The Agency Problem arises when a conflict of interest arises between a principal and his agent. The press often represents itself as an 'agent' of the larger society, a seeker after the truth on behalf of the public. It is perfectly legitimate to ask whether a conflict of interest can arise between the media and the public. A moment's reflection is enough to establish it is not always the case that the press -- whether a newspaper or an individual blogger -- has interests which completely coincide with the general public because any media entity is a proper subset of the public: being a part it cannot be the whole. In the case of the Newsweek decision to print a poorly sourced story on the descreation of a Koran at Guantanamo Naval Base it is pertinent to ask how the costs and benefits of the magazine's action would be distributed; whether the interests of the agent substantially coincide with the principal -- the public -- in whose name the press often claims to act. But any boost in circulation would accrue benefits to the employees and stockholders of Newsweek and not to general members of the public unless they had shares. It is equally clear that any externalities arising from the Koran story would not normally be borne by Newsweek. Though people might die, places destroyed or riots occur they would not likely happen to people or places associated with Newsweek.
The fallacy in the argument, of course, is the premise that Newsweek acts as an agent for the general public. It isn't, and is free from any responsibility as a public agent in the uproar it has caused by its retracted story. Newsweek is not an agent, but the purveyor of a product for which there happens to be a market protected by the First Amendment. This should be clear, and there is nothing wrong with it. But the question arises: to what extent is a commercial organization free to dump the external costs of their business on others. For historical and political reasons, society has been reluctant to make the purveyors of this sort of information accountable for the full cost of their speech, reasoning it would be better for society -- the Commons -- to bear the externality than to risk restricting expression. As in any case where an economic actor does not bear the entire cost of its actions, there is a tendency to overexploit the capacity of the Commons; to privately appropriate the gains and leave the effluent on the village green to be swept up by everyone else.
In this specific case, it is possible to entirely dispose of the argument that responsbility is somehow the "Bush Adminstration's" because Newsweek itself has retracted the Koran story. Whatever else the "Bush Administration" may be guilty of, it is not guilty in this particular case; but since Newsweek will not bear the costs of its mistake (because it is under no agency obligation to do so) it is equally clear that the costs must be borne by someone else in this particular case also: by the Commons; in this instance largely by the elected agents of the public, i.e. the government and its representatives, that is, by someone in Afghanistan or Iraq.
The interesting question is what should prevent this from happening again and the answer, insofar as I can see, is nothing. The system works that way by design choice. One thing that may create pressure for change is the increasing cost of dumping such externalities onto the Commons. In a world where certain groups are likely to detonate car bombs or radiological devices in response to any real or imagined slight, the Commons may be unable to bear the external costs of news organizations mindlessly purveying inflammatory and poorly-sourced news products. That is essentially the argument for censorship in wartime. Yet censorship itself imposes such huge costs that it is questionable whether such a cure would be better than the disease. In the past the choice of evils was avoided by resorting to social pressure like appeals to patriotism or personal requests. A newsmagazine in 1944 would probably not even considered publishing the equivalent of the Koran story on the basis of the slightest of sources and without any collateral confirmation whatsoever. But we're not in Kansas any more. Without that self restraint there is nothing for it but for the Commons to keep bearing the full cost of Newsweek-type journalism until the system snaps, to the detriment of all.