Amoral Capitalism: The Irresistable Economics of Tabloid Sleaze

After the sudden demise of the News of the World today, tabloid editors will surely think twice before drawing on illegally obtained information. But other unethical practices – used by a range of print, broadcast, and online media businesses – will continue, like paying sources for dubious information (“cash for trash”) or fabricating juicy stories outright to boost circulation or ratings.

This sleaze machine is fueled not by the deviance of editors and producers but by rational economic incentives. This is yet another example of how capitalism is often at odds with moral propriety and professional ethics -- a subject I've written about in my books The Cheating Culture and The Moral Center. Strangely, though, this obvious point is rarely made as one industry after another delivers scandal after scandal. Or maybe this isn't so strange: Conservatives fret about morality, but don't like to criticize capitalism, while progressives are happy to bash capitalism but tend to focus on its material, not moral, failings.

In any case, this tabloid hacking scandal is a textbook case of how market incentives can bring out the worst in people. The media business is brutal, with intense competition, impatient shareholders, and often razor-thin profit margins. Everyone in this world is under extreme pressure to perform and cutting ethical corners is one way to get an edge. The News of the World became Britain’s highest-circulation newspaper in large part by being less scrupulous than the competition. Cheating paid – at least until this week.

These dynamics are not unique to the media industry. All publicly-held companies are expected to show robust earnings every single quarter and while executive compensation has skyrocketed it has also become more tied to performance. With the sticks hitting harder and the carrots getting fatter, it should be no wonder that scandals have consumed so many industries – whether it’s corporations cooking their books or bankers lying about the toxicity of mortgage-backed securities or pharmaceutical executives authorizing the illegal “off-label” marketing of drugs.

When cheating pays, and few people are punished for breaking the rules, even those who want to be ethical may find that this isn’t so easy.

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