From the obituary of Freddy Johnston:

Even as he uttered those words, the company’s card was being marked. Four months earlier a small American business called Google had started AdWords, an online system allowing businesses to advertise alongside keyword searches. Oblivious to the threat, Johnston Press marched on and in 2006 bought The Scotsman from the Barclay brothers for £160 million.

Soon came the financial crisis and a seismic shift in consumer behaviour. Classified advertising revenues of £177 million in 2008 dwindled to £22 million a decade later, while newspaper sales sank from £101 million to £55 million over the same period.

We are regularly told that Google and Facebook must give more back. They must support local journalism because they have caused it’s near demise through their monopolisation of the online advertising market.

Something which is not, in fact, true. These numbers are American but given the monopoly nature of the local press in both countries applies here too. Roughly one third of a local paper’s revenue was subscription or cover price. One third display advertising and the other one third classified. The classifieds market being subject to network effects - people advertise in the local paper because that’s where people look, people look because that’s where people advertise.

It’s that classifieds market that the internet stole. The jobs are on Monster.com, the property on Rightmove, prams on e-Bay and so on. It’s the pulling of the rug on that one third - and by far the most profitable one third - of the revenue that has done the damage.

What do the political classes incessantly call for? That Google and Facebook, who have taken some portion of the display advertising budget must compensate.

The solution demanded doesn’t solve the problem because that solution is based upon incomplete - or even incorrect - analysis of the original problem. What, politically, everyone knows turns out to be based upon a fable.

Which is why politics isn’t a good way of dealing with the real world - politics doesn’t know or understand the real world.

Which is something that Hayek said better and earlier than we just have done but it’s true all the same.