Mark Liberman at Language Log says the game theory can explain why pundits "best move always seems to be to take the low road":
...Overall, the promotion of interesting stories in preference to accurate ones is always in the immediate economic self-interest of the promoter. It's interesting stories, not accurate ones, that pump up ratings for Beck and Limbaugh. But it's also interesting stories that bring readers to The Huffington Post and to Maureen Dowd's column, and it's interesting stories that sell copies of Freakonomics and Super Freakonomics. In this respect, Levitt and Dubner are exactly like Beck and Limbaugh.
We might call this the Pundit's Dilemma — a game, like the Prisoner's Dilemma, in which the player's best move always seems to be to take the low road, and in which the aggregate welfare of the community always seems fated to fall. And this isn't just a game for pundits. Scientists face similar choices every day, in deciding whether to over-sell their results, or for that matter to manufacture results for optimal appeal.
In the end, scientists usually over-interpret only a little, and rarely cheat, because the penalties for being caught are extreme. As a result, in an iterated version of the game, it's generally better to play it fairly straight. Pundits (and regular journalists) also play an iterated version of this game — but empirical observation suggests that the penalties for many forms of bad behavior are too small and uncertain to have much effect. Certainly, the reputational effects of mere sensationalism and exaggeration seem to be negligible. ...
I think it's correct that the penalties pundits face for "many forms of bad behavior are too small and uncertain to have much effect," but I'm not sure that was always true to the extent it's true today. So the question to me is why the tolerance for this behavior has changed over time (has it changed?).
I'm not sure I know the answer to that, but I suspect it has something to do with increased competition among media companies for eyeballs and ears combined with profit incentives that cause information organizations to maximize something other than the output of credible information (maximizing profit may not be the same as maximizing the output of factual, useful information).
Though this type of behavior was always present in the media, it seems to have gotten much worse with the proliferation of cable channels and other media as information technology developed beyond the old fashioned antennas on roofs receiving analog signals. I don't want to go back to the days where we had an oligopolistic structure for the provision of news (especially on network TV), competitive markets are much better, but there seems to be a divergence between what is optimal for the firm and what is socially optimal.
Some people have argued that there are big externalities to good and bad reporting, and therefore that "some kind of tax credit scheme for non-entertainment news reporting might enhance societal efficiency and welfare." That might help to change incentives, but I'm not sure it solves the fundamental problem. There must be reputation effects that matter to the firm, some way of making the firms pay a cost for bad pundit behavior. But that is up to the public at large, people must reward good behavior and penalize bad, it is not something the government can control. I suppose we could try something like British libel laws to partially address this, but looking at the UK press does not convince me that this solves the problem.
So I don't know what the answer is. It drives me crazy that, for example, people invited to appear on CNN will say something that is an outright lie, and the person saying it clearly knows it is a lie or misrepresentation, but yet they get invited back anyway due to their entertainment value. Why isn't the rule that if you lie once on the air, you can never come back again? No matter what they say or how accurate they are, the line-up on the news, op-ed pages, etc., etc., is pretty much the same tired old group of people who have proven they will say controversial things that draw ratings. And that is what matters, never mind the accuracy.
The distressing part is that there doesn't seem to be a good way to change these incentives so long as the public continues to lend their eyeballs and ears to those who play this game.
Is there a solution?