Defamation is the making of a false statement that creates a negative image of another person. At a superficial level the point of anti-defamation laws are to prevent such false statements. But false statements by themselves are not damaging unless they do harm to the subject’s reputation. For that, the statement must be credible.
If the direct effect of an anti-defamation law is to reduce the number of false statements made, an indirect effect is to enhance the credibility of all of the false statements that continue to be made. Because a member of the public who cannot assess the veracity of a given statement will begin with the presumption that the statement is more likely to be true since a larger fraction of all statements made are true. This of course encourages more false statements, undermining the original direct effect of the law.
Indeed it is impossible to eliminate false damaging statements without making them even more damaging.
Nevertheless, in equilibrium the net effect of an anti-defamation law is to increase the truthfulness of public discourse. The marginal slanderous statement is the one which is just damaging enough to compensate for the expected cost of a lawsuit. When that cost is higher, the previously marginal statement is crowded out.
But that just says that the proportion of statements that are false goes down. Another effect anti-defmation laws are to reduce the number of truthful statements. Even a truthful statement has a chance of being judged false and damaging. There will overall be fewer things said.
Furthermore, since a defamatory statement must be proven to be false and some falsehoods are easier to demonstrate than others, the incidence of anti-defamation laws on various types of lies must be considered. A libelous claim will be made if and only if the cost of the potential lawsuit is outweighed by the value of making it. For statements whose explicit intention is to defame, that value increases as the overall credibility of public discourse increases. Among those statements, the ones that are hardest to prove false will actually be said more and more often.
In fact as long as the speaker is creative enough to think of a variety of different ways to defame, the main effect of anti-defamation laws will be to substitute away from verifiable lies in favor of statements which are more difficult to prove false. This will be so as long as a sufficiently large segment of the public cannot tell the difference between statements that can be verified and statements that cannot.
Cheap Talk 
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January 24, 2012 at 7:17 pm
dan s
nice 1 – but unverifiable lies look bad to sophisticated segment of public. and wouldbe liars better off not being constrained to lie in unverifiable ways (re effect on unsophisticated segment). overall welfare effects of laws still seem likely positive. unless deterrence effect (re true statements) high. but maybe other costs ?
January 25, 2012 at 1:33 pm
William Newman
You wrote “In fact as long as the speaker is creative enough to think of a variety of different ways to defame, the main effect of anti-defamation laws will be to substitute away from verifiable lies in favor of statements which are more difficult to prove false.”
Are there some side conditions on this predicted outcome that you didn’t mention? It seems inconsistent with what has happened with employee references in the US. Both from what I’ve read and from personal accounts from people checking references, it’s apparently become difficult to get US employers to go on record with anything more than a sort of “name, rank and serial number”-style minimalist report on their former employees. As far as I am aware, the primary effect has been to dry up the supply of information about employee performance, a secondary effect has been to move the remaining supply of information into a sort of black market of untraceable off-the-record channels, and there is no clear sign of your predicted effect of unverifiable claims.