The law and economics of blogging: the economics of blogging

[See the Introduction to Law and Economics of Blogging.]

The above description of technology provides insights into the economics of blogging.

Private costs: This is a classic example of “cheap speech,” anticipated in Eugene Volokh’s prescient article, Cheap Speech and What It Will Do, 104 Yale L.J. 1805 (1995). Blogging requires no more than a computer, internet access, and a blogging program such as Typepad. This ease of access means nearly infinite diversity and nearly zero intermediation, either directly or indirectly through entry costs. One doesn’t need permission or a permit or financing to enter the blogosphere.

Private benefits

Why do people blog? The capital outlays are minimal, but time costs may not be. Consider the following incentives:

--Self-expression: This is the original motive for blogging – simply a desire to make observations, often about personal matters. The most important subgenre is “poliblogging,” where the writers express political views. Poliblogging was spurred by the coincidence of the invention of blogging technologies and the 2004 presidential election, which elicited strong views on both sides.

--Reputation and marketing: Blogs increasingly are being used to market paid services, most prominently by lawyers and other professionals. In this sense, the blog is a kind of “loss-leader,” where giving away the free service pays for itself by pulling people into the paid service. This causes a potential tension, which is likely to increase, between the quirkiness encouraged by the frequent posting and low costs that characterize blogs, and the incentive to recoup time costs through marketing, which encourages bloggers to stay “on message.”

--Blogging as for-profit ventures: The business model is evolving. Bloggers can now offer “blogads,” or do public-broadcasting-type “pledge drives.” Because blogging is so cheap, the blog can start up with no initial investment and no ads, and turn to the business model if it becomes popular. Obviously ad sale may affect the content of blogs.

--Blogs in academia: Blogs can be used as teaching tools, and as a medium for presenting and publicizing scholarship. Social benefits of blogs

Social benefits

--Public discourse and decisionmaking: Blogs can be seen as an example of what James Surowiecki calls The Wisdom of Crowds. Surowiecki theorizes that “crowds” can make better decisions than individuals or small groups if they meet the qualifications of diversity, independence, and decentralization. Because of the technology and economics discussed above, particularly including low private costs, blogging satisfies all of these conditions.

--Filling gaps in markets: The costs of mass media can be recouped only through economies of scale. This requires catering to a substantial market, which can leave service gaps. Blogging enables advertisers to do micromarketing to small niches.

--Specialty knowledge: Often the blogger finds a niche of specialty knowledge, such as sentencing. This focus can fill gaps left by broader information services. Note that specialty blogs build an audience by staying “on message,” thereby forfeiting some self-expression benefits. Thus, Law Professor Blogs, a network of specialty blogs, says:

Our blogs are not a collection of personal ruminations about the Presidential campaign, the war in Iraq, or what the editor had for dinner last night. Neither do our editors offer their personal views on every policy issue in the news or every new court decision. We leave that terrain to the many existing blogs with that mission. Instead, our editors focus their efforts, in both the permanent resources & links and daily news & information, on the scholarly and teaching needs of law professors. Our hope is that law professors will visit the Law Professor Blog in their area (or areas) as part of their daily routine.

--Commentary: Blogging provides a mechanism for vetting or “fisking” more mainstream sources. As Wikipedia defines it:

Fisking, or to Fisk, refers to the act of critiquing, often in minute detail, an article, essay, argument, etc. with the intent of challenging its conclusion or theses by highlighting supposed logical fallacies and incorrect facts. The practice was named after British journalist Robert Fisk after he issued a dispatch from Pakistan describing his savage beating at the hands of Afghan refugees.

Probably the most famous example of fisking, aside from Fisk story that gave it its name, is the role of bloggers in uncovering the CBS/Texas Air National Guard fraud. Someone noticed the anachronistic typeface in the disputed document quickly publicized his doubts.

This suggests a possible long-term equilibrium in terms of the relationship between blogging and the mainstream media. Bloggers can be analogized to remora fish, who clean parasites from host fish such as sharks. The remora get food, and the sharks are healthier.

This also illustrates the comparative advantages of blogging and conventional expertise. There is a value to expertise. But experts do not always know everything. Fisk was an award-winning journalist, CBS a major news organization with significant resources. While an expert probably knows more than the average amateur blogger, he does not necessarily know more than the entire universe of bloggers whose expertise is aggregated on the Web.

Social costs

Like all speech, blogs can cause emotional harm, reputational damage, mislead and defraud. The particular problem with blogs is that they are not intermediated – they are simply individuals talking, amplified by the megaphone of the Internet.

In the absence of legal liability, an individual blogger may suffer no reputational penalty or loss of profits from harmful speech. That is particularly true if the blogger’s main incentive for speaking is the utility she derives from self-expression. Indeed, the blogger may get more personal satisfaction from vindictive speech that is harmful and fraudulent than from milder speech that is true and socially beneficial.

Low-quality blogs may harm not only individuals but other blogs by creating a lemons market. If blogs earn a reputation for untruthfulness, people may shun all blogs because they cannot distinguish the good from the bad.

However, the mismatch between social costs and private benefits may not be significant because it is substantially self-correcting. First, while it is cheap to create a blog, getting noticed may require a significant time investment in developing a reputation that will cause others to link to them, and in updating more frequently to trigger more Google visits. Bloggers have an incentive to avoid forfeiting time investments and reputational capital through inaccurate or otherwise low-quality posts.

Second, while blogging has no formal intermediation, low barriers to entry permit intermediation through the “wisdom” of a diverse, independent and decentralized “crowd” of bloggers. Each blogger may err, but since the errors are random and unbiased, the judgment of the group may be more accurate than that of an expert who has a particular point of view and bias.