Does Rupert Murdoch vet his papers' film reviews?

Media conglomerates often own newspapers and other media, while also making films, releasing music, publishing books and so on. Unsurprisingly, they are often accused of pressuring their news media to review these entertainment media more favourably than they otherwise would, and this suspicion seems quite reasonable at first blush. But a new paper finds no evidence that this is true at all for movies. "Does Media Concentration Lead to Biased Coverage? Evidence from Movie Reviews" by economists Stefano DellaVigna and Johannes Hermle say there is not even evidence of a tiny effect and suggest this means reputational effects are very important for newspapers:

Media companies have become increasingly concentrated. But is this consolidation without cost for the quality of information? Conglomerates generate a conflict of interest: a media outlet can bias its coverage to benefit companies in the same group. We test for bias by examining movie reviews by media outlets owned by News Corp.–such as the Wall Street Journal–and by Time Warner–such as Time. We use a matching procedure to disentangle bias due to conflict of interest from correlated tastes. We find no evidence of bias in the reviews for 20th Century Fox movies in the News Corp. outlets, nor for the reviews of Warner Bros. movies in the Time Warner outlets. We can reject even small effects, such as biasing the review by one extra star (our of four) every 13 movies. We test for differential bias when the return to bias is plausibly higher, examine bias by media outlet and by journalist, as well as editorial bias. We also consider bias by omission: whether the media at conflict of interest are more likely to review highly-rated movies by affiliated studios. In none of these dimensions we find systematic evidence of bias. Lastly, we document that conflict of interest within a movie aggregator does not lead to bias either. We conclude that media reputation in this competitive industry acts as a powerful disciplining force.

The whole thing is very clear in a chart—newspapers owned by News Corp are about as positive about Fox films as those owned by Time Warner (and vice versa). So much for media bias, eh!

Don't be so swift to criticise streaming

The big news in the entertainment world this week is that Taylor Swift was never (ever, ever) really that much of a fan of Spotify, and as her album 1989 takes worldwide charts by storm, she’s taken her entire back catalogue off the music streaming service. She explains :

...everything new, like Spotify, all feels to me a bit like a grand experiment. And I'm not willing to contribute my life's work to an experiment that I don't feel fairly compensates the writers, producers, artists, and creators of this music. And I just don't agree with perpetuating the perception that music has no value and should be free.

If Spotify is a ‘grand experiment’, it’s one with everyone’s attention. Its ‘freemium’ model yields 50m active users and 12.5m paid up subscribers, and Spotify royalties have recently overtaken iTunes download earnings in Europe. Other companies want in, too. Apple have recently acquired Beats in an move to host a streaming service of their own, whilst both SoundCloud and YouTube have announced plans for a premium subscription service. Streaming accounts for an ever-increasing proportion of music revenue, with consumers increasingly choosing access to a wide range of music over the ownership of specific albums or tracks.

The CEO of Spotify Daniel Ek has responded to Taylor’s commercial-cum-ethical decision, taking pains to cast Spotify as the enemy of piracy and champion of artists. It’s well worth a read, but what's interesting is the blame he levels at the wider music industry in response to Taylor’s claim that streaming fails to fairly compensate artists:

The music industry is changing – and we’re proud of our part in that change – but lots of problems that have plagued the industry since its inception continue to exist. As I said, we’ve already paid more than $2 billion in royalties to the music industry and if that money is not flowing to the creative community in a timely and transparent way, that’s a big problem.

Around 70% of Spotify’s revenue goes straight to the rights holders of the music they stream in the form of royalties, and these rights are invariably held by an artist’s record company. On average, record labels keep 46% of CD sale revenue, and 68% of download revenue. Creators receive around 9% and 8% of this revenue respectively. (Gowers Review, p.51)

At major labels at least, artists seem to receive a similar proportion of streaming royalties (and are allegedly victim to a few dirty legal tricks along the way). In addition to royalties, many labels demand advance minimum payments which can vastly exceed the actual royalties actually generated by plays, with no guarantee that artists will see any of this surplus. So whilst Spotify might pay out three to four thousand dollars for 500,000 streams, an artist might see less than 10% of that.

Of course, money isn’t really the issue for Taylor Swift, who can easily afford to take her music off of the streaming service; whilst her entire catalogue was on track to generate $6m in royalties this year, 1989 made around $12m in sales in its first week. For large artists, removing music from sites before a release or holding off streaming for a couple of months could make fantastic business sense.

But money is an issue for the majority of artists, and it's reasonable to critique what income they receive from streaming. Though some like Swift, David Byrne and Thom Yorke attack streaming for what they consider meagre payouts per play, they'd be better off focusing their attention not on the upstart ‘disrupter’, but the entrenched music industry which Spotify claims it is actively trying to save.

Spotify certainly has a challenge there. The size of the streaming industry is currently nowhere near big enough to compensate for the long-term decline in physical (and now digital) sales. And whilst it is growing rapidly, Spotify is yet to turn a profit in its 6 year history. This is largely a problem of scale, as the more users and the more plays the company attracts, the more it must pay out in royalties. Some analysts think it just needs more users to pay up. Others worry that the high proportion of their revenue forked over to rights holders makes them intrinsically unprofitable. In this scenario, streaming services might simply become loss leaders for larger companies like Apple and Google, or get taken over by the music labels themselves. In which case, perhaps Thom Yorke is right that streaming is the “last desperate fart of a dying corpse” after all.

But what part of the music industry is dying, and is it really worth saving? The entrenched record labels and collecting societies have long warned that technological advances, piracy and copyright infringement are destroying the livelihoods of creators. They expend significant time and resources lobbying for government protections like DRM and copyright extensions, multinational treaties like ACTA, and forcing ISPs to police their users' activities. Yet if you look past these vocal and influential legacy organisations, the music industry is actually flourishing. A study by Mike Masnick points out that the global value of the broader music industry has grown from $132bn to $168bn between 2005 and 2010. The number of new albums produced each year is rising rapidly, concert sales tripled over the past decade in the US and entertainment spending as a function of income has risen by 15%.

The music scene is evolving, and with the low costs of digital production and distribution becoming more competitive. There’s going to be some who lose out and see their old business models change. Certainly,  Spotify alone cannot revive label's revenue to the heyday of CD sales, and nor is it their responsibility to. But it is shortsighted to suggest à la Taylor Swift that to stream music is to consider it valueless. And if artists are concerned by the lack of revenue reaching them, the best place to start complaining is to their own labels. The growth of the music ecosystem in non-traditional areas shows that they're already lagging behind the times despite all their billions in intellectual property, and it would be such a shame to see them have their breadwinners turn against them, too. I for one wouldn’t want to feel Taylor’s wrath.

The lesson of not being able to find sandwich makers in Northampton

It would, of course, have to be The Guardian that manages to get the story of looking for sandwich makers in Hungary completely arse over tip. We mean, of course, come on, it would just have to be, wouldn't it? The story being that a company that makes pre-packaged sandwiches for the supermarkets and the like finds that its new factory in Northampton is finding it difficult to recruit workers. So, they go off to an agency in Hungary to see if anyone there would like to relocate. That's the story we're being told, don't worry over much about the details. At which point Mary Dejevsky (for it is she) tells us that:

The UK, I fear, persists in the delusion that it is a high-skilled high-productivity, high-pay economy when for at least a decade or more it has been nothing of the kind.

What?

If this were a low-skill, low-pay economy then there would be armies of people willing to do low-skill, low-wage, jobs like making sandwiches. That there are Hungarians willing to relocate shows that Hungary quite probably is such a low-skill, low-wage, economy. Further, that the UK apparently needs to import such low-skill and low-wage labour shows that the UK economy is offering higher-skill and higher-wage jobs to the indigenes.

The very story being used to prove the contention in fact proves exactly the opposite of the contention being made. People have better options than low-skill, low-paid jobs. Thus the UK economy cannot be said to be reliant upon low-skill, low-pay jobs.

What is so difficult about this for people to understand?

Mazzucato versus Worstall and Westlake

Marianna Mazzucato’s 2013 The Entrepreneurial State is the most influential book on innovation. Although Mazzucato’s arguments in the book and beyond are many and varied – for example, I’m particularly sympathetic to her scepticism of the uncritical financial support for small businesses – the arguments gaining the most traction are the least convincing and potentially most damaging. In short, Mazzucato’s thesis is that the state has been the key driver of “innovation” and should therefore take a more active role than they currently do. Central to this, is the policy suggestion that government agencies that fund this innovation should take a cut of the profits from the inventions. Two writers have convincingly unpicked this – the Adam Smith Institute's Tim Worstall and Nesta’s Stian Westlake.

First, on the point about states driving innovation, Worstall cites William Baumol, who makes the crucial distinction between innovation and inventions. In reference to Mazzucato’s observation that the key technologies that went into making the iPhone were state funded Worstall explains: “Baumol's point is that the private sector could have come up with these technologies, even though it was the state that did. But only the private, or market, sector could have come up with the iPhone.”

To put it another way, the iPhone is more than the sum of its parts. In an excellent article (worth reading in full), Westlake cites the work of Jonathan Haskel, which “suggests that for every £1 that British businesses spend on R&D, they spend £8 on other intangible investments of the sort that Apple used to make the iPod a success: design, new business models, marketing and software development.”

But perhaps Mazzucato’s biggest mistake is one of policy. As Westlake explains elsewhere, in The Entrepreneurial State Mazzucato suggests that “the state should find ways to share directly in the profits of companies that benefit from government innovation spending. A repayment system needs to 'reward [the government for] the wins when they happen so that the returns can cover the losses from the inevitable failures.'”

Westlake outline three convincing reasons why this wouldn’t work: “it would be nightmarish to administer; it imposes costs on exactly the wrong businesses, creating both a presentational and a practical problem; and it’s worse than an already existing option – funding innovation from general taxation.” Westlake's last point cuts to heart of the problem. As Worstall has pointed out in a response to Mazzucato’s response to his criticism of her work:

That governments sometimes produce public goods should not be a surprise. That’s what governments are for in fact. To provide collectively those things that cannot be provided through voluntary cooperation. To then complain that government doesn’t get extra rewards for doing the very thing we institute it for seems most odd. That’s why we pay our taxes in the first place: in order to get those public goods. Why should there then be some extra appropriation when all government is doing is what we asked it to and paid for it to do in the first place?

Philip Salter is director of The Entrepreneurs Network.

The problem with low pay

The Resolution Foundation tells us that there's some great big problem with low pay in the UK. Looking at their actual statistics though it's difficult to see what the problem is. Of course, everyone would like more money for whatever it is that they do. But what keeps people in those low pay jobs seems to be that people opt to stay in those low pay jobs. Only one in four low earners has managed to permanently escape the prison of low pay in the past decade, according to a major study published today.

The Resolution Foundation think tank uncovered the most graphic evidence to date of the scourge of in-work poverty, in which millions working part-time, in sales jobs and the hospitality industry, cannot move up the income ladder. Fewer than one in five people working in restaurants, pubs, takeaways and catering left low pay for good in the past 10 years.

A scourge, eh? Well, that's what the Independent says. The report itself is a bit more measured.

And what they mention, but don't emphasise, is the interesting stuff. For example, many on low pay actively decline to take promotions that will earn them more:

Part of the reason that many of these people who are usually in employment do not progress may be to do with the limited appeal of moving into positions of greater responsibility. The limited pay increases received for moving from an entry-level position to a supervisory role were often as little as 30p or 40p extra an hour. When weighed against the additional stress which comes with the role and the hassle of rearranging their work-life balance, for many people progression may not appeal.

They also find that those who stay in low pay over the long term tend to be single mothers and a number of people who are only in the workforce intermittently. And, of course, given that part time pay is generally lower than full time pay per hour the low paid (defined as those on less than two thirds of median hourly wage) are predominantly those working part time.

When we add all of that together, what do we see? The intermittency will at least in part be women leaving the workforce to have children. Single mothers are obviously balancing that work life balance, and the most common, we would think, reason for not taking a promotion that disrupts that work life balance would be the need to take care of children. And, of course, there's many more women working part time than there are men for exactly the same reason.

It's entirely true that it's not in fact necessary for women to do the bulk of the childcare but that is the way our society generally works. So, we find women with children concentrated in those part time areas, not taking promotions, dropping in and out of the workforce as further children arrive. And thus earning low pay as these are the very things that seem to identify those who stay on low pay.

In other words the Resolution folks have simply found the flip side of the gender pay gap in the UK. That there isn't one but there is a motherhood pay gap. Women with children generally earn less than men or women without children. It's not a great stretch to move from that to the idea that women with children will be predominant among the low paid. And while they don't emphasise this this is the rough outline of their finding.

And the point is that, despite everyone wanting more money for their labours, this is a result of the choices of those individuals. There's a series of trade offs there, responsibility for higher pay, more rigid hours for higher pay, longer hours for higher pay and so on. And people are deciding which they prefer. Which ain't the higher pay.

And, given that it's all a result of individual choices there's really nothing that we should be trying to do about it.

Would being more like Qatar be a good way of fighting poverty?

Eric Posner and Glen Weyl have a provocative essay in the New Republic this month arguing that massive guest worker schemes could help facilitate large numbers of immigrants from poor countries to come and work in the developed world. Their model is the Gulf States, which have enormous numbers of workers—85% of the population of the United Arab Emirates, for instance, are guest workers:

If the OECD countries copied the migration policies of the GCC countries, they would reduce global inequality by much more than their welfare systems do within their borders. For example, if OECD countries welcomed migrants in proportion to their GDP at the same rate and from the same poor nations as Qatar does, this would reduce global inequality by about twice the amount that eliminating all internal inequality in the OECD countries would—and by twice the rate that taxes and transfers in these countries reduce global inequality. If they  adopted the same per-citizen rate at which the UAE takes migrants, they could accomplish much more. By taking in the 60 percent of the global population who make less than the bottom five percent in the United States and paying them $5,000 per year, the U.S. and Europe would reduce global inequality by roughly a third.

We citizens of OECD countries take pride in our political and civil rights, and our generous welfare systems. Yet we maintain our high standard of living by giving no rights and trivial money to people who live outside our arbitrary borders. While we fuss over whether we should raise or lower our marginal tax rates, we ignore the plight of the most desperate people in the world. And yet we are surprised that leaders of China and the GCC accuse us of hypocrisy when we criticize their records on human rights.

It's a controversial idea. These schemes seem to address most of the intractable problems that people have with immigration—these guest workers cannot vote, their children do not become citizens of the states they are born into, and they have to return home after a certain period of time, so they can't have the negative lasting impact on culture that some people say immigration will lead to.

But, as I and many other visitors to the Gulf have noted, the system feels almost like slavery. Indeed in cases where workers' passports are confiscated it essentially is slavery. Posner and Weyl are not suggesting this, but their plan would bring the reality of global poverty right up to our doorsteps—provided they know what their lives will be like, we can assume they would be made better off by this, but many people would find actually seeing this kind of deprivation on a daily basis to be unacceptable. But whether we could tolerate this and whether we should tolerate it are two very different questions.

There's bad ideas and then there's really bad ideas

And this idea of a Royal College of Teaching falls into the category of really bad ideas:

This time it is from Labour’s Tristram Hunt, in his plan to introduce teacher licensing. The implication is that teachers cannot look after their own standards so the state will have to set them, and police them.

Increasing centralisation: no, that's not what we think the economy needs.

But a solution to this gradual erosion of teacher autonomy, dignity and professionalism may be at hand. For the last two years, teachers and educationalists have been looking at how they might set up a ‘Royal College of Teaching’.

And that's worse. For what it does is centralise how things are taught into the control of the one group of people we don't in fact want to have control of that. That is, the educationalists who have messed up the system already.

As Hayek pointed out, knowledge is local. Yes, that foes mean that we don't want the politicians telling teachers how to do their jobs in detail. We want headteachers, people with actual experience of teaching, to be telling teachers how to do teaching. But not only don't we want politicians describing the details, we also don't want the so-called experts in educational methodologies telling teachers how to teach. Nor the sort of bureaucrats and educationalists who would flock to a centralised body like a Royal College of Teaching. What we want is as above: headteachers working with their teachers to work out what works best in their particular circumstances.

Another way to put this is that centralised control under the politicians would be undesirable: but centralised control under the "experts" with no outside influences would be even worse. After all, who do you think is responsible for the current mess in British teaching? Teachers, or those who have been educating teachers for the past 50 years and who would inevitably be those running the new College?

No, a very bad idea indeed.

The John Blundell Studentships

We are pleased to announce the creation of the John Blundell Studentships. Named after the former Director General of the Institute of Economic Affairs, who died earlier this year, the Studentships are designed to help talented pro-freedom students who are unable to fund themselves for postgraduate work. We aim that this support will help create intellectual ambassadors for freedom among the rising generation.

John was a tireless promoter of the free society and the free economy. An incalculable number of teachers, students, activists, professionals and even politicians were first brought to an understanding of these ideas, and to their own commitment to them, through the work of John Blundell.

This initiative will continue his life's work, of developing minds and ideas, into the future. There is no more fitting memorial. His wife, Christine Blundell, says "John would have been delighted."

More details will be announced soon. In the meantime, we welcome your suggestions, pledges of support and memories of John. Just drop me a line at eamonn.butler@old.adamsmith.org.

There's less to this robots will steal all our jobs story than you might think

We've another of those spine chilling warnings that the robots are going to come and steal all our jobs:

From self-driving cars to carebots for elderly people, rapid advances in technology have long represented a potential threat to many jobs normally performed by people.

But experts now believe that almost 50 per cent of occupations existing today will be completely redundant by 2025 as artificial intelligence continues to transform businesses.

A revolutionary shift in the way workplaces operate is expected to take place over the next 10 to 15 years, which could put some people's livelihoods at risk.

Customer work, process work and vast swatches of middle management will simply 'disappear', according to a new report by consulting firm CBRE and China-based Genesis.

We could all get very worried and ponder what it is that people might do. Alternatively we could be sensible and give the correct answer: something else. And even if that something else is something that isn't currently thought of as a "job" that doesn't matter one whit.

For we don't actually care whether someone, anyone, has a job. We don't, really, care whether they have an income either. What we do care about is that everyone has the opportunity to consume. And if the robots are off making everything then obviously there's lots to consume. So we've not got a basic nor an insurmountable problem here. All that's necessary is some system of getting what is produced into the hands of someone who can consume it.

And oddly enough we've got that system, that market for labour. We've had it for many centuries. The idea that someone might make a living as a writer of books (as opposed to a court funded artiste) would have been ridiculously exotic a few centuries back. The idea that a sprinter might make a living from sprinting was near illegal only 50 years ago. The idea that someone can make a living as a free market diversity adviser (they're not all tax funded) still seems pretty exotic to us frankly.

As has happened before, as has been happening for centuries, as the machines take over the much spreading then the muck spreaders go off to do something else. Usually, something a little less smelly and more enjoyable for a human being to do.

And there's one more observation we should make here. 50% of the jobs are going to disappear in 15 years? Pah! Lightweights.

For people always forget about "jobs churn". The economy destroys some 10% (for the UK, 3 million) jobs each year. Unemployment doesn't rocker by that amount because the economy also, roughly you understand, creates 3 million jobs each year. Those that disappear might appear to be the same as those that are created but they're almost always not quite. The move from one job to another always involves a subtle shift in what is being done. And continual subtle shifts in the flow of jobs move the stock of jobs along at a fair old clip.

We already expect some 150% of jobs extant in this current economy to explode, disappear, and be recreated as slightly different ones over the next 15 years. Whether this 50% is included in that figure or on top of it it's not the revolution some are predicting: it's just an addition to hte normal workings of the economy.

National roaming is one of the reasons we want that arbitration clause in trade deals

One of the things that gets a certain type of lefty up in arms is the arbitration clauses in the various proposed trade pacts on offer at present. It's portrayed as a violation of democracy that if politicians are allegedly in breach of the contracts under which people invest in the country then everyone can go off to a neutral (ie, not controlled by the politicians) legal system to sort matters out. We here regard it more as the upholding of the rule of law but there we go, be a dull world if we all thought the same way. However, we've got an interesting little example of what we mean in this latest silly idea:

There are bad ideas that might appear at first blush to have some merit, and then there are just bad ideas. A consultation announced this week by the Government into whether to enforce national “roaming” so as to improve mobile phone coverage very much falls into the latter category.

Were the normally sound Sajid Javid, the responsible minister, to go this route – and the fact that the consultation has been limited to just three weeks powerfully suggests he has already made up his mind – it would potentially amount to a breach of the terms under which mobile phone operators bought their licences.

Quite, it is very much a change in the terms of those licences. Licences which the phone companies paid tens of billions of pounds for. And none of us really think that the changes are going to increase the profits of the mobile phone companies, do we? So, they paid up in the belief that the rules would be one way and now they've paid up the rules are (perhaps) to be changed. This is exactly the sort of thing that that arbitration clause in trade deals is all about. Holding government, the politicians, to the terms that they agreed at the point of investment. And if those rules are changed to work out whether it's a reasonable change and if it isn't then who should pay whom to sort of the economic effects of the changes.

Our best guess here is that national roaming isn't going to go anywhere, whether it's a good idea or not. For we can't imagine that George Osborne fancies the idea of having to pay back chunks of those licence fees that he's already banked and spent.