The Paradox Wrecking the News Industry

What the Grossman-Stiglitz Paradox reveals about the challenges facing 21st century media

Apr. 5, 2026 at 9:50pm

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A new analysis explores how the 'Grossman-Stiglitz Paradox' from economics helps explain the struggles of the modern news industry. The paradox outlines a fundamental conflict between the efficient spread of information and the incentives to produce high-quality original reporting, leading to a scenario where news outlets either become perfectly informed or perfectly uninformed.

Why it matters

The Grossman-Stiglitz Paradox sheds light on the paradoxical dynamics that have led to a decline in journalist employment and quality news production, even as information technology has lowered distribution costs and opened up new consumer markets. Understanding this economic theory can help inform solutions to sustain a healthy news ecosystem.

The details

The Grossman-Stiglitz Paradox states that valuable information can be costly to obtain or produce, so not everyone does it. However, once that information is transmitted to the broader marketplace, it becomes less profitable for information producers to keep investing in new high-quality content. This creates a scenario where either everyone is perfectly informed or perfectly uninformed. The author applies this paradox to explain why the explosion of digital media has coincided with a decline in professional journalism, why paywalls have become common, and why news outlets increasingly rely on subsidies.

  • The Grossman-Stiglitz Paradox was outlined in a 1980 academic paper.

The players

Sanford J. Grossman

An economist who, along with Joseph Stiglitz, developed the 'Grossman-Stiglitz Paradox' that explains a fundamental conflict between the efficient spread of information and the incentives to produce high-quality information.

Joseph E. Stiglitz

An economist who, along with Sanford Grossman, developed the 'Grossman-Stiglitz Paradox' that explains a fundamental conflict between the efficient spread of information and the incentives to produce high-quality information.

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What they’re saying

“There is a fundamental conflict between the efficiency with which markets spread information and the incentives to acquire information.”

— Sanford J. Grossman and Joseph E. Stiglitz, Economists

The takeaway

The Grossman-Stiglitz Paradox provides an economic framework for understanding the challenges facing the modern news industry, where the efficient spread of information online has undercut the incentives for producing high-quality original reporting. Addressing this paradox will be crucial to sustaining a healthy news ecosystem that serves the public good.