Society and Culture

Can the free market solve the ‘fake news’ problem?

Those dismayed by the Brexit vote in the UK, or the election of Donald Trump in the US, often blame the phenomenon of ‘fake news’. Rather more worryingly, some have concluded that increased government intervention in the free exchange of information and opinions is now needed to ‘protect’ democracy. In reality, ‘fake news’ is as old as the hills. The internet may have magnified the problem a little, but the market is already providing its own solutions.

One fancy definition of ‘fake news’ is ‘the deliberate publication of misleading or false statistics, hoaxes, propaganda or other disinformation purporting to be real or factual’. Some commentators have opted for the rather more pithy ‘bullshit’, while my colleague Chris Snowdon has suggested ‘talking bollocks’. Whatever you call it, the influence some attribute to ‘fake news’ is closely related to the belief that the world has only recently begun an era of ‘post-truth’.

To be clear, there is an obvious public interest in countering ‘fake news’. Indeed, it is already the subject of an inquiry by the UK parliament. But this begs three questions. Is ‘fake news’ a new phenomenon? Is it really that influential? And what, if anything, should be done about it?

On the first point, most commentators agree that ‘fake news’ isn’t actually new. Propaganda, to give it another name, has of course been around since ancient times. It has simply been given a wider platform by the development of the internet since the late 20th century, just as it benefited from the spread of the printing press in the 16th century, the emergence of mass circulation newspapers in the 19th, and radio and film in the 20th. And it would be ridiculous to argue that successful politicians have only recently become ‘economical with the truth’.

Admittedly, the development of the internet has surely been the most important of these technological advances. It has allowed people to disseminate ‘fake news’ quickly to a very large number of people at near-zero cost and with practically no regulatory oversight. There is little, for example, to prevent the spread of relatively sophisticated fake stories purporting to come from authoritative sources.

The bigger issue, then, is whether ‘fake news’ actually works. Some commentators appear convinced that ‘fake news’ played a decisive role in the UK referendum on EU membership last year, thereby casting doubt on the legitimacy of the outcome. Much is made here of the notorious claim that Brexit would allow an additional £350m per week to be spent on the NHS. And of course, President Trump is recognised as a master of ‘alternative facts’.

However, ‘fake news’ is surely far less effective than many assume. There is little evidence that voters in the UK referendum were swayed by any particular claim made by the Leave camp. The £350m figure, for example, was widely discredited at the time and few people could have been unaware of the concerns about it.

It is also hard to believe that it would have made any real difference if a lower (more accurate) figure for the UK’s net contribution to the EU had been used instead. The official forecasts from the OBR explicitly assume that ‘any reduction in expenditure transfers to EU institutions would be recycled fully into extra domestic spending’ and have pencilled in a figure of around £13bn per year from 2019/20. Yes, that’s only £250m per week, not £350m, and clearly not all of it would go the NHS. But the essential point made by the Leave campaign was arguably valid.

What’s more, there was plenty of disinformation (‘Project Fear’) from the Remain camp too. This includes dire predictions of an imminent recession which have already been proved wrong. Presumably, if the vote had been to Remain, the Leave camp would now be blaming the ‘lies’ told by the other side. It must be reassuring for those on the wrong side of a defeat to believe that the opposition only won by cheating.

As for President Trump, it is again debatable whether ‘fake news’ helped him get elected. This is neatly summed up in the idea that voters ‘took him seriously, but not literally’. Perhaps, he would have won anyway given the weaknesses of the Clinton campaign. It is certainly hard to argue that an alternative approach to the truth is doing him any favours now, given the collapse in his approval ratings.

More generally, it is questionable whether ‘fake news’ actually has much impact in terms of changing public opinion, rather than just reinforcing the views of those suffering from ‘confirmation bias’. I’m often struck by how enthusiastically supporters of a particular position will ‘like’ and ‘retweet’ statements with which they agree, whether they are true or not. But equally, these statements are usually quickly debunked once they reach a wider audience.

So how should we respond to the problem of ‘fake news’? As you might expect, I favour market-based solutions, rather than government intervention. For a start, it is notable that ‘fake news’ appears to be more successful where there is less competition – in Russia, for example. Fake news is presumably the only news in North Korea. Diversity in media sources is therefore essential. Indeed, this may be one way in which the internet actually reduces the threat from ‘fake news’ – which is why so many authoritarian regimes choose to restrict access to it. Allowing the state to decide what is or isn’t ‘fake news’ would be a far more dangerous threat to democracy than anything the Twitterati can come up with.

In addition, there is ample evidence that demand for more reliable information is creating its own supply and the market is already providing its own solutions. One example is advertiser boycotts of outlets that fail to prevent the placement of ads next to inappropriate (e.g. extremist) content or on sites that are mainly channels for fake news. Another is the emergence of a large number of independent fact-checking organisations, some of which are now being used by Google and Facebook. And there is also plenty of evidence that serial offenders – even US Presidents! – quickly lose credibility (a form of self-regulation).

Of course, this free-for-all is far from perfect. Who checks the ‘fact checkers’? Who decides which news sources are ‘reliable’? But it is surely better to let consumers pick and choose who to believe, rather than leave it to government. After all, the truth is still out there.


This is the first in a series of blogs on the current state of the media and advertising industry and the challenges presented by new technologies and platforms. Future blogs will cover press regulation, libel law, and whether traditional and new media are competing on a level playing field.


Julian Jessop is an independent economist with over thirty years of experience gained in the public sector, City and consultancy, including senior positions at HM Treasury, HSBC, Standard Chartered Bank and Capital Economics. He was Chief Economist and Head of the Brexit Unit at the IEA until December 2018 and continues to support our work, especially schools outreach, on a pro bono basis.

1 thought on “Can the free market solve the ‘fake news’ problem?”

  1. Posted 18/08/2017 at 20:10 | Permalink

    ‘Fake News’ is just another form of gossip.
    Gossip is just an elaboration of what people fear might happen. An explanation of why they’re telling you about this person(s) that you should be wary of.
    I think that fits both the EU Referendum and Donald Trump’s election.
    The folk who passionately voted against them are warning us all what is yet to come. But all we renegades see are nasty name-calling bullies. And all the gossips see are the possible nasty motivations.
    Of these things, wars are made.

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