The Connection and Effect of the Media on the Economy - Research Paper Example

The Connection and Effect of the Media on the Economy Recent studies found that the media plays a pivotal role in agenda setting and "priming" because of its ability to influence mass perceptions and behavior. This underscores the argument that there is a close interrelationship between the economy, the media through the latter’s hold on the tide of public opinion. This paper will specifically identify medias link on economic variables such as supply, aggregate supply, aggregate demand, GDP, consumer sentiment, associate MPC, real GDP, nominal GDP and inflation. Shaping Behaviors The most interesting and perhaps credible model that explains medias effect on economy is the magic bullet theory or also known as the hypodermic needle theory. According to Biagi (2006), this theory posits that media could inject ideas into someone the ways liquids are injected through a needle and that these ideas were in direct causal relation to behavior. (256) This is demonstrated best in the shift of supply. Media is crucial in the changing tastes and fashions of the public and that this factor is fundamental in creating demands for certain products and services. For instance, the supermarket Sainsburys was inundated with requests for specific ingredients for particular recipes being shown in the cooking shows by Delia Smith and Jamie Oliver, to the extent where stores ran out of food items that were previously only moderate sellers. (Dransfield 2004, 288) Media changes knowledge, attitude, the behavior and sentiment of consumers and these make it a powerful force in the movement of the market and the aggregate supply and the demand for products and services as revealed by the Sainsbury’s case. The argument in regard to the media’s impact on variables such as aggregate demand is demonstrated in the potency and efficacy of media advertising. Advertising and promotions placed on all media platforms have the power to reinforce the use of products and the choice of particular brands. A study cited by Martin, for example, found that advertising reinforces the demand for alcoholic beverages, specifically highlighting that the reinforcing effects account for 1 to 3 percent of the variability in drinking. (p. 220) Media and Inflation Again, in the context of shaping perception and changing behaviors, the media can be directly responsible in regard to how inflation is viewed by the public. In a study conducted by the Glasgow Media Group, for example, it found that the news stories in the British media – those about union and management portrayals - is partly responsible for the errors in public perception on inflation. Here, media stories blamed union demands for higher wages has driven the high inflation in Britain. It was reported that union members agreed with the media that inflation has risen because of the demand for high wages despite the fact that real wages had not increased. According to the study, the union members discounted their actual experience in favor of what the news told them. (Wallack 1993, 63) From another perspective, the media may indirectly help in the incidence of inflation through its influence on public opinion and, eventually, on policymakers responsible for fiscal policies. It must be underscored that, according to Premchand (1984), inflation can result from the pursuit of expansionary fiscal policies that lead to higher deficits, easy money policies and greater liquidity. (p. 233) The media tends to favor stories and reportage that calls for the achievement of full employment as well as the use of inflation to finance development especially in Third World countries – a major factor in expansionary fiscal policies. Media and GDP Media’s effect on the Gross Domestic Product – the sum of the value of goods and services in the economy over a particular period – is evident in two fronts: first and again, is through its influence over policy-making and consumption through its power to guide public opinion and in agenda-setting; secondly, is through the amount of media goods and services in the economy. The media’s power on agenda-setting and policy-making has been mentioned previously. Its effect on variables such as inflation is also true in terms of the movements of the GDP. As it dominates the public spaces, it has the ability to pressure policymakers into passing fiscal policies that have tremendous effect on the movements of the aggregate economy. It also has the power to depict the economic health of a country positively or adversely because of its interest in reporting statistics such as real GDP and nominal GDP. This is crucial in policy-making because media reporting attracts the interest of policy-makers especially in terms of international GDP comparisons. (OECD 2008, p. 35) Besides perception and its role on policymaking, media is an important element in the Keynesian argument that consumption or consumer demand drives GDP. The popular conception is that personal expenditures amount to approximately 67% of GDP in the US, 65% in the UK, 58% in Germany, and 54% in France and because of this consumption is the biggest sector in the economy. (Kates 2003, p. 101) Here, media exerts its most powerful influence. It is pivotal in the shift of the economic needs of the twenty-first century capitalism from production to consumption. Media saturation has magnified the scale and effect of consumerism. It reinforced people’s need for consumption, to acquire leisure and even consumer ethic. In tandem with increased affluence, media fueled people’s desire for conspicuous consumption by celebrating consumerist attitude, hedonism and style through its expansion in advertising, marketing, design and public relations. It is in this area wherein media also has bearing on the movements of the marginal propensity to consume (MPC) as well as the aggregate demand. In a free-market and capitalistic society, media is essential in the development of marketing systems, which are characterized by positive consumer behavior. Media empowers marketing programs in order to have powerful effect on autonomous consumption, associate MPC as well as on prospects for success of an investment in a new product, and on the volume of trade. (Weitz and Wensley 2002, 18) This dimension is magnified further by media’s ability to link consumer and products amidst the highly globalized market today. Also, there are the media goods and services that now represent a small but growing proportion of total economic activity in developed countries. For example, in the United Kingdom, media products and services account for some 3-5 percent of the GDP. (Doyle 2002, p. 3) The growing amount of economic transactions in the media industry will surely affect GDP directly as the world is now consisted of media screens and its popular cultural images – TVs, VDUs, videos, computers, computer games, personal stereos, adverts, the Internet, etc. Conclusion It is clear that media’s effect on the economy is present and wide-reaching. Such effect is both direct and indirect. It directly affects the movements of the economy because of the growing media goods and services being produced today. It has been mentioned by this paper that in developed countries the percentage on the aggregate economy can reach up to 5 percent and that it is still growing. The most important aspect, however, in al the discourse on the media’s impact on economy is through its ability to influence behaviors of the consumers, producers and policymakers. The pervasiveness of consumption is a testament to this argument. Here, because of media’s influence: new products are being successfully produced and sold; the patterns of supply and demand of products are continually being rearranged. Then, there is media’s role in policymaking. A report on an issue could immediately affect fiscal policymaking that could directly affect economic variables such as the GDP of an economy. Works Cited Biagi, Shirley. Media/Impact: An Introduction to Mass Media. Belmont, CA:Cengage Learning, 2006. Doyle, Gillian. Understanding media economics. London: SAGE, 2002. Dransfield, Robert. Business for Foundation Degrees and Higher Awards. Oxford: Heinemann, 2004. Kates, Steven. Two Hundred Years of Says Law: Essays on Economic Theorys Most Controversial Principle. Edward Elgar Publishing, 2003. OECD. Purchasing Power Parities and Real Expenditures 2007: 2005 Benchmark Year. OECD Publishing, 2008. Premchand, A. Government Budgeting and Expenditure Controls: Theory and Practice. International Monetary Fund, 1984. Wallack, Lawrence. Media advocacy and public health: power for prevention. SAGE, 1993. Weitz, Barton and Wensley, Robin. Handbook of marketing. Newbury Park, CA: SAGE, 2002. Read More