Fake news is a $78 billion problem, reveals new study

Fake news is costing the global economy a whopping $78 billion every year, a new research has revealed.

“The long-term economic cost of disinformation is real even if the information is not", the study by the University of Baltimore and the Israel-based cybersecurity firm CHEQ asserts pointing out state-sponsored bad actors, motivated by ideology, or simply plain profit, are the main culprits.

Interestingly while business rivalry and the desire for unmerited profit has emerged as the significant drivers of fake news, electoral battles in many countries over the past few years have also resulted in a spike in the fake news industry.

The biggest impact of fake news has been seen on the stock markets with targeted companies and brands losing close to $40 billion in value apart from the direct costs of reputation management, regulatory issues and other financial costs in recent times.

The biggest impact of fake news has been on the stock markets with targeted companies and brands losing close to $40 billion in value

The single biggest incident of stock loss on account of fake news was in December 2017 when ABC reported that “National Security Adviser Lieutenant General Michael Flynn, would testify that Donald Trump had instructed him to contact Russian government officials during the 2016 election campaign.” The S&P 500 index tanked 38 points wiping off $300 billion value from American stocks while the report was proven false and withdrawn subsequently the report recounts. 

“From a risk management perspective, based on an analysis of past cases involving fake news inflicting damage on global stock markets, we find a potential loss of up to 0.05% of stock market value is at risk due to fake news. This amounts to $39 billion annual loss as a direct result of fake news,” the authors said in the report.

As a segment, however, public health has been the biggest victim of the fake news industry resulting in higher delivery costs and preventive healthcare services. For instance, the anti-vaxxer movement and other digital health misinformation campaigns across the West in recent times has had a catastrophic impact on physical health, the study points out. A case in point is the reported tripling of measles cases in the UK with people misled by fake news refusing to administer the vaccination.

Of late electoral battles have also emerged a significant motivation for the dissemination of fake news and not surprisingly, the two largest democracies of the world, the United States of America and India, had the the dubious distinction of being the first and second respectively among the countries that spent the most on election-related fake news in most recent campaigns, the study estimated.

The US and India have the dubious distinction of being the first and second respectively among the countries that spent the most on election-related fake news

Apart from the monetary costs, in many instances, this category of fake news leads to violence also the result of which cannot be accurately estimated. 

Climate change is the other big target of the fake news industry with similarly explosive results.  For instance, the Climate Literacy and Energy Awareness Network which reviewed more than 30,000 free online resources on climate change, found only 700 articles that were broadly accurate, on the theme of climate change.  Once again, the long-term economic costs of disinformation is real even if the information is not, the report says quoting the estimate by the National Bureau of Economic Research which says failure to tackle climate change would yield a 7.2 percent cut to GDP per capita worldwide by 2100.

The estimates are at best conservative, reflecting only basic direct costs, and the true cost extends well beyond media expenditures, the report says. If we consider the indirect and secondary costs of fake news price paid is likely to be far higher. These costs can contribute to loss of faith in institutions, and costs required to correct misinformation. In some cases, fake news may even lead to violence, while the flow of misleading propaganda drives out positive and constructive news causing damage to political decision-making.