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The Sound of Silence: Anti-Defamation Law and Political ...research.economics.unsw.edu.au/gbose/DevWorkshop/papers/Gabri… · The Sound of Silence: Anti-Defamation Law and Political

Apr 24, 2020

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  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    The Sound of Silence: Anti-Defamation Law andPolitical Corruption

    Gabriele Gratton

    University of New South Wales

    September 16, 2011 UNSW School of Economics Workshop:

    Development Challenges in a South Asian Context

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Motivation

    We read newspapers to get information about the conduct of

    politicians.

    Often we have to take decisions (reelect, impeach, etc.) before

    this information can be veri�ed.

    Were the media absolutely free to publish whatever allegation,

    would you believe in what they say?

    Anti-defamation legislation gives incentives to media to publish

    only evidence of scandals with a solid ground.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Motivation

    We read newspapers to get information about the conduct of

    politicians.

    Often we have to take decisions (reelect, impeach, etc.) before

    this information can be veri�ed.

    Were the media absolutely free to publish whatever allegation,

    would you believe in what they say?

    Anti-defamation legislation gives incentives to media to publish

    only evidence of scandals with a solid ground.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Motivation

    At what cost? What if the laws are so punitive that journalists

    would not publish some information even when they know it to

    be true (chilling e�ect)?

    How then to interpret the silence of media? Do they have

    nothing true to show to us, or they have something so bad

    (and true) they are scared to show it?

    ...tragedy begins not when there is a misunderstanding

    about words, but when silence is misunderstood.

    Henry D. Thoureau

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Main results

    If in equilibrium there exists a true allegation not worth

    publishing, then

    1 corruption is larger than without any anti-defamation

    protection;

    2 any limitation to political corruption relies on the possibility of

    punishing the politician when the media remain silent.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    (Italian) Examples

    Lockhead scandal: President Giovanni Leone forced to resign

    in 1978. Public apologies from his accusants in 1998.

    Governor Piero Marrazzo resigns in October 2009 for a sex

    scandal. Newspaper possessed video evidence since the

    Summer but refused to mention the scandal until the police

    opened an investigation

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Related Literature (very incomplete)

    Anti-defamation law: Garoupa (1999) and (1999a)

    government and media: Besley and Prat (2006)

    media freedom and democracy: Besley and Burgess (2002),

    Djankov et Al. (2001), Suphachalasai (2005) , Ferraz and

    Finan (2008)

    Principal-agent-supervisor: Antle(1984), Tirole (1986), among

    others

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    The model

    I study perfect Bayesian equilibria of a model with:

    principal

    media

    politician

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    politician and scandals

    The politician chooses his level of corruptionc ∈ [0, 1]: greatestwrong he is going to commit. Direct payo�: γc , γ > 0.

    The media observes c . This is private information the media

    cannot publish.

    Also, the media observes publishable evidence of scandal

    s ∈ [0, 1]: with probability q > 0, s = c ; otherwises ∼ U (0, 1).If s ≤ c , the scandal is true.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    politician and scandals

    The politician chooses his level of corruptionc ∈ [0, 1]: greatestwrong he is going to commit. Direct payo�: γc , γ > 0.

    The media observes c . This is private information the media

    cannot publish.

    Also, the media observes publishable evidence of scandal

    s ∈ [0, 1]: with probability q > 0, s = c ; otherwises ∼ U (0, 1).If s ≤ c , the scandal is true.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    the media �rm

    The media can either publish the scandal (x = s) or send themessage 'nothing' (x = φ).

    Revenue function: π (x) : {[0, 1] , φ} → R+, c2, π′ (·) > 0,π′′ (·) ≤ 0 and 0 = π (φ) < π (0).

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    the principal

    The principal commits a priori to a mechanism

    e (x) : {[0, 1] , φ} → [0, 1]: probability of rewarding politicianwith r ≤ γ if scandal x is published.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Trial

    After e (x) is realized and rent (eventually) collected, thepolitician can sue the �rm for defamation.

    Judges assessment of corruption level, g .

    Politician wins the trial if g < x . He receives � ∈ (0, r) if hehas been rewarded, otherwise receives δ ∈ (�, r ]Firm is punished ρ (x) : [0, 1]→ R+, c2 with ρ′ (·) > 0,ρ′′ (·) ≥ 0 and ρ (0) = 0.2 kinds of trial:

    1 fair trial: no cost for politician for politician, g = c;2 biased trial: cost f > �, with probability 1− ζ, g = c , othersise

    g ∼ U (0, 1).

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Trial stage

    probability of politician winning a biased trial if a true scandal

    x = s ≤ c is published: ζs.The politician will sue the �rm if and only if he has received no

    reward and

    s >f

    δζ.

    If f ≥ δζ, the politician will never incur cost f and no biasedtrial will occur in equilibrium.

    Assumption

    f < δζ: imperfect justice

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Trial stage

    probability of politician winning a biased trial if a true scandal

    x = s ≤ c is published: ζs.The politician will sue the �rm if and only if he has received no

    reward and

    s >f

    δζ.

    If f ≥ δζ, the politician will never incur cost f and no biasedtrial will occur in equilibrium.

    Assumption

    f < δζ: imperfect justice

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Preliminaries

    Proposition

    Without any anti-defamation law, all PBEs of the model are

    characterized by a level of corruption c = 1− rq/γ such thate (c) = 1 and e (x) = 0 for all x > c. All PBEs are equilibria withdefamation and there is no equilibrium with chilling.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    De�ne

    s̄ :=

    {1 if π (s) > ρ (s) ,∀s ∈ [0, 1] ;s ∈ [0, 1] : π (s) = ρ (s) otherwise;

    I use s̄ ∈ (0, 1] as a measure of the stringency of anti-defamationlaws.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Imperfect justice

    If x > fδζ , then the politician will sue the �rm if he has notbeen rewarded by the principal.

    De�ne s (e (·)):

    s (e (·)) :=1 if

    π (s) > sζ (1− e (s)) ρ (s) ,∀s ∈ [0, 1] ;

    s ∈ [0, 1] :π (s) = sζ (1− e (s)) ρ (s) otherwise.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Imperfect justice

    If x > fδζ , then the politician will sue the �rm if he has notbeen rewarded by the principal.

    De�ne s (e (·)):If x > s (e (·)), then the �rm's expected payo� of publishing isnegative.

    The �rm will not publish a true scandal s ≤ c if

    s > s̃ (e (·)) := max {s (e (·)) , f /δζ} .

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Media strategy

    Lemma

    De�ne ŝ (e (·)) := min {s̃ (e (·)) ,max {s̄, c}}, the optimal strategyfor a media �rm observing a scandal s and corruption level c is

    x (s, c) =

    {s if s ≤ ŝ (e (·)) ;φ otherwise.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Chilling neutralizing mechanism

    How can the principal avoid any chilling?

    if s̃ (e (·)) ≥ 1, then all true scandals will bepublished⇐⇒e (1) ≥ ē = max {ê, 0},

    ê := 1− π (1)ζρ (1)

    .

    De�nition

    A mechanism is chilling neutralizing (all true scandals are worth

    being published) if e (1) ≥ ē.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Chilling neutralizing mechanism

    Proposition

    There exists a non-empty and bounded set of combinations of s̄

    and ē for which the PBE mechanism e (x) is chilling neutralizing.For low enough values of s̄, the PBE mechanism e (x) is notchilling neutralizing and there exists a unique PBE such that the

    equilibrium level of corruption is larger than if there was no

    anti-defamation protection.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    If the anti-defamation law is so stringent that in

    equilibrium there exists at least one scandal that would

    not be worth publishing by the media even if true, then

    the equilibrium level of corruption is larger than without

    any anti-defamation protection.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    The sound of silence

    Lemma

    Suppose that the mechanism e (x) is not chilling neutralizing. Ife (φ) = 1, then no level of corruption c < 1 can sustained inequilibrium.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Robustness check

    What if ρ (x − g), (strictly) increasing and convex for x > g ,always continuous and equal to 0 for x ≤ g?

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Imperfect justice

    Proposition

    Call N the set of anti-defamation laws such that the PBE of themodel has a chilling neutralizing mechanism, then N is a propersubset of the set of laws. For all laws/∈ N , the equilibriummechanism is such that e (φ) = 0 and the equilibrium level ofcorruption is equal to c (e (x)) > 1− rqγ .

    Proposition

    There is no equilibrium with chilling. There exist anti-defamation

    laws such that the unique PBE is an equilibrium with defamation

    but not an equilibrium with a chilling neutralizing mechanism.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

  • Introduction The model Imperfect justice Robustness check: punishment depending on distance from the truth.

    Imperfect justice

    Proposition

    Call N the set of anti-defamation laws such that the PBE of themodel has a chilling neutralizing mechanism, then N is a propersubset of the set of laws. For all laws/∈ N , the equilibriummechanism is such that e (φ) = 0 and the equilibrium level ofcorruption is equal to c (e (x)) > 1− rqγ .

    Proposition

    There is no equilibrium with chilling. There exist anti-defamation

    laws such that the unique PBE is an equilibrium with defamation

    but not an equilibrium with a chilling neutralizing mechanism.

    Gabriele Gratton University of New South Wales

    The Sound of Silence: Anti-Defamation Law and Political Corruption

    IntroductionThe modelImperfect justiceRobustness check: punishment depending on distance from the truth.