Free Speech and the Fake News Problem

33 Pages Posted: 19 Apr 2023 Last revised: 31 Oct 2023

See all articles by Marshall W. Van Alstyne

Marshall W. Van Alstyne

Boston University - Department of Management Information Systems; Massachusetts Institute of Technology (MIT) - Sloan School

Date Written: April 10, 2023


How should a platform or a society address the spread of misinformation? Scholars often repeat, and courts often assume, that the best test of truth is the power to get itself accepted in the competition of the market. While such writing focuses on veracity, this Essay proposes that harms are better cognized as decision errors and externalities. A focus on truth per se is misguided because one cannot own truth and one cannot be dispossessed of truth. By contrast, one can be liable for decision errors and externalities. This alternate interpretation suggests a syllogism that redefines the problem:

Misinformation produces externalities. Externalities produce market failures. Market failures require intervention, but the First Amendment forbids government intervention in speech. Thus, attempts by courts and society to push the problem to the “marketplace of ideas” to sort things out will fail. Markets do not self-correct market failures.

This Essay then offers a message of hope. Using this new definition, it proposes to design a system of rights such that decentralized institutions can internalize negative externalities. Society might then curb misinformation with no censorship at all and no central authority – not government, not private firms, and not powerful individuals – judging truth. The task of addressing fake news is transformed into a task of problem definition, decentralized mechanism design, and truthful signaling for which tools of information economics are well-suited.

This is the first of two essays addressing the challenge of false claims in free speech. It focuses on externalities. The second essay, Information Economics and Free Speech (, focuses on decision errors.

Keywords: Free Speech, Fake News, Misinformation, Platforms, Section 230, Information Economics, Decision Theory, Externalities

JEL Classification: K1, K4, D02, D62, D63, D72, D82, L15, L38, L4, L51, L86

Suggested Citation

Van Alstyne, Marshall W., Free Speech and the Fake News Problem (April 10, 2023). Available at SSRN: or

Marshall W. Van Alstyne (Contact Author)

Boston University - Department of Management Information Systems ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-358-3571 (Phone)


Massachusetts Institute of Technology (MIT) - Sloan School ( email )

Initiative on the Digital Economy
245 First St, Room E94-1521
Cambridge, MA 02142
United States
617-253-0768 (Phone)


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