An overview of institutions

Nutt-Powell et al (1978) provide the following definition and the dimensions of institutions. An institution is a discernible entity that carries or is the repository for social meaning.

Institutional analysis, therefore, is the study of how and in what forms social meaning is created, transmitted, maintained, and/or changed. The three defining dimensions of an institution are: (1) function; (2) activity; and (3) role.

Ranganathan et al. (2010) define formal institutions (constitutions, laws, property rights, etc.) as those that are legally introduced and enforced by state institutions, and which are embedded in state operations based on laws that are enforced and monitored by the government. Informal institutions (attitudes, customs, norms, traditions, etc.) are seen to rely on enforcement methods not supported by the government, and these authors say that they also have roots in the local communities and are embedded with the existing customs, traditions, rules of conduct, and beliefs.

It is increasingly being recognized, however, that formal institutions alone do not shape human behavior, but that much of what goes on can be explained also by informal institutions/constraints that are grounded in and emanate from a society’s culture (de Soysa and Jütting, 2006). In our case, it is to be noted that media bias, which is a phenomenon within the society thus works within the boundaries of the formal and informal institutions.

According to North (1990, 1992), institutions are the ‘rules of the game’, and thus these rules will determine the direction and strength of economic and social activities. Institutions (formal

78 and informal) should thus also influence and determine both these factors, i.e. the manner in which the political interests participate in that event and the way in which consumers in a particular country react based on their pre-conceived belief systems around that issue.

Institutional changes affect the various economic and social aspects of the society.

Institutions help create knowledge in the society by providing information to the individual decision-maker, and in particular, institutions provide social knowledge which may be needed for interaction with other individual decision-makers. Media is thus expected to react to these institutional pressures and slant the news in a particular direction. It is thus interesting to examine if media bias can be due to institutional influence in any particular country or region.

While media is also an institution in its own right, it may also be influenced by other institutions and the possible slanting of news by news reporters can also be due to the impact of certain institutions.

Early authors such as Polanyi (1957), Hirschman (1958), Gerschenkron (1962), Weber (1968) and Braudel (1986 ed.) wrote extensively about the extent and nature of the dependence of the market on the state. These can be seen as the origins of the study of institutions.

Later on, refuting the classical economic theory of instrumental rationality, North (1990, 1992) presented the theory of institutions which was based on the premise that individuals possess mental models to interpret the world around them, which are in part culturally derived – i.e.

produced by the intergenerational transfer of knowledge, values, and norms which vary radically among different ethnic groups and societies. Based on this definition, the concept of institutions offers an excellent platform to study the media bias against GM foods in Europe.

North (1990) identified how formal and informal institutions can affect economic productivity in a country. In the speech delivered at his Nobel Prize award ceremony in 1993, he defined institutions as the humanly devised constraints that structure human interaction. They are

79 made up of formal constraints (rules, laws, constitutions) which are intentionally designed, and informal constraints (norms of behavior, conventions, and self-imposed codes of conduct that are loosely defined as ‘culture’) which are not forced upon the society but which evolve over a period of time. Together they define the incentive structure of societies and specifically economies.

North (1992) goes on to propose that the incomplete information and limited mental capacity by which to process information determines the cost of transacting which underlies the formation of institutions. According to North (1992), the issue is not only the rationality postulate but the specific characteristics of transacting that prevent the actors from achieving the joint maximization result of the zero transaction cost model, and that the costs of transacting arise because information is costly and asymmetrically held by the parties to exchange. Placed in the context of the current paper, it can be argued that the asymmetric nature of information ownership and the resulting transaction cost is what media take advantage of, and the bias reflected in the reporting of genetically modified foods can be presented as an outcome of this process.

The difference between institutions and organizations is also well explained by North (1992).

Institutions are the rules of the game of a society or, more formally, they are the humanly-devised constraints that structure human interaction. They are composed of formal rules (statute law, common law, regulations), informal constraints (conventions, norms of behavior, and self- imposed codes of conduct), and the enforcement characteristics of both.

Organizations are the players: groups of individuals bound by a common purpose to achieve objectives. They include political bodies (political parties, the senate, a city council, a regulatory agency); economic bodies (firms, trade unions, family farms, cooperatives); social bodies (churches, clubs, athletic associations); and educational bodies (schools, colleges, vocational training centers).

80 A number of studies have since been carried out based on the notions of these formal and informal institutions and how they impact economic development, using a wide variety of variables such as geographic and political factors, trade integration and social factors.

World Bank published a report entitled Building Institutions for Markets in 2002, in which a complete chapter has been dedicated to the role of media freedom in the development of economic and social development. This chapter explains how a free media could reduce corruption, assist in public health efforts and improve education. According to Gehlbach and Sonin (2014), the extent of media freedom depends critically on two variables: the mobilizing character of the government and the size of the advertising market. Media bias, according to these authors, is greater and state ownership of the media more likely when the need for social mobilization is large; however, the distinction between state and private media is smaller. Finally, these authors also say that large advertising markets reduce media bias in both state and private media, but increase the incentive for the government to nationalize private media.

The enforcement of both formal and informal institutions can occur through the internalization of certain norms of behavior, the social pressure exerted on the individual by the group, or the power of third party enforcers who threaten to use force against individuals who violate rules. Institutions reduce uncertainty by providing a predictable structure in which people can act. In providing the rules of the game, institutions facilitate economic, social and political interactions. As such, differences in economic outcomes across societies and countries can be attributed to different institutional structures. Moreover, changes in institutions, for better or worse, directly influence changes in economic well being (Coyne and Leeson, 2009).

Through their studies in 2001 and 2002, Acemoglu, Johnson and Robinson use the data on property rights institutions and disease prevalence in selected ex-colonial countries including the USA, Australia, New Zealand and some African countries, and show that institutions have an impact on income levels. The major finding of this study is that private property rights are

81 the primary determinant of nations’ levels of economic development. Rodrik, Subramanian and Trebbi (2004) also show that the quality of institutions is the most important factor in explaining income differences.

More recently, scholars have placed importance on understanding institutional changes over a period of time and how countries with poor institutions can start to build new ones in order to achieve desired economic progress and development. Boettke, Coyne and Leeson (2008) argue that institutions that exist in the current period are the result of past choices and experiences. These current institutions, in turn, continue to influence the various economic and social aspects of the society. It is in this light that the current paper examines whether some of the key characteristics of the institutions in a country or region can have an impact on media bias.

According to Helmke and Levitsky (2003), informal institutions, or norms, are self-enforcing institutions, in that they constitute members of a community’s mutual best response to one another; formal rules, by contrast, are enforced by a third party, usually the state. They go on to argue for a cognitive approach that defines “informal institution” in terms of shared expectations rather than shared values. Robert Axelrod (1997) goes beyond the basic paradigm of the Prisoner's Dilemma to study a rich set of issues, including how to cope with errors in perception or implementation, how norms emerge, and how new political actors and regions of shared culture can develop.

Previous studies have evaluated, using empirical models, as to how media can affect these institutions. However, in this study, an analysis is presented as to how these institutions can influence media bias in a specific case of new technology launches, and more specifically, when there is a presumed ‘fear’ of these technologies. In other words, how do these formal and informal institutions, which are not only vastly different from one country to the other but also evolve over time, affect the level and direction of media bias. After analysing for

82 possible reverse causality in the variables used, this analysis shows that selected political and social institutions can have a strong impact on the level and direction of media bias.

Different reasons for media bias have been identified by various scholars – for example, large and important newspapers such as New York Times and Washington Times set the agenda that network news people follow (Goldberg, 2002), and suppress certain events that could be perceived as unfavorable by their audiences (Bernhardt, Krasa and Polborn, 2008).

Identifying bias is no easy task and even Alterman (2003), after claiming the bias to be

‘conservative’ rather than ‘liberal’, agrees that it is possible to find evidence for both views.

Political institutions have already been shown to cause media bias and in fact most of the scholars have chosen to examine the political environment when studying media bias.

On the other hand, demographic institutional environments, such as education, which improve the access to external information, may also act as barriers for informational cascades to take place, and the availability of information from external sources can stop or slow down this process. Activists sometimes use religious leaders as ‘experts’ when trying to increase the interest on a specific issue amongst the consumers. Thus, information regarding GM foods from key religious leaders such as the Pope is often leveraged by NGOs to their advantage.¹⁸ The relevance of religious leaders may be more relevant in issues where their opinions are valued, such as in abortion.¹⁹ Firms and GM advocates are also discredited based on the funding sources.²⁰ Similarly, any support for GM food by specific religious groups is rapidly discredited by some activists since any such move will act against their interests.²¹ Thus, religion as an institution can play a role in influencing media coverage.

Agriculture and food are closely related to the analysis of genetic modification, and hence economic institutions such as agriculture (expressed as % of GDP of a particular country)

18 http://www.catholicnews.com/data/ stories/cns/1004910.htm

19 http://www.bbc.com/news/world-europe-25723422

20

http://www.geneticliteracyproject.org/2013/11/27/gm-watch-attacks-mark-lynas-for-alleged-connections-to-agriculture-giant-monsanto/#.UwBn9PldWSo

21 http://gmo-journal.com/2011/11/14/one-sided-islamic-gmo-workshop/

83 and the size of the food industry are also likely to influence the level and type of bias by the media.