What to do About Newspapers?

I am an economist, trained to appreciate markets, and yet when I start to talk about one of my pet concerns, the fact the newspapers and their 4th estate role are dying (which I have blogged about in the past), normal people who usually mistrust markets tune me out and say things like well it will all be internet based soon, nothing to be done, etc., etc. But the problem there is that no one has figured out how to make internet newspapers turn a profit, so what will happen to real reporting?

My question is: can we afford, as a society, to loose the essential watchdog role of the media? I think not. Partly this comes from my background studying developing countries where corruption is a huge drag on growth. Many countries lack an effective independent media which allows corruption to flourish unchecked. And partly this comes from the fact that I believe a well-function democracy relies on well-informed citizens.

So what to do? I have advocated for the idea that public money should be used to support what is, essentially a public good. And now, or the first time, I find a prominent economist arguing the same thing. The point of this article is that it is the reporting that should be supported, not the papers themselves - I agree entirely. I good friend suggests an NPR-type model of print journalism, member driven and government supported - what do you think?