Dynamic Censorship and Government Regulation

• In Event: Formal Models of Autocratic Politics

Abstract

Censorship is a mechanism used by authorities to restrict access to information among their populace. Existing literature often simplifies censorship as a straightforward decision by the authority to either censor or allow information, particularly information they deem unfavorable. However, these studies overlook a widely practiced form of censorship where authorities dynamically control information access.

China's film industry exemplifies dynamic censorship, encompassing three key stages: project application, scriptwriting, and filming, each rigorously reviewed and potentially modified by the government. Despite increasingly stringent censorship under Xi Jinping's leadership since 2012, China's film market has continued to flourish, becoming the world's second-largest, trailing only the U.S. market. Notably, several films deemed sensitive and potentially censorable have been released and achieved box office success. This project proposes a dynamic model to explore this phenomenon. Furthermore, our model, highlighting progressive regulation and approval, is relevant to other complex government processes, such as U.S. foreign investment oversight and the FDA's drug approval process.

We analyze dynamic censorship using a model where a firm invests in a project subject to government oversight. The firm prioritizes the project's market performance, while the government considers both the project's economic impact and its potential threat on social stability. The model has two stages. In the first stage, the firm submits the project for government review. The government can approve, reject, or request adjustments, allowing the firm to potentially manipulate the government's perception and alleviate concerns about social stability threats. In the second stage, the government makes its final decision based on the revised project submitted by the firm.

Our findings reveal several insights. First, the government tends to avoid setting strict guidelines early on when the threat to social stability is unclear. This approach stems from the government's preference for projects to succeed in the market, provided they don't pose a threat to the regime. A predefined red line might lead to the premature dismissal of potentially valuable projects (type I error). The dynamic process allows for collaboration to minimize uncertainty. Second, firms can influence government approval, even for politically sensitive projects. They may leverage the revision process to alter the perception conveyed to the government, potentially diminishing concerns about social stability. This possibility of manipulation could reduce the likelihood of the firm's self-censorship at the early stages, encouraging firms to undertake riskier, more sensitive projects. Third, cooperation between government and firms can boost market efficiency. Such collaboration could result in a Pareto welfare improvement.

Authors

• Congyi Zhou, New York University

• Liqun Liu, Shanghai Jiao Tong University