more evenhanded. The First Amendment does not fully protect corporate political speech -- that is, corporate executives who speak on behalf of the corporation. But a corporation's employees, including the creators of television shows, are free to use corporate resources construct megaphones for their own political views.