Bribery is a good thing because it helps the bribed to learn what is best! So argues law & economics professor Thomas W. Hazlett “in today’s Financial Times”:http://news.ft.com/cms/s/61a388f6-0ce3-11da-ba02-00000e2511c8.html :
bq. Payola was made famous by scandals in the 1950s, when “cash, drugs and women” were traded to rock and roll disc jockeys in exchange for airtime, but the practice has a richer history. In both Britain and the US, 19th- and early 20th-century performers Âcollected side-payments from music publishing houses for singing their songs.
bq. Ronald Coase, the Nobel PrizeÂwinning economist, explained the practice in 1979. Radio stations own something valuable: songs played more tend to sell more. Competition for airtime develops, but how one conducts the best auction – given that station revenues come primarily from selling audiences to advertisers – is complicated.
bq. One view is that radio stations should be faithful to listeners and make choices based only on their DJs’ honest musical appreciation. But how do they know what gangsta rap track is top quality? Payola helps them learn, because record companies will tend to value airtime the most for releases for which they have the highest expectations of future sales.
I’d love to read commentary on this over at “Marginal Revolution”:http://www.marginalrevolution.com/ . Tyler?