[Here’s Zach’s review of Chapter 1 of this month’s Nieman Journalism Lab Book Club selection. For more info, check here. —Ed.]

Economists aren’t afraid to ask questions like, “Would the First Amendment pass a cost-benefit test?” Worse, they are willing to claim that the answer isn’t obvious.

But infuriating as they may be, economists are often a necessary foil to conventional wisdom, ingrained assumptions, and institutions that have too long relied on rigid dogma. That’s why we’re reading All the News That’s Fit to Sell, by James T. Hamilton, an economist and political scientist at Duke, who poses that question about our Constitution’s most important sentence toward the end of his first chapter. He’s approaching the news business from a perspective that would be considered heretical in most newsrooms. If you asked a reporter — or, worse, an editor — what factors affect coverage in her newsroom, she might rattle off the trusty who, what, where, when, and why. Hamilton agrees that five W’s determine what does and doesn’t become news, but he says they are:

1. Who cares about a particular piece of information?

2. What are they willing to pay to find it, or what are others willing to pay to reach them?

3. Where can media outlets or advertisers reach these people?

4. When is it profitable to provide the information?

5. Why is this profitable?

From those questions flow a host of assumptions about what sort of information is provided to the public, with media companies favoring news that is either cheaper to produce or for which readers and/or advertisers are willing to pay more money. If that sounds obvious, then you’re ready to take Hamilton’s logic to more interesting conclusions such as: Reporters are more likely to produce reaction stories than move on to a fresh topic because follow-ups are “cheaper to write” — that is, they require less of a reporter’s resources — than tackling something new.

What I constantly wondered in reading this chapter was the extent to which Hamilton’s “economic theories of news” apply to the web, where supply-and-demand curves often appear out of whack. Does any of this hold up in an economy based on giving away the news for free? Hamilton makes an important point when he observes that readers “pay” for news on the Internet with their time, which is just as scarce a resource as money. And in that case, economic theory should still apply. If that’s true, then Hamilton has a number of provocative observations that I found to cut against the grain of most thinking about new media:

— The low entry costs of the web are typically said to enable a wider variety of topics than traditional media, thus improving the quality of journalism available to readers. But Hamilton attempts to show how “an increase in the number of competitors may increase diversity but may decrease quality” as they all engage in a “race to the bottom” for limited profits. When the cost of entry to become a news organization is higher, there’s a greater incentive to carve out a unique and profitable niche. But as the number of competitors grows, everyone (who’s interested in profits) may have no choice but to focus on the cheapest types of news.

— The web’s unlimited capacity is also supposed to offer a salon of competing viewpoints that don’t receive due space in print or on television. But Hamilton warns that “as the number of journalists covering a story grows, an individual reporter may be more likely to simply go with the angle and events developed by previous reporters,” leading to group-think. He even makes a compelling, if troubling, case for how a monopoly could “lead to more diverse news products” than a competitive marketplace for news. [Felix Oberholzer-Gee at Harvard Business School has done some similarly counterintuitive work arguing that format diversity in local radio markets actually increases as the number of owners in a market decreases. —Ed.]

Hamilton doesn’t address either of those points specifically to news on the Internet, but that’s where I’d like to take them. Is there reason to fear that an unlimited marketplace of competing news organizations on the web could actually hurt the quality of journalism that’s produced?

The Wall Street Journal published a piece by Chris Anderson, the editor of Wired, on Saturday that serves as a nice supplementary reading to the first chapter of Hamilton’s book. It’s called “The Economics of Giving It Away” and explores some of the themes in Anderson’s much-anticipated book, due this summer, on the strange and often elusive business models that surround innovation on the Internet. Fortunately for us, the Journal’s subscription-based website has decided to give this article away.