Wednesday, February 20, 2008

The Fourth Estate

The Oregon Legislature, The Oregonian reported today, was scrambling yesterday to draft legislation to address a problematic practice by which individual school districts get teachers who have been disciplined due to sexual misconduct to resign in return for not disclosing the misconduct to potential employers (in many cases, other school districts).

This brings up two pertinent economic questions:

The first is the practice itself and if it indeed calls for legislative remedy. In this case we have what economists recognize as a classic incentives problem: the private incentive of a school district that faces a teacher who has been disciplined for sexual misconduct is to make the problem go away at the lowest cost to the school district. Thus cutting a deal to have a voluntary resignation is a very good strategy for the district. The cost of cutting such a deal is not born by the school district, but by society at large (assuming that even a small percentage of such teachers are recidivist). What do economists call such costs? Externalities. Externalities are a classic case of justifiable government intervention - often explained in terms of protecting the public interest in the face of private incentives which are opposed. However, there seems to be a couple of potential pitfalls to finding an appropriate policy solution. First, it is not clear to me how much this practice is based on allegations of misconduct, rather than confirmed cases through a system of due process. It seems to me that many school districts are simply trying to make a potential problem go away, so legislation prohibiting this practice would potentially force school districts to go through costly investigations and often costly litigation. Second, this is likely not a state problem but a national problem, so it is not clear that the remedy is a state-level one. If Oregon passes a law that says, for example, Oregon school districts must disclose allegations of misconduct to future employers, this will potential impose a huge cost on Oregon school districts and yet we may still have a large number of teachers who have been dismissed for misconduct coming into the state.

The other pertinent economic question that this raises is the fact that we rely so heavily on the news media to bring problems to our attention. If the news media really are the fourth estate and have a critical role to play in our democracy, is the for-profit model the way to go? What are the incentives of The Oregonian to do such investigation? Sales of papers. Is this private incentive enough to ensure that the socially optimal level of investigative journalism, a public good, is being achieved? No. We all benefit from this journalism whether we read the O or not, so a lot of us are free riding on this information that, once published, becomes a common property resource. Economists know that in these cases - private provision of public goods - the good is underprovided relative to the social optimum. This raises an interesting question - should the public finance investigative journalism?


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