Category Archive for: Press [Return to Main]

Tuesday, January 31, 2017

CNN Hires Hack Trump Adviser to Spout Gibberish About Economics

Jordan Weissmann:

CNN Hires Hack Trump Adviser to Spout Gibberish About Economics: ...I would like to pause for a brief moment to commemorate the act of journalistic malpractice CNN has just committed by hiring conservative scribbler and Trump adviser Stephen Moore as an economics analyst. It is a doozy. ...
In economics circles, Moore is looked at as a sort of tragicomic figure, the supply-side gang leader who can't count straight. ...
CNN has a habit of veering wildly from serious journalism from its Washington bureau or its online KFile investigative team to vomit-worthy infotainment in which toadies like Jeffrey Lord or—previously—Corey Lewandowski defend whatever the heck Donald Trump has just said. (The network has a lot of airtime to fill, and it fills it with mostly useless discussion panels.) You can guess which side the pendulum just swung to with Moore's hire.

A network that is serious about delivering factual information instead of propaganda to viewers would not have made these hires.

Thursday, December 01, 2016

Some Concrete Proposals for Economists and the Media

Simon Wren-Lewis:

Some concrete proposals for economists and the media: You can now listen to my SPERI/New Statesman prize lecture in full here, or even watch it all here. The talk looks at recent UK history, involving austerity and Brexit, to argue that there are serious problems in how the broadcast media treats economics.[1] The two main problems I talk about are exclusion and balance. Exclusion, where academic economists are simply ignored because they are not part of the Westminster bubble, can lead journalists to assume statements made by politicians are true even though an economist knows they are false or at least highly questionable. I give a number of examples in the talk... Balance is where a view that represents a consensus among academic economists is treated as just another opinion, to be balanced by the opposite view. This simply devalues knowledge. ...
Solutions to these problems must start with academic economists themselves. It is asking too much to expect journalists to know whether a view put forward by an economist represents a consensus among academics or an idiosyncratic view. An obvious way to remedy this is through regular, topical polls of as many academic economists as possible. (I prefer this approach to sampling selected academic ‘leaders’...) ... What these establish is whether a consensus exists or not on key issues. They are much better at doing this than letters to newspapers.
The reason why this is far better than getting more academics on programs like Newsnight (not that I have any problem with that) is that it can then prevent the problem of balance. I use in the talk the example of climate change to show how the broadcast media could treat a consensus view among economists (90% or more agreement) as knowledge, not as simply an opinion to be balanced against another. Getting the broadcasters to do that will not be easy... Our target audience should not be Newsnight but the 6pm or 10pm news programs, which may be the only non-partisan news that readers of the right wing press ever see. We need political correspondents to routinely say what the economic consensus is, and use it to interrogate politicians when they deviate from it. ...
Only once this pressure is brought to bear on the media will we see the media begin to improve its own capability in the area of economics. ...
The broadcast media should be a defense against populism, not the means by which populism takes hold. If you treat knowledge as just an opinion, of course people will vote for whatever sounds good to their ears. ...
We cannot expect people to make sensible decisions about these issues if expertise on these issues (not just economic, but legal, constitutional etc) is kept locked away in specialist programs they will never see, or ignored altogether. We must stop allowing politicians to dictate what is knowledge and what is just an opinion.
[1] The lecture and this post are about the UK. Although the general points I make about expertise are universal, my specific recommendations only apply to a broadcast media that is not under government control and is regulated to prevent partisan broadcasting. Although my knowledge of the US is far less, it seems to me the problems there are deeper still, particularly now we have a POTUS and Congress who show no respect for truth. ...

Tuesday, November 22, 2016

Populism and the Media

Simon Wren-Lewis:

Populism and the media: This could be the subtitle of the talk I will be giving later today. I will have more to say in later posts, plus a link to the full text..., but I thought I would make this important point here about why I keep going on about the media. In thinking about Brexit and Trump, talking about the media is not in competition with talking about disenchantment over globalisation and de-industrialisation, but a complement to it. I don’t blame the media for this disenchantment, which is real enough, but for the fact that it is leading people to make choices which are clearly bad for society as a whole, and in many cases will actually make them worse off. They are choices which in an important sense are known to be wrong.
Many will say on reading that last sentence that this is just your opinion, but in a way that illustrates the basic problem. Take Brexit. We know that erecting trade barriers is harmful: the only question is whether in this case it will be pretty harmful or very harmful. Some of this is already in the process of happening, as the depreciation reduces real wages. We also know that erecting barriers against your neighbours is extremely unlikely to be offset in any significant way by doing deals with countries further away. This is knowledge derived largely from empirical evidence and uncontroversial theory and agreed almost unanimously by economists.
The moment you reduce it to just another opinion, to be balanced by opposing opinions, as happened in the broadcast media during the Brexit campaign, you allow that knowledge to be ignored when critical choices are made. ...

Sunday, November 13, 2016

The Other Infrastructure

This is by David Warsh:

The Other Infrastructure, Economic Principals: Bridges, roads, airports, the electricity grid, pipelines, food and fuel and water systems: all of these are underfunded to some degree. So are the myriad new arrangements, from satellites and ocean buoys to emission scrubbers and ocean barriers, required to keep abreast and cope with climate change. Which wheels will begin to get the grease in coming months? We’ll see.

At the moment I am even more interested in the well-being of social information systems Last week The Wall Street Journal announced it would reduce its print edition from four sections to two, bringing it into line with the Financial Times. Should that be an occasion for concern? On the contrary, let me try to convince you that it is welcome news.

Although newspapers still carry crossword puzzles, comics, agony aunts, and churn out all manner of fashion magazines, they are mainly in the business of producing provisionally reliable knowledge. What’s that? I have in mind propositions on which every honest and knowledgeable person can agree.

Not so much big judgement, such whether climate change is occurring or whether Vladimir Putin is a despot, but rather ascertainable facts, beginning with what parties to various debates are saying about themselves and each other and about their pasts. These are the foundations on which big judgements are based

A case in point: almost all of what the world knows about Donald Trump, that is, that we consider that we really know, we owe to The New York Times, The Wall Street Journal, The Washington Post, the Financial Times, and various newspaper-like organizations, Bloomberg News, Politico, and the Guardian in particular. The Associated Press, Reuters and the BBC contributed a little less; magazines still less; the rest of radio and television, hardly anything at all, with the notable exception of Fox News anchor Megyn Kelly’s lead off question in the first presidential debate. Someone will prepare a list of the fifty or a hundred of the best stories of the last year, I expect. I’ll only mention a few memorable examples:

The Post’s coverage of the Trump Foundation; the Times’ many investigations, including those of his tax strategies and his practices as a young landlord; a Politico roundtable of five Trump biographers; the WSJ’s pursuit of the George Washington bridge closing, coverage that changed the course of the campaign; and the FT’s continuing emphasis on the foreign policy implications of the America election. The same thing could be said about newspapers’ coverage of Hillary Clinton.

Newspapers exist to process and assess the rival claims of experts – politicians, governments, corporations, the professoriate, pollsters, authors, whistleblowers, filmmakers, and denizens of the blogosphere. When its own claims to authority are misplaced – a spectacular example having been the Monday before the election, when newspapers were still expecting a Clinton victory – the print press and its kith and kin correct themselves (the next day) and investigate the prior beliefs that led them to error. A free and competitive press resembles the other great self-correcting systems that have evolved over centuries – democracy, markets, and science.

And as for social media, the new highly-decentralized content producers, to the extent they are originators of new information, the claims made there are slowly becoming subject to the same checking and assessment routines as are claims advanced in other realms. (No, the Pope did not endorse Donald Trump.) As for intelligence services, in which the experts’ job is to know more than is public, it is the newspapers that make them less secret. More than any other institution in democratic industrial societies, newspapers produce a provisional version of the truth. So the condition of newspapers should concern us all.

In What If the Newspaper Industry Made a Colossal Mistake?, in Politico, Jack Shafer speculated recently the newspaper companies had “wasted hundreds of millions of dollars” by building out web operations instead of investing in their print editions, “where the vast majority of their readers still reside and where the overwhelming majority of advertising and subscription revenue still come from.” As perspicacious a press critic as is writing today, Shafer was reporting on an essay by a pair of University of Texas professors, H. Iris Chyi and Ori Tenenboim, in Journalism Practice.

Chyi and Tenenboim overstated their case, I think. Those dollars invested in web operations weren’t wasted; they had to be spent. Most newspapers, all but the WSJ, made the mistake of making their content free on the Web for several years. Only gradually did they come round to the approach the Journal had pioneered: a paywall, with some sort of a metering technology designed to encourage online subscriptions.

More serious has been the lack of thinking-out-loud about the future of those print editions. No one needs to be told that smart phones have replaced newspapers, radio, and television as the tip of the spear of news. It appears that Facebook and Twitter have supplanted cable television and radio talk shows as the dominant forum for political discussion. But newspapers haven’t gone away; indeed, by establishing beachheads for the content they produce on social media platforms, they have become more influential than ever.

The immense prestige associated with newspapers arose from the fact that for centuries they were reliable money machines, thanks to their semi-monopoly on readers’ attention. It is no longer news that the revenue model has turned upside down, Advertisers used to pay two thirds or more of the cost of publishing a successful newspaper; today it is more like a third, if that. Attention was slowly eroded away by radio, broadcast and pay television, until the invention of search-based advertising in 2002 turned decline into a seeming rout. The basic business model is still the same, as Tim Wu explains in The Attention Merchants; The Epic Scramble to Get Inside Our Heads (Knopf, 2016): “free diversion in exchange for a moment of your consideration, sold in turn to the highest-bidding advertiser.” It’s the technology that has changed.

In a world in which the gas pump starts talking to you when you pick up the hose and video commercials are everywhere online, the virtues of print are many-sided, for readers and advertisers alike. In Why Print Still Rules, Shafer laid out the case for print’s superiority as a medium – “an amazingly sophisticated technology for showing you what’s important, and showing you a lot of it.” It’s finite. It attracts a paying crowd, which is why advertisers are willing to pay more – much more – for space.

The fancy newspapers are in good shape to refurbish their printed editions. Three of the four have new owners with deep pockets. Rupert Murdoch, a maverick Australian, now a US citizen, bought the WSJ in 2007; Amazon’s Jeff Bezos, thought to be the second richest American, after Bill Gates, bought the WPost in 2013; the Japanese newspaper group around Nikkei bought the FT in 2015. The NYT is the shakiest of the four, but there seems little doubt that the cousins of the Sulzberger/Ochs clan will find a suitable partner, the oft-expressed enmity of President-elect Trump notwithstanding.

Pricing, meanwhile, is all over the map, as is the appropriate size of the paper edition itself. The FT delivers two sections of tightly-written no-jump news over five days and a great weekend edition for $406 a year. The WSJ costs $525 a year for six days, including a first-rate weekend edition. The Times charges $980 a year for seven days a week, including a Sunday edition that contains much more content than most readers need. (Its ads bring in a ton of money.) That’s why the WSJ decision to cut back to from four to two daily sections is significant: it acknowledges the reduced but still very powerful claim of print on consumers’ ever-more stretched budget of time. It puts more pressure on the Times’s luxury brand.

It’s the regional papers that worry me, as much for their roles as distributors of news as producers of it. When the Times, WSJ and FT are placed on the stoop in the morning, my old paper, The Boston Globe, is not among them. At around $770 a year, it simply costs too much, especially considering the meager local content it provides. Assume that the “right” price for a year of a fancy paper today is somewhere between the FT and the WSJ, at around $500 a year. At around half as much, or even $300, a print edition of the Globe would be highly attractive. My hunch is that circulation would again begin to increase, and, in the process, shore up the metropolitan area’s home-delivery network. Instead I buy digital versions of the Globe (for $208) and the Post (for $149). Want to know what a year of the print Post costs? So does the copy editor. But I stopped looking after interrogating the web page for five minutes. Newspapers are notorious for gulling their subscribers. Not even the FT is straightforward about it.

Like the other leading papers – the Chicago Tribune, Los Angeles Times, Philadelphia Inquirer, and Baltimore Sun – the Globe was sold for a song to a non-newspaper owner in the course of the panic that followed the advent of search advertising in 2002. These publishers no longer seem to see themselves as part of an industry that was quite tight-knit before the fall. That’s another disadvantage with which the big national dailies must cope. For many years, newspaperfolk considered that their businesses were mostly exempt from the laws of supply and demand. Price cuts play a big part in the lore of its past. Today, the future of the industry depends on the recognition that price/performance is everything.

Monday, October 31, 2016

Paul Krugman: Working the Refs

"They’re trying to create bias, not end it":

Working the Refs, by Paul Krugman, NY Times: The cryptic letter James Comey, the F.B.I. director, sent to Congress on Friday looked bizarre at the time — seeming to hint at a major new Clinton scandal, but offering no substance. Given what we know now, however, it was worse than bizarre, it was outrageous. Mr. Comey apparently had no evidence suggesting any wrongdoing...; he violated longstanding rules about commenting on politically sensitive investigations close to an election; and he did so despite being warned by other officials that he was doing something terribly wrong.
So what happened? We may never know the full story, but the best guess is that Mr. Comey ... let himself be bullied by the usual suspects. Working the refs — screaming about bias and unfair treatment, no matter how favorable the treatment actually is — has been a consistent, long-term political strategy on the right. And the reason it keeps happening is because it so often works. ...
The desire to get right-wing critics off one’s back may also explain why the news media keep falling for fake scandals. ...
Sure enough, much of the initial coverage of the Comey letter was based not on what the letter said, which was very little, but on a false, malicious characterization of the letter by Jason Chaffetz, the Republican chairman of the House Committee on Oversight and Government Reform. You might think reporters would have learned by now not to take what people like Mr. Chaffetz say at face value. Apparently not. ...
Which brings us back to Mr. Comey. ... Mr. Comey was subjected to a constant barrage of demands that he prosecute her for … something. ...
And it looks as if he tried to buy them off by throwing them a bone just a few days before the election. Whether it will matter politically remains to be seen, but one thing is clear: he destroyed his own reputation.
The moral of the story is that appeasing the modern American right is a losing proposition. Nothing you do convinces them that you’re being fair, because fairness has nothing to do with it. The right long ago ran out of good ideas that can be sold on their own merits, so the goal now is to remove merit from the picture.
Or to put it another way, they’re trying to create bias, not end it, and weakness — the kind of weakness Mr. Comey has so spectacularly displayed — only encourages them to do more.

Monday, July 18, 2016

Paul Krugman: Both Sides Now?

Balancing the unbalanced:

Both Sides Now?, by Paul Krugman, NY Times: When Donald Trump began his run for the White House, many people treated it as a joke. Nothing he has done or said since makes him look better. On the contrary, his policy ignorance has become even more striking, his positions more extreme, the flaws in his character more obvious, and he has repeatedly demonstrated a level of contempt for the truth that is unprecedented in American politics.
Yet while most polls suggest that he’s running behind in the general election..., there’s still a real chance that he might win. How is that possible? Part of the answer, I’d argue, is that voters don’t fully appreciate his awfulness. And the reason is that too much of the news media still can’t break with bothsidesism — the almost pathological determination to portray politicians and their programs as being equally good or equally bad, no matter how ludicrous that pretense becomes. ...
You might think that Donald Trump, who lies so much that fact-checkers have a hard time keeping up, who keeps repeating falsehoods even after they’ve been proved wrong, and who combines all of this with a general level of thuggishness aimed in part at the press, would be too much even for the balance cultists to excuse.
But you would be wrong. ...
And in the last few days we’ve seen a spectacular demonstration of bothsidesism...: an op-ed article from the incoming and outgoing heads of the White House Correspondents’ Association, with the headline “Trump, Clinton both threaten free press.” How so? Well, Mr. Trump has selectively banned news organizations he considers hostile; he has also, although the op-ed didn’t mention it, attacked both those organizations and individual reporters, and refused to condemn supporters who, for example, have harassed reporters with anti-Semitic insults.
Meanwhile, while Mrs. Clinton hasn’t done any of these things, and has a staff that readily responds to fact-checking questions, she doesn’t like to hold press conferences. Equivalence!
Stung by criticism, the authors ... issued a statement denying that they had engaged in “false equivalency” — I guess saying that the candidates are acting “similarly” doesn’t mean saying that they are acting similarly. And they once again refused to indicate which candidate was behaving worse.
As I said, bothsidesism isn’t new, and it has always been an evasion of responsibility. But taking the position that “both sides do it” now, in the face of this campaign and this candidate, is an act of mind-boggling irresponsibility.

Friday, May 06, 2016

Paul Krugman: Truth and Trumpism

Don't believe everything you read:

Truth and Trumpism, by Paul Krugman, NY Times: How will the news media handle the battle between Hillary Clinton and Donald Trump? I suspect I know the answer — and it’s going to be deeply frustrating. But maybe, just maybe, flagging some common journalistic sins in advance can limit the damage. ...
First, and least harmful, will be the urge to make the election seem closer than it is, if only because a close race makes a better story. You can already see this tendency...
A more important vice in political coverage, which we’ve seen all too often in previous elections — but will be far more damaging if it happens this time — is false equivalence.
You might think that this would be impossible on substantive policy issues, where the asymmetry between the candidates is almost ridiculously obvious. ... But beware of news analyses that, in the name of “balance,” downplay this contrast. ...
And what about less quantifiable questions about behavior? I’ve already seen pundits suggest that both presumptive nominees fight dirty, that both have taken the “low road” in their campaigns. For the record, Mr. Trump has impugned his rivals’ manhood, called them liars and suggested that Ted Cruz’s father was associated with J.F.K.’s killer. On her side, Mrs. Clinton has suggested that Bernie Sanders hasn’t done his homework on some policy issues. These things are not the same.
Finally, I can almost guarantee that we’ll see attempts to sanitize the positions and motives of Trump supporters, to downplay the racism that is at the heart of the movement and pretend that what voters really care about are the priorities of D.C. insiders — a process I think of as “centrification.” ...
 I’m seeing suggestions that Trumpism is driven by concerns about political gridlock. No, it isn’t. It isn’t even mainly about “economic anxiety.”
Trump support in the primaries was strongly correlated with racial resentment: We’re looking at a movement of white men angry that they no longer dominate American society the way they used to. And to pretend otherwise is to give both the movement and the man who leads it a free pass.
In the end, bad reporting probably won’t change the election’s outcome, because the truth is that those angry white men are right about their declining role. ...
Still, the public has a right to be properly informed. The news media should do all it can to resist false equivalence and centrification, and report what’s really going on.

Thursday, March 03, 2016

'Cameron’s Chickens'

Simon Wren-Lewis:

Cameron’s chickens: As many have written, although Donald Trump is despised by the Republican party establishment, he is an unintended and unfortunate creation of that party. They built up a system where you needed money to enter politics, because they controlled the money. (It is to Sanders’ credit, and the popular will behind his campaign, that he has overcome this hurdle.) But that allowed someone very rich to highjack the system. The Republicans have exploited prejudice to win votes, which allowed someone to throw away the dog whistle and openly attack those from other religions. [1] And so on. In these ways, Trump represents the Republican’s chickens coming home to roost. As Matt Taibbi writes (sorry about ad in link), Trump is a rather good con man and so for him the US political system is an easy mark.
Will the EU referendum be the moment David Cameron’s chickens come home? Although economic arguments are central, and the case for staying is strong and the case for leaving weak, how much will voters without any economics background be able to come to that conclusion? Most newspapers will push the weak arguments, or more generally just try and muddy the waters as they do all the time on climate change. The visual media’s natural format is to set this up as a two-sided debate, and if the leave campaign can find enough credible advocates to put the economic case for leaving the main outcome might be confusion. [2] ...
The EU referendum is therefore another test of how much economic expertise can influence public opinion. As regular readers will know, we have been here before, and not just on austerity. The overwhelming evidence was that independence would initially leave Scottish people worse off, but for many this evidence was successfully counteracted by the SNP’s wishful thinking projections. From recent experience, therefore, I am not too optimistic that the economic evidence will prevail. [3] For a Prime Minister who has preferred the economics of the Swabian housewife to anything taught in universities, this too is a chicken come home to roost.

Wednesday, November 11, 2015

'Even Famous Female Economists Get No Respect'

Bit behind today. This is by Justin Wolfers:

Even Famous Female Economists Get No Respect: Men’s voices tend to dominate economic debate, although perhaps this is shaped by how we talk about the contributions of female economists. This is easiest to see in how we discuss the work of economist power couples.
Remembering the journalistic cliché that one is an example, two is a coincidence and three is a trend, I figured it worth exploring how female economists are treated. ...

Friday, October 30, 2015

Paul Krugman: Springtime for Grifters

Catherine Rampell blames the media for the behavior of Republicans during the debate (and more generally), but if the press called them on their "grifting,", would the Republican base listen?

Springtime for Grifters, by Paul Krugman, Commentary, NY Times: At one point during Wednesday’s Republican debate, Ben Carson was asked about his involvement with Mannatech, a nutritional supplements company that makes outlandish claims ... and has been forced to pay $7 million to settle a deceptive-practices lawsuit. The audience booed, and Mr. Carson denied being involved...
As it happens, Mr. Carson lied. ... But the Republican base doesn’t want to hear about it... These days, in his party, being an obvious grifter isn’t a liability, and may even be an asset. ...
About the grifters: Start with the lowest level, in which marketers use political affinity to sell get-rich-quick schemes, miracle cures, and suchlike. That’s the Carson phenomenon, and it’s just the latest example of a long tradition..., a “strategic alliance of snake-oil vendors and conservative true believers” goes back half a century. ...
At a somewhat higher level are marketing campaigns more or less tied to what purports to be policy analysis. Right-wing warnings of imminent hyperinflation, coupled with demands that we return to the gold standard, were fanned by media figures like Glenn Beck, who used his show to promote Goldline, a firm selling gold coins and bars at, um, inflated prices. ...
Oh, and former Congressman Ron Paul, who has spent decades warning of runaway inflation and is undaunted by its failure to materialize, is very much in the business of selling books and videos showing how you, too, can protect yourself from the coming financial disaster.
At a higher level still are operations that are in principle engaging in political activity, but mainly seem to be generating income for their organizers. ... For example, only 14 percent of what the Tea Party Leadership Fund spends is “candidate focused.”
You might think that such revelations would be politically devastating. But the targets of such schemes know, just know, that the liberal mainstream media can’t be trusted...
Furthermore, the success of the grifters ... defines respectability down.
Consider Mr. Rubio... There was a time when Mr. Rubio’s insistence that $6 trillion in tax cuts would somehow pay for themselves would have marked him as deeply unserious... But the Republican base doesn’t care what the mainstream media says. ...
The point is that we shouldn’t ask whether the G.O.P. will eventually nominate someone in the habit of saying things that are demonstrably untrue, and counting on political loyalists not to notice. The only question is what kind of scam it will be.

Sunday, October 18, 2015

'A Strong Press is the Best Defense Against Crony Capitalism'

Luigi Zingales:

A Strong Press is best Defense Against Crony Capitalism: ...the form of capitalism prevailing in most of the world is very distant from the ideal competitive and meritocratic system we economists theorize in our analyses... It is a corrupt form, in which incumbents and special-interest groups shape the rules of the game to their advantage, at the expense of everybody else: it is crony capitalism.
The reason why a competitive capitalism is so difficult to achieve is that it requires an impartial arbiter to set the rules and enforce them. Markets work well only when the rules of the game are specified beforehand and are designed to level the playing field. But who has the incentives to design the rules in such an impartial way? ...
This is where the media can play a crucial role. ...
Inquisitive, daring and influential media outlets willing to take a strong stand against economic power are essential in a competitive capitalist society. They are our defense against crony capitalism. When the media outlets in any country fail to challenge power, not only are they not part of the solution, they become part of the problem.

Friday, October 09, 2015

Paul Krugman: It’s All Benghazi

Beat the press:

It’s All Benghazi, by Paul Krugman, Commentary, NY Times: So Representative Kevin McCarthy, who was supposed to succeed John Boehner as speaker of the House, won’t be pursuing the job after all. He ... finished off his chances by admitting — boasting, actually — that the endless House hearings on Benghazi had nothing to do with national security, that they were all about inflicting political damage on Hillary Clinton.
But we all knew that, didn’t we?
I often wonder about commentators who write about things like those hearings as if there were some real issue involved... Surely they have to know better... Somehow, though, politicians who ... are obviously just milking those issues for political gain keep getting a free pass. And it’s not just a Clinton story.
Consider the example of an issue ... that dominated much of our political discourse just a few years ago: federal debt.
Many prominent politicians made warnings about the dangers posed by U.S. debt, especially debt owned by China... Paul Ryan ... portrayed himself as a heroic crusader against deficits. Mitt Romney made denunciations of borrowing from China a centerpiece of his campaign... And by and large, commentators treated this posturing as if it were serious. ...
Well, don’t tell anyone, but the much feared event has happened: China is no longer buying our debt, and is in fact selling ... U.S. debt... And what has happened is what serious economic analysis always told us would happen: nothing. It was always a false alarm. ...
 People who really worry about government debt don’t propose huge tax cuts for the rich, only partly offset by savage cuts in aid to the poor and middle class, and base all claims of debt reduction on unspecified savings to be announced on some future occasion. ... 
Sometimes I have the impression that many people in the media consider it uncouth to acknowledge, even to themselves, the fraudulence of much political posturing. The done thing, it seems, is to pretend that we’re having real debates...
But turning our eyes away from political fakery, pretending that we’re having a serious discussion when we aren’t, is itself a kind of fraudulence. Mr. McCarthy inadvertently did the nation a big favor with his ill-advised honesty, but telling the public what’s really going on shouldn’t depend on politicians with loose lips.
Sometimes — all too often — there’s no substance under the shouting. And then we need to tell the truth, and say that it’s all Benghazi.

Saturday, June 06, 2015

'Views Differ on Shape of Macroeconomics'

Paul Krugman:

Views Differ on Shape of Macroeconomics: The doctrine of expansionary austerity ... was immensely popular among policymakers in 2010, as the great turn toward austerity began. But the statistical underpinnings of the doctrine fell apart under scrutiny... So at this point research economists overwhelmingly believe that austerity is contractionary (and that stimulus is expansionary). ...

Nonetheless, Simon Wren-Lewis points us to Robert Peston of the BBC declaring

I am simply pointing out that there is a debate here (though Krugman, Wren-Lewis and Portes are utterly persuaded they’ve won this match – and take the somewhat patronising view that voters who think differently are ignorant sheep led astray by a malign or blinkered media).

Wow. Yes, I suppose that “there is a debate” — there are debates about lots of things, from climate change to evolution to alien spaceships hidden in Area 51. But to suggest that this debate is at all symmetric is just wrong — and deeply misleading to one’s audience.

As for the claim that it’s somehow patronizing to suggest that voters are ill-informed when (a) macroeconomics is a technical subject, and (b) the media have indeed misreported the state of the professional debate — well, this is sort of an economic version of the line that one must not suggest that the Iraq war was launched on false pretenses, because this would be disrespectful to the troops. If you’re being accused of misleading reporting, it’s hardly a defense to say that the public believed your misinformation — more like a self-indictment. ...

Tuesday, May 19, 2015

Restoring the Public’s Trust in Economists

I have a new column:

Restoring the Public’s Trust in Economists: The belief that economics has become politicized is a big reason the general public has lost faith in the ability of economists to give advice on important policy questions. For most issues, like raising the minimum wage, the effects of government spending, international trade, whether CEOs deserve their high compensation, etc., etc., it seems as though economists who also happen to be Republicans will mostly line up on one side of the issue, while economists who are Democrats mostly take the other. Members of the general public, not knowing who to believe and unable to rely upon the press to sort it out, either throw up their hands in frustration or follow the side that agrees with their preconceived notions and ideological beliefs.
But why is it so hard to sort out? Why can’t the press do a better job of avoiding “he said – she said” reporting and give the public direct and specific answers to these important policy questions? One reason is the “mathiness” that has infected our economic models, something economist Paul Romer recently identified as a big problem with economic theory. ...

Friday, May 08, 2015

Paul Krugman: Triumph of the Unthinking

 Why do bad economic ideas resonate with voters?:

Triumph of the Unthinking, by Paul Krugman, Commentary, NY Times: “Words,” wrote John Maynard Keynes, “ought to be a little wild, for they are the assault of thoughts on the unthinking.” I’ve always loved that quote, and have tried to apply it to my own writing. But I have to admit that in the long slump that followed the 2008 financial crisis — a slump that we had both the tools and the knowledge to end quickly, but didn’t — the unthinking were quite successful in fending off unwelcome thoughts.
And nowhere was the triumph of inanity more complete than in Keynes’s homeland, which is going to the polls as I write this. Britain’s election should be a referendum on a failed economic doctrine, but it isn’t, because nobody with influence is challenging transparently false claims and bad ideas.
Before I bash the Brits, however, let me admit that we’ve done pretty badly ourselves. ...
It’s true that in practice Mr. Obama pushed through a stimulus that, while too small and short-lived, helped diminish the depth and duration of the slump. But when Republicans began talking nonsense, declaring that the government should match the belt-tightening of ordinary families — a recipe for full-on depression — Mr. Obama didn’t challenge their position. Instead,... the very same nonsense became a standard line in his speeches, even though his economists knew better, and so did he...
Like Mr. Obama and company,... Labour hasn’t tried to push back, probably because they considered this a political fight they couldn’t win. But why?
Mr. Wren-Lewis suggests that it has a lot to do with the power of misleading analogies between governments and households, and also with the malign influence of economists working for the financial industry, who in Britain as in America constantly peddle scare stories about deficits and pay no price for being consistently wrong. If U.S. experience is any guide, my guess is that Britain also suffers from the desire of public figures to sound serious, a pose which they associate with stern talk about the need to make hard choices (at other people’s expense, of course.)
Still, it’s quite amazing. The fact is that Britain and America didn’t need to make hard choices in the aftermath of crisis. What they needed, instead, was hard thinking...
But hard thinking has been virtually excluded from British public discourse. As a result, we just have to hope that whoever ends up running Britain’s economy isn’t as foolish as he pretends to be.

Friday, May 01, 2015

Paul Krugman: Ideology and Integrity

 "Never being able to say that you were wrong is a serious character flaw":

Ideology and Integrity, by Paul Krugman, Commentary, NY Times: The 2016 campaign should be almost entirely about issues. The parties are far apart on everything from the environment to fiscal policy to health care, and history tells us that what politicians say during a campaign is a good guide to how they will govern.
Nonetheless, many in the news media will try to make the campaign about personalities and character instead. ... But the character trait that will matter most isn’t one the press likes to focus on. ...
You see, you shouldn’t care whether a candidate is someone you’d like to have a beer with. Nor should you care about politicians’ sex lives, or even their spending habits unless they involve clear corruption. No, what you should really look for, in a world that keeps throwing nasty surprises at us, is intellectual integrity: the willingness to face facts even if they’re at odds with one’s preconceptions, the willingness to admit mistakes and change course. ...
As you might guess, I’m thinking in particular about the sphere of economics... Did I predict runaway inflation that never arrived? Well, the government is cooking the books, and besides, I never said what I said. ...
So what’s the state of intellectual integrity at this point in the election cycle? Pretty bad, at least on the Republican side of the field.
Jeb Bush, for example, has declared that “I’m my own man” on foreign policy, but the list of advisers circulated by his aides included the likes of Paul Wolfowitz, who predicted that Iraqis would welcome us as liberators, and shows no signs of having learned from the blood bath that actually took place.
Meanwhile, as far as I can tell no important Republican figure has admitted that none of the terrible consequences that were supposed to follow health reform ... has actually happened. ...
We’re talking about never admitting error, and never revising one’s views. Never being able to say that you were wrong is a serious character flaw.... But moral cowardice should be outright disqualifying in anyone seeking high office. ... We really, really don’t want the job of responding to that crisis dictated by someone who still can’t bring himself to admit that invading Iraq was a disaster but health reform wasn’t.
I still think this election should turn almost entirely on the issues. But if we must talk about character, let’s talk about what matters, namely intellectual integrity.

Thursday, April 30, 2015

'WSJ Editorial Page Watch: The Slow-Growth Fed?'

Ben Bernanke:

WSJ Editorial Page Watch: The Slow-Growth Fed?: For the second year in a row, the first-quarter Gross Domestic Product figures were disappointing. TheWall Street Journal, in an editorial entitled "The Slow-Growth Fed," uses the opportunity to argue (again) for tighter monetary policy..., (the WSJ concludes), monetary policy is not working and efforts to use it to support the recovery should be discontinued.
It's generous of the WSJ writers to note, as they do, that "economic forecasting isn't easy." They should know, since the Journal has been forecasting a breakout in inflation and a collapse in the dollar at least since 2006...
The WSJ ... argues that, because monetary policy has not been a panacea for our economic troubles, we should stop using it. I agree that monetary policy is no panacea, and as Fed chairman I frequently said so. With short-term interest rates pinned near zero, monetary policy is not as powerful or as predictable as at other times. But the right inference is not that we should stop using monetary policy, but rather that we should bring to bear other policy tools as well. I am waiting for the WSJ to argue for a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive. We shouldn't be giving up on monetary policy, which for the past few years has been pretty much the only game in town as far as economic policy goes. Instead, we should be looking for a better balance between monetary and other growth-promoting policies, including fiscal policy.

Infrastructure construction, which can be viewed as a supply-side policy with beneficial demand side effects, ought to be a no-brainer on both sides of the political divide.

Monday, April 27, 2015

Paul Krugman: Nobody Said That

 Why don't prognosticators accept responsibility for their prediction errors?:

Nobody Said That, by Paul Krugman, Commentary, NY Times: Imagine yourself as a regular commentator on public affairs — maybe a paid pundit, maybe a supposed expert in some area, maybe just an opinionated billionaire. You weigh in on a major policy initiative that’s about to happen, making strong predictions of disaster. The Obama stimulus, you declare, will cause soaring interest rates; the Fed’s bond purchases will “debase the dollar” and cause high inflation; the Affordable Care Act will collapse in a vicious circle of declining enrollment and surging costs.
But nothing you predicted actually comes to pass. What do you do?
You might admit that you were wrong, and try to figure out why. But almost nobody does that; we live in an age of unacknowledged error.
Alternatively, you might insist that sinister forces are covering up the grim reality. Quite a few well-known pundits are, or at some point were, “inflation truthers,” claiming that the government is lying about the pace of price increases. There have also been many prominent Obamacare truthers declaring that the White House is cooking the books, that the policies are worthless, and so on.
Finally, there’s a third option: You can pretend that you didn’t make the predictions you did. I see that a lot when it comes to people who issued dire warnings about interest rates and inflation, and now claim that they did no such thing. Where I’m seeing it most, however, is on the health care front. Obamacare is working better than even its supporters expected — but its enemies say that the good news proves nothing, because nobody predicted anything different. ...
It’s both easy and entirely appropriate to ridicule this kind of thing. But there are some serious stakes here, and they go beyond the issue of health reform, important as it is.
You see, in a polarized political environment, policy debates always involve more than just the specific issue on the table. They are also clashes of world views. Predictions of debt disaster, a debased dollar, and Obama death spirals reflect the same ideology, and the utter failure of these predictions should inspire major doubts about that ideology.
And there’s also a moral issue involved. Refusing to accept responsibility for past errors is a serious character flaw in one’s private life. It rises to the level of real wrongdoing when policies that affect millions of lives are at stake.

Sunday, April 26, 2015

'Mediamacro Myth 6: 2013 Recovery Vindication'

Simon Wren-Lewis:

Mediamacro myth 6: 2013 recovery vindication: The idea that austerity during the first two years of the coalition government was vindicated by the 2013 recovery is so ludicrous that it is almost embarrassing to have to explain why. The half-truths in this case are so flimsy they do not deserve that label. I can think of two reasons why that claim could have any credibility. The first is that people confuse levels and rates or change. The second is that some critics of austerity might have occasionally overstated their case.
To see the first point, imagine that a government on a whim decided to close down half the economy for a year. That would be a crazy thing to do, and with only half as much produced everyone would be a lot poorer. However a year later when that half of the economy started up again, economic growth would be around 100%. The government could claim that this miraculous recovery vindicated its decision to close half the economy down the year before. That would be absurd, but it is a pretty good analogy with claiming that the 2013 recovery vindicated 2010 austerity.
The second point is that some critics of austerity did on a few occasions allow their rhetoric to get the better of them, and suggested that if austerity continued a recovery would never come. That was always an overstatement. ...
What any knowledgeable and honest media reporting should have done is tear the vindication argument to shreds. ...

Thursday, April 23, 2015

'Mediamacro Myth: 2010 Britain Faced a Financial Crisis'

Simon Wren-Lewis is attempting to debunk a series of "mediamacro myths". This is the first in the series:

Mediamacro myth 1: 2010 Britain faced a financial crisis: The idea that the Coalition rescued Britain from a crisis is routinely put forward as fact by both the Conservatives and Nick Clegg. Every time the media let such statements pass (as they invariably do), the language seems to get more florid: Clegg’s latest is that the coalition was born in the “midst of an economic firestorm”. [1]
The facts say this is pure nonsense. The economy had begun to recover from the recession, and this recovery might have continued if it had not been hit on the head by domestic and Eurozone austerity. As Larry Elliott makes clear (see also here), there was no sign of any market panic, either in the markets for Sterling or government debt. ...
So where is the half-truth that gives the ‘firestorm’ myth some credence? It is of course the Eurozone crisis, and the idea that the UK could suffer a similar fate to the Eurozone periphery. But academic macroeconomists understand that the situation of a country with its own central bank, like the UK, is quite different from a country without, because the central bank can (and in the UK will) act as a lender of last resort, so the government will never ‘run out of money’. That simple fact is sufficient to prevent any crisis happening for an economy like the UK. ...
Why is it so important to keep up the pretence that in 2010 the UK economy was ‘on the brink’ of a financial crisis? Because only then can the pain of the subsequent few years be excused. The truth is that the failure to recover until 2013 was not the inevitable cost of rescuing the economy from crisis, but an avoidable choice by the Coalition government. The delayed recovery, and the damage that did to living standards, was at least in part a direct consequence of attempts to reduce the deficit far too early, and there was no impending crisis that forced the government's hand. [3]

Friday, October 10, 2014

Paul Krugman: Secret Deficit Lovers

Why isn't America celebrating the large fall in the deficit?:

Secret Deficit Lovers, by Paul Krugman, Commentary, NY Times: What if they balanced the budget and nobody knew or cared?
O.K., the federal budget hasn’t actually been balanced. But the Congressional Budget Office has tallied up the totals for fiscal 2014..., and reports that the deficit plunge of the past several years continues. ...
So where are the ticker-tape parades? For that matter, where are the front-page news reports? After all, talk about the evils of deficits and the grave fiscal danger facing America dominated Washington for years. Shouldn’t we be making a big deal of the fact that the alleged crisis is over?
Well, we aren’t, and once you understand why, you also understand what fiscal hysteria was really about.
First, ordinary Americans aren’t celebrating the deficit’s decline because they don’t know about it. That’s not mere speculation...
Why doesn’t the public know better? Probably because of the way much of the news media report this and other issues, with bad news played up and good news downplayed if it’s reported at all.
This has been glaringly obvious in the case of health reform, where every problem ... has been the subject of headlines, while in right-wing media — and to some extent in mainstream news sources — favorable developments go unremarked. As a result, many people — even, in my experience, liberals — have the impression that the rollout of Obamacare has been a disaster, and have no idea that enrollment is above expectations, costs are lower than expected, and the number of Americans without insurance has dropped sharply. Surely something similar has happened on the budget deficit. ...
Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs. ...
But isn’t the falling deficit just a short-term blip, with the long-run outlook as dire as ever? Actually, no..., there has ... been a dramatic slowdown in the growth of health spending — and if that continues, the long-run fiscal outlook is much better than anyone thought possible not long ago. ...
So let’s say goodbye to fiscal hysteria. I know that the deficit scolds are having a hard time letting go; they’re still trying to bring back the days when Bowles and Simpson bestrode the Beltway like colossi. But those days aren’t coming back, and we should be glad.

Saturday, September 06, 2014

'The Wall Street Journal Parade of Climate Lies'

Jeff Sachs is unhappy with the editorial page of the WSJ:

The Wall Street Journal Parade of Climate Lies: That Rupert Murdoch governs over a criminal media empire has been made clear enough in the UK courts in recent years. That the Wall Street Journal op-ed pages, the latest victim of Murdoch's lawless greed, are little more than naked propaganda is perhaps less appreciated. The Journal runs one absurd op-ed after another purporting to unmask climate change science, but only succeeds in unmasking the crudeness and ignorance of Murdoch's henchmen. Yesterday's (September 5) op-ed by Matt Ridley is a case in point.
Ridley's "smoking gun" is a paper last week in Science Magazine by two scientists Xianyao Chen and Ka-Kit Tung, which Ridley somehow believes refutes all previous climate science. Ridley quotes a sentence fragment from the press release suggesting that roughly half of the global warming in the last three decades of the past century (1970-2000) was due to global warming and half to a natural Atlantic Ocean cycle. He then states that "the man-made warming of the past 20 years has been so feeble that a shifting current in one ocean was enough to wipe it out altogether," and "That to put the icing on the case of good news, Xianyao Chen and Ka-Kit Tung think the Atlantic Ocean may continue to prevent any warming for the next two decades."
The Wall Street Journal editors don't give a hoot about the nonsense they publish if it serves their cause of fighting measures to limit human-induced climate change. If they had simply gone online to read the actual paper, they would have found that the paper's conclusions are the very opposite of Ridley's. ...

Monday, July 14, 2014

Paul Krugman: Obamacare Fails to Fail

Why don't we hear more about the success of Obamacare?:

Obamacare Fails to Fail, by Paul Krugman, Commentary, NY Times: How many Americans know how health reform is going? For that matter, how many people in the news media are following the positive developments?
I suspect that the answer to the first question is “Not many,” while the answer to the second is “Possibly even fewer”... And if I’m right, it’s a remarkable thing — an immense policy success is improving the lives of millions of Americans, but it’s largely slipping under the radar.
How is that possible? Think relentless negativity without accountability. The Affordable Care Act has faced nonstop attacks from partisans and right-wing media, with mainstream news also tending to harp on the act’s troubles. Many of the attacks have involved predictions of disaster, none of which have come true. But absence of disaster doesn’t make a compelling headline, and the people who falsely predicted doom just keep coming back with dire new warnings. ...
Yes, there are losers from Obamacare. If you’re young, healthy, and affluent enough that you don’t qualify for a subsidy (and don’t get insurance from your employer), your premium probably did rise. And if you’re rich enough to pay the extra taxes that finance those subsidies, you have taken a financial hit. But it’s telling that even reform’s opponents aren’t trying to highlight these stories. Instead, they keep looking for older, sicker, middle-class victims, and keep failing to find them.
Oh,... the overwhelming majority of the newly insured, including 74 percent of Republicans, are satisfied with their coverage.
You might ask why, if health reform is going so well, it continues to poll badly. It’s crucial ... to realize that Obamacare, by design, by and large doesn’t affect Americans who already have good insurance. As a result, many peoples’ views are shaped by the mainly negative coverage in the news... Still, the latest tracking survey from the Kaiser Family Foundation shows that a rising number of Americans are hearing about reform from family and friends, which means that they’re starting to hear from the program’s beneficiaries.
And as I suggested earlier, people in the media — especially elite pundits — may be the last to hear the good news, simply because they’re in a socioeconomic bracket in which people generally have good coverage.
For the less fortunate, however, the Affordable Care Act has already made a big positive difference. The usual suspects will keep crying failure, but the truth is that health reform is — gasp! — working.

Wednesday, June 11, 2014

'What's the Penalty for Pundits Who Get It Wrong?'

Barry Ritholtz:

What's the Penalty for Pundits Who Get It Wrong?: Five years ago, Arthur Laffer ... wrote an op-ed article. It was a grab bag of his pet peeves: opposition to Federal Reserve policies ... and concern about the “unfunded liabilities of federal programs,'' including Social Security and Medicare. And, of course, he decried deficits, which in large part are the result of his thesis that tax cuts often increase revenue. As it turns out, for the most part, they don’t.
The article he penned on June 11, 2009? “Get Ready for Inflation and Higher Interest Rates.”  ...
Pretty much every single warning, every data point, every item Laffer complained about was wrong.
Why does this happen, and why are there no penalties for being so inaccurate? ... This isn't about economics, it's about politics. Unfortunately, the dismal science has become the vehicle of choice for those who seek to further their own political agenda. ...

I would separate those who are honestly wrong from those who take a misleading position (or one they know is wrong) for political purposes. There should be consequences in both cases, those who are honestly wrong again and again should come to be ignored, but those who intend to mislead and deceive should face much higher penalties. As it stands, there's hardly any penalty at all for telling people what they want to hear even if there is no basis for it, or misleading people to accomplish a political agenda.

Friday, May 30, 2014

Piketty, Krugman, and Wren-Lewis Respond to the FT

Piketty's full response from Vox EU (see also Paul Krugman: Thomas Doubting Refuted and Simon Wren-Lewis: What the Financial Times got (very) wrong):

Response to FT, by Thomas Piketty, Vox EU: This is a response to the criticisms - which I interpret as requests for additional information – that were published in the Financial Times on May 23 2014 (see FT article here).1 These criticisms only refer to the series reported in chapter 10 of my book Capital in the 21st century, and not to the other figures and tables presented in the other chapters, so in what follows I will only refer to these series.
This response should be read jointly with the technical appendix to my book, and particularly with the appendix to chapter 10 (available here). The page numbers given below refer to the HUP edition of my book that was published in March 2014.
Let me start by saying that the reason why I put all excel files on line, including all the detailed excel formulas about data constructions and adjustments, is precisely because I want to promote an open and transparent debate about these important and sensitive measurement issues.
Let me also say that I certainly agree that available data sources on wealth inequality are much less systematic than what we have for income inequality. In fact, one of the main reasons why I am in favor of wealth taxation, international cooperation and automatic exchange of bank information is that this would be a way to develop more financial transparency and more reliable sources of information on wealth dynamics (even if the tax was charged at very low rates, which everybody could agree with).
For the time being, we have to do with what we have, that is, a very diverse and heterogeneous set of data sources on wealth: historical inheritance declarations and estate tax statistics, scarce property and wealth tax data; household surveys with self-reported data on wealth (with typically a lot of under-reporting at the top); Forbes-type wealth rankings (which certainly give a more realistic picture of very top wealth groups than wealth surveys, but which also raise significant methodological problems, to say the least). As I make clear in the book, in the on-line appendix, and in the many technical papers on which this book relies, I have no doubt that my historical data series can be improved and will be improved in the future (this is why I put everything on line). In fact, the “World Top Incomes Database” (WTID) is set to become a “World Wealth and Income Database” in the coming years, and together with my colleagues we will put on-line updated estimates covering more countries. But I would be very surprised if any of the substantive conclusions about the long run evolution of wealth distributions was much affected by these improvements.
I welcome all criticisms and I am very happy that this book contributes to stimulate a global debate about these important issues. My problem with the FT criticisms is twofold. First, I did not find the FT criticism particularly constructive. The FT suggests that I made mistakes and errors in my computations, which is simply wrong, as I show below. The corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis, contrarily to what the FT suggests. Next, the FT corrections that are somewhat more important are based upon methodological choices that are quite debatable (to say the least). In particular, the FT simply chooses to ignore the Saez-Zucman 2014 study, which indicates a higher rise in top wealth shares in the United States during recent decades than what I report in my book (if anything, my book underestimates the rise in wealth inequality). Regarding Britain, the FT seems to put a lot of trust in self-reported wealth survey data that notoriously underestimates wealth inequality.
I will start by giving an overview of the series on wealth inequality that I present in chapter 10 of my book. I will then respond to the specific points raised by the FT.
Overview of the series on wealth inequality reported in chapter 10
The long run series on wealth inequality provided in chapter 10 of my book deal with only four countries: France, Britain, Sweden, and the United States.
Figure 10.1. Wealth inequality in France, 1810-2010 (p.340)
Figure 10.2. Wealth inequality in versus France 1810-2010 (p.341)
Figure 10.3. Wealth inequality in Britain, 1810-2010 (p.344)
Figure 10.4. Wealth inequality in Sweden, 1810-2010 (p.345)
Figure 10.5. Wealth inequality in the United States, 1810-2010 (p.348)
Figure 10.6. Wealth inequality in Europe versus the US, 1810-2010 (p.349)
The series used to construct figures 10.1-10.6, replicated in the book on p.340-348 are available in table S10.1, as well as in the corresponding excel file.
These wealth inequality series deal with much fewer countries and are substantially more exploratory than the empirical material provided in other parts of the book: income and population growth in chapters 1-2; wealth-income ratios in chapters 3-6; income inequality series in chapters 7-9. This follows from the fact that available data sources on wealth inequality are much less systematic than data sources on growth, wealth-income ratios and income inequality. In particular, we do have yearly income declarations statistics for dozens of countries, but we do not have yearly wealth declarations statistics for most countries. So we have to do with the diverse set of sources that I described above.
I believe that the data we have on wealth inequality is sufficient to reach a number of conclusions. Namely, wealth inequality was extremely high and rising in European countries during the 19th century and up until World War 1 (with a top 10% wealth share around 90% of total wealth in 1910), then declined until the 1960s-1970s (down to about 50-60% for the top 10% wealth share); and finally increased moderately since the 1980s-1990s. In the United States, wealth inequality was less extreme than in Europe until World War 1, but it was less strongly affected by the 20th century shocks, and in recent decades it rose more strongly than in Europe. Both in Europe and in the United States, wealth inequality is less extreme than what it was in Europe on the eve on World War 1.
I believe that the data that we have is sufficient to reach these conclusions, but that it is insufficient to go much beyond that. In particular, our ability to measure the most recent trends in wealth inequality is limited, partly due to the huge rise in cross border financial assets and offshore wealth. According to Forbes-type wealth rankings, the very top of the world wealth distribution has been rising about three times faster than average wealth at the global level over the 1987-2013 period (see chapter 12 of my book, in particular Table 12.1. The growth rate of top global wealth, 1987-2013). This seems to be clear evidence than wealth inequality is rising, partly because the rate of return to very large portfolios is higher than the growth rate. This interpretation is consistent with what I find with the returns to large university endowments (see Table 12.2. The return on the capital endowments of US universities, 1980-2010). But we do not really know whether this holds only at the very very top or for bigger groups (say, above 10 millions $ and not only above 1 billion $). Let me make very clear that I do not believe that r>g is the only force that determines the dynamics of wealth inequality. There are many other important forces that could in principle drive wealth inequality in other directions. The main message coming from my book is not that there should always be a deterministic trend toward ever rising inequality (I do not believe in this); the main message is that we need more democratic transparency about wealth dynamics, so that we are able to adjust our institutions and policies to whatever we observe.
I now consider each of the four countries one by one and respond to the specific points raised by the FT. I start with Sweden (the first country for which the FT expresses concerns), and then move to France, the United States, and finally to Britain (arguably the country with the biggest data problems) and to the European average.
Sweden (see figure 10.4 here)
The FT does not point out any significant disagreement regarding Sweden. Their corrected figure looks virtually identical to mine (see their figure on Sweden here).
The FT argues however that my choice of years from raw data sources is not entirely clear. For instance, they point out that raw data for year "1908" for year "1910", year "1935" for year "1930", and so on. These issues are already explained in the book and in the technical appendix, but they probably need to be clarified. Generally speaking, when I present series on wealth-income ratios and wealth inequality (and also for some figures on income inequality), I usually choose to present decennial averages rather than yearly series. This is because wealth series often display a lot of short-run volatility (in particular due to sharp movements in asset prices). So in order to focus the attention on long-run evolutions, it is better to abstract from these short-run movements and show decennial averages. See for instance the wealth-income series presented in chapter 5: contrast figure 5.1 and figure 5.5. When full yearly series are available, the way decennial averages are computed in the book is the following: "1900" usually refers to the average "1900-1909", and so on. This is further explained in the technical paper "Capital is back..." (Piketty-Zucman QJE 2014) available here.
In the case of the wealth inequality series reported in chapter 10, the raw series are usually not available on annual basis, so I compute decennial averages on the basis of the closest years available. This is clearly explained in the chapter 10 excel file (see sheet "TS10.1"). For instance, "1870" is computed as the average for years "1873-1877", "1910" as the average "1907-1908", and so on. These choices can be discussed and improved, but they are reasonably transparent (they are explicitly mentioned in the excel table, which apparently the FT did not notice), and as one can check they have negligible impact on long run evolutions.
The FT also suggests that I made a transcription error by using the estimate for 1908 for the top 1% wealth share (namely, 53.8% of total wealth) for year 1920 (instead of the correct raw estimate for that year, namely 51.5% of total wealth). In fact, this adjustment was intended to correct for the fact that there is a break in a data sources in 1908: pre-1908 series use estate tax data, while post-1908 use wealth tax data, resulting into somewhat lower top wealth (as exemplified by year 1908, for which both data sources co-exist; see Waldenstrom 2009, Table 3.A1, p.120-121). This is standard practice, but I agree that this adjustment should have been made more explicit in the technical appendix and excel file.2 In any case, whatever adjustment one chooses to make to deal with this break in series is again going to have a negligible impact on long-run patterns.
France (see figure 10.1 and figure 10.2)
The FT does not point out any significant disagreement regarding France. Their corrected figure looks virtually identical to mine (see their figure on France here).
The FT argues however that no explanation is given for some of the data construction. Namely, the FT claims the following: “The original source reports data relative to the distribution of wealth among the dead. In order to obtain the distribution of wealth across the living, Prof Piketty augments the share of the top 10 per cent of the dead by 1 per cent and the wealth share of the top 1 per cent by 5 per cent. An adjustment of this sort is standard practice in this type of calculations to correct for the fact that those who die are not representative of the living population. Prof. Piketty does not explain why the adjustment is usually constant. But in one year, 1910, it is not constant and the adjustment scale rises to 2 per cent and 8 per cent respectively. There is no explanation.”
This is a surprising statement, because all necessary explanations are actually given in the technical research paper on which these series are based (see Piketty-Postel-Vinay-Rosenthal AER 2006) and in the chapter 10 excel file (see sheet "TS10.1DetailsFR"). Namely, the PPVR AER 2006 paper includes detailed, year-by-year estimates of how differential mortality affects wealth inequality among the living, and finds that the ratio between top wealth shares among the living and top wealth shares among decedents rises at the end of the 19th century and in the early 20th century. Intuitively, this is because differential mortality effects seem to become stronger around that time (namely, life expectancy rises quite fast among top wealth holders, but much less so for the rest of the population). One can see this explicitly in table A4 of the working paper version of the PPVR AER 2006 article; this is explicitly reproduced in chapter 10 excel file (see sheet "TS10.1DetailsFR", table A4 (2), ratios for top 1% shares). More recent research has also confirmed the changing pattern of differential mortality around that time. See in particular the appendix tables to Piketty-Postel-Vinay-Rosenthal EEH 2014. Differential mortality is a complex issue, and we do not have perfect answers; but we do our best to address this issue in the most transparent way. In particular, we put on line on this web site the large micro files that we have collected in French inheritance archives, so that everybody can reproduce our computations and use this data for their own research. We are currently collecting additional micro files in Parisian and provincial archives, and we will put new data files and updated estimates in the future.
What it find somewhat puzzling in this controversy is the following: (i) the FT journalists evidently did not read carefully the technical research papers and excel files that I have put on-line; (ii) whatever adjustment one makes to correct for differential mortality (and I certainly agree that there are uncertainties left regarding this complex and important issue), it should be clear to everyone that this really has a relatively small impact on the long-run trends in wealth inequality. This looks a little bit like criticism for the sake of criticism.
United States (see figure 10.5)
The FT does point out more substantial disagreements regarding the United States. Their corrected figure actually looks very close to mine regarding the long run evolution, but not for the recent decades, where the FT considers that I overestimate somewhat the rise in wealth inequality (see their figure on United States here). The FT also expresses concerns about some of the adjustments that are made for earlier periods, although they have little impact on the overall patterns.
As I explain in the book (chapter 10, p.347) and in the technical appendix to chapter 10 (available here), there are very large uncertainties regarding US historical sources on wealth inequality, and I certainly agree that the series that are provided in the book can be improved. I try to combine in the most consistent manner the information coming from estate tax statistics (which unfortunately only cover the top few percents of the distribution, and not the entire population like in France) and the information coming from household wealth surveys (fortunately the SCF is known to be of higher quality than most other wealth surveys). In particular, the estimate for year 1970 tries to combine the estimates available for top 10% and top 1% wealth shares for years 1960 and 1980 and the evolution of very top wealth shares between 1960, 1970 and 1980. This has little impact on the overall long-run pattern, but I agree that this is relatively uncertain, and that this could have been explained more clearly.
I should stress however that the more recent and more reliable estimates that were recently produced by Emmanuel Saez (Berkeley) and Gabriel Zucman (LSE) confirm the pattern that I find. See Saez-Zucman 2014. For the recent decades, they actually find a larger rise of top 10% wealth shares and especially top 1% and top 0.1% wealth shares than what I report in my book. So, if anything, my book tends to underestimate the recent rise in US wealth inequality (contrarily to what the FT suggests).
This important work was done after my book was written, so unfortunately I could not use it for my book. Saez and Zucman use much more systematic data than I used in my book, especially for the recent period. Also their series are constructed using a completely different data source and methodology (namely, the capitalization method using capital income flows and income statements by asset class). Now that this work is available, the Saez-Zucman series (which unfortunately the FT article seems to ignore) should be used as reference series for wealth inequality in the United States. In a recent survey chapter that will be published in the Handbook of Income Distribution (HID), we choose to use the Saez-Zucman series (rather than the series reported in my book) in order to describe the long-run evolution of US wealth inequality. See Piketty-Zucman 2014 (see in particular supplementary figure S3.5, p.91 for a comparison between the two series; as one can see, they look very similar).3
Britain (see figure 10.3)
The FT does point out substantial disagreements regarding the recent evolution in Britain. Their corrected figure actually looks very close to mine regarding the long run evolution, but not for the recent decades, where the FT considers that there was no rise at all in wealth inequality, and possibly a decline, whereas I report a rise (see their figure on Britain here). The biggest disagreement comes from the latest data point (c.2010): the FT considers that the right estimate for the top 10% wealth share is around 44% of total wealth (this comes from a recent household survey based upon self-reported data, namely the “wealth and assets survey”, which I believe underestimates top wealth groups significantly; see below); whereas I report an estimate with a top 10% wealth share around 71% (this comes from more reliable estate tax statistics). This is a very large difference indeed.
Let me make clear that although I think my estimate is more reliable and rests on better methodological choices, I also believe that this large gap reflects major uncertainties and limitations in our collective ability to measure recent evolution of wealth inequality in developed countries, particularly in Britain. As I explain above, I believe this is a major challenge for our statistical and democratic institutions.
The estimates that I report for wealth inequality in Britain rely primarily on the very careful estimates that were established by Atkinson-Harrison 1978 and Atkinson et al 1989 using estate tax statistics from the 1920s to the 1980s. I updated these series for the 1990-2010 period using official HMRC data that are also based upon estate tax records. I find a rising inequality trend, although a more modest one than for the United States. I think this is the most reasonable estimate one can obtain given available data, but this certainly should be improved in the future.
What is troubling about the FT methodological choices is that they use the estimates based upon estate tax statistics for the older decades (until the 1980s), and then they shift to the survey based estimates for the more recent period. This is problematic because we know that in every country wealth surveys tend to underestimate top wealth shares as compared to estimates based upon administrative fiscal data. Therefore such a methodological choice is bound to bias the results in the direction of declining inequality. For instance, as I note in the technical appendix to chapter 10 (available here), the recent wealth surveys undertaken by INSEE in 2004-2010 in France indicate a top decile share just above 50% of the total wealth, whereas fiscal data (inheritance and wealth tax) suggest a top decile share above 60% of the total wealth. The gap seems particularly large for the case of Britain, which could reflect the fact that the “wealth and assets survey” seems particularly bad at measuring the top part of the wealth distribution of the UK. Indeed, according to the latest report by the Office of national statistics (ONS), the response rate for this survey was only 64% in 2010-2012; this is an improvement as compared to the response rate of 55% that was observed during the 2006-2008 wave of the same survey (see ONS 2014, Table 7.1); but it is pretty clear that with such a low response rate, it is hard to claim that one can adequately measure wealth inequality, particularly at the top of the distribution. Also note that a 44% wealth share for the top 10% (and a 12.5% wealth share for the top 1%, according to the FT) would mean that Britain is currently one the most egalitarian countries in history in terms of wealth distribution; in particular this would mean that Britain is a lot more equal that Sweden, and in fact a lot more equal than what Sweden as ever been (including in the 1980s). This does not look particularly plausible.
Of course the estate records based estimates also raise significant methodological concerns, and I do not claim that the resulting estimates are perfectly reliable. In particular, they might also underestimate top wealth levels (because top wealth holders sometime escape the estate tax through sophisticated trust funds or offshore assets). But they definitely seem more plausible than the estimates based upon self-reported survey data.
Note also that in recent years more and more scholars and statisticians have started to recognize the limitations of household wealth surveys and to upgrade the top segments of survey based wealth distributions using other sources. For instance, a recent study undertaken at the research department of the ECB attempts to upgrade in a systematic manner the top tail of the wealth surveys undertaken in Eurozone countries by using the Pareto coefficients that one can estimate using Forbes rankings and other lists of very high wealth individuals in each country. The results indicate that this can lead to very large increases (more than 10 percentage points) in top wealth shares (see Vermeulen 2014). In the United States, although the SCF wealth survey is generally regarded as a very high quality wealth survey, there has been some important work trying to upgrade the top tail by using Forbes ranking and estate tax data (see Johnson-Shreiber 2006 and Raub-Johnson-Newcomb 2010). This is definitely something that should be done for the British “wealth and assets survey”.
Regarding the 19th century estimates, the FT expresses concerns with the way I compute the top wealth shares for Britain in 1810 and 1870. Namely, I borrow the top 1% wealth shares estimates from Lindert (54.9% and 61.1%, respectively), and I assume that the next 9% shares shifted from 28% to 26%. Lindert does report a lower estimate for the next 9% share (about 16%). However this would indicate a relatively unusual pattern of Pareto coefficients within the top 10% of the distribution (as compared both to the French 19th century inheritance data, which is a lot more comprehensive than the British probate data, and to the British estate tax statistics for 1911-1913). Given that the probate records used by Lindert seem to provide a better coverage of the top 1% than of the next 9%, I use Pareto interpolation techniques to estimate the next 9% share. This is an issue that should have been explained more clearly and that would definitely deserve further research. This has a limited impact for the long run patterns analyzed here (the pre-World War 1 rise in wealth inequality would be even larger without this adjustment).
European average (see figure 10.6)
Finally, the FT also expresses the following concern: the European average series, which I computed by making a simple arithmetic series between France, Britain and Sweden, should have been computed using population weighted averages. I do agree that population (or GDP) weighted averages are generally superior to simple arithmetic averages. However I should stress that it really does not make much of a difference here, because all three European countries that I use follow fairly similar long run patterns. Namely, all three countries display high and rising top wealth shares during the 19th century and up until World War 1 (with about 90% of total wealth for the top 10% around 1910); then a sharp decline until the 1960s-1970s (with top 10% wealth shares down to 50-60%); and finally a modest rise since the 1980s-1990s. So whether one weights the three countries with equal weights or according to population or GDP does not make a big difference. But in case Britain did follow a markedly different pattern than the other countries in recent decades (with a decline in wealth inequality rather than a rise), then putting more weight on Britain than on Sweden becomes a significant issue. So we are back to the previous question: what happened to wealth inequality in Britain in recent decades? The FT seems to believe it has become more equal; however the way they use self-reported wealth survey data is not convincing. This is nevertheless an interesting debate for the future, and we should all agree that we know too little about it.
1 See also the other two articles published by the FT on May 23 2014: here and there. See also my short reponse published here in the FT. Unfortunately I was given limited time to submit this response, so I could not address specific points; here is a longer response.
2 Also note that the raw series display a decline in top 1% wealth share between 1908 and 1920, but a sharp rise in the share of the next 9% (resulting into a significant increase in the top 10% share). This does not look entirely plausible and might also be due to a break in raw data sources (unless this is due to sharp short-run variations in the relative price of assets held by these different wealth groups).
3 Note that this HID chapter also includes novel series about the evolution of the share of inheritance in total wealth accumulation. These new series use a different methodology and complement those reported in chapter 11 of my book.

Friday, May 16, 2014

The Media, the Market and Truth

Simon Wren-Lewis:

But can Mankiw be rescued from the charge of paternalism? (No, I never expected to write that line either.)

More here.

Friday, February 28, 2014

'The Real Reason Nobody Reads Academics'

Appreciate the mention:

The Real Reason Nobody Reads Academics, by Ezra Klein: New York Times columnist Nicholas Kristof recently ignited a bit of a firestorm with a column asking why academics are irrelevant to public debates. I’d turn the question around: Why aren’t journalists better at taking advantage of academic expertise?
The most efficient arrangement would have academics communicate directly with the public. Thankfully for journalists, they don’t. ... It would be a disaster for our profession if academics became good at communicating what they know.
The relationship between academics and journalists should be a happy symbiosis. The two sides are perfectly designed, in strengths and weaknesses, to support each other. ...
The good news is the chasm is closing. Academics have increasingly turned to the blogosphere, opening a window on academic conversations that were formerly out of view. In political science, for instance, the Monkey Cage is a minor miracle. In economics, Mark Thoma at the Economist’s View is tireless in tracking discussion across the profession.
Still, it would be better if academics didn’t have to blog, or know a blogger, to get their work in front of interested audiences. That would require a new model for disseminating academic work -- one that gets beyond the samizdat system used for working papers on the one hand, and the rigid journal publication system on the other. If academia was easier to keep up with, I think a lot of academics would be surprised to learn how many journalists care about their work, and I think a lot of journalists would be happy to find how much academic research can do for their stories.

Monday, January 27, 2014

'A Tea Party Knight Is Out'

David Warsh wonders if the WSJ is "changing things somewhat in the orientation of its editorial board":

A Tea Party Knight Is Out, by David Warsh: News, goes an old saw, is what happens near an editor. That’s what commenced last September when Wall Street Journal editors got hung up in lane closings at the George Washington Bridge.

Whoever they were, the editors passed along their displeasure and, perhaps, suspicions to the paper’s transportation reporter, Ted Mann. After a month of working the phones, Mann broached the possibility that the tie-up was deliberate, with a story on October 2: Port Chief Fumed Over Bridge Jam/Patrick Foyle Fired Off an Email Message after Learning of Lane Closure..., it was clearly the WSJ that first put Gov. Christie in play. ...

Aggressive WSJ reporting on a frontrunner for the next Republican Party presidential nomination is evidence that Rupert Murdoch hasn’t monkeyed with the longstanding culture of the news pages. ...

I mention it here because ... Murdoch may have an interest in changing things somewhat in the orientation of its editorial board. I refer to the departure of Stephen Moore to the Heritage Foundation.

Moore was the board’s chief economic commentator, a founder of the Club for Growth, enthusiast of Tea Party ideals, possessor of a master’s degree from George Mason University and a disciple of Arthur Laffer and Julian Simon. ...

The WSJ editorial page is a position of enormous influence... Depending on how Moore is replaced, the opportunity exists for Murdoch’s paper to play a constructive role... – perhaps even to modulate the spirit of intransigence that dates back to 1972, when editor Robert Bartley and Jude Wanniski initiated a new era of political economic discourse in US politics.

It was Bartley’s unrelenting attacks on Bill Clinton in the 1990s that established the predicate that presidents who are Democrats not only have bad politics, but are not legitimate. Much of the present-day animosity toward Obama got its start with Bartley’s over-the-top opposition to Clinton. ...

I plan to pay much closer attention to the editorial page of the WSJ in the months to come. Something is going on there.

Monday, October 14, 2013

Republicans are Delusional about US Spending and Deficits

Dean Baker is not happy with how budget issues are being presented to the public:

Republicans are delusional about US spending and deficits: It is understandable that the public is disgusted with Washington; they have every right to be. At a time when the country continues to suffer from the worst patch of unemployment since the Great Depression, the government is shut down over concerns about the budget deficit.
There is no doubt that the Republicans deserve the blame for the shutdown and the risk of debt default. They decided that it was worth shutting down the government and risking default in order stop Obamacare. That is what they said as loudly and as clearly...
Going to the wall for something that is incredibly important is a reasonable tactic. However, the public apparently did not agree with the Republicans. Polls show that they overwhelmingly oppose their tactic of shutting down the government and risking default over Obamacare. As a result, the Republicans are now claiming that the dispute is actually over spending.
Anywhere outside of Washington DC and totalitarian states, you don't get to rewrite history. However, given the national media's concept of impartiality, they now feel an obligation to accept that the Republicans' claim that this is a dispute over spending levels.
But that is only the beginning of the reason that people should detest budget reporters. The more important reason is that they have spread incredible nonsense about the deficit and spending problems facing the country, causing most of the public to be completely confused on these issues. ...
Yes, the public has every right to be disgusted.

Sunday, October 06, 2013

Hal Varian: The Economics of the Newspaper Business

This one is from Brad DeLong's "noted" list:

Hal Varian: the economics of the newspaper business: Thank you... I am an economist by training, and only a part-time journalist, so I want to focus my remarks on the economics of the newspaper business during this period of transition.
1. Printed  newspaper circulation has been declining for 50 years...
2.  The internet is a superior way to distribute and read news...
3.  The basic economic problem facing news is increased competition for attention...
4.  Newspapers never made money from news...
5.  Offline news reading is a leisure time activity, online news reading is a labor time activity...
6.  Ad revenue depends on reader engagement...
7.  Tablets give newspapers a way to reclaim some lost audience...
8. The fundamental challenge facing newspapers is to increase the time people spend on their content...

(He explains each point in the longer version.)

Wednesday, July 31, 2013

'A False Equivalence Classic'

News organizations should listen to James Fallows. It's soooo frustrating to see reporting like this:

A False Equivalence Classic, by James Fallows: A reader sent in the paragraph below as another classic in the false-equivalence chronicles. It comes from a bigtime news organization... I'm intentionally leaving out the details, because what makes the story significant is not that it's exceptional but that it's representative.

The article is about the risk that the economy will be disrupted yet again, by yet another showdown over raising the federal debt ceiling...:

With investors already nervous about the Federal Reserve's plan to start scaling back its stimulus program, another fiscal policy standoff could be more disruptive this time around.
In recent days, both Democrats and Republicans have been digging in their heels, setting up another possible nerve-wracking battle over the debt ceiling, which the Treasury expects to hit by November.
"Hearing Washington banter back and forth over this again was like a recurring bad dream," said [I'll leave out this guy's name too]...

That's one way to describe what's going on: Another damned partisan flap! Can't these politicians grow up and stop squabbling? ... This is of course the tone that runs through most gridlock/ dysfunction stories...

If you describe the "disagreement" [this] ... way, no one's really to blame. It's just politics, a sign of the symmetrical dysfunction that plagues us all.

If you describe it [a] second way, then one side is sticking to historic norms and practices -- and the other is deliberately bringing on a showdown, with the all consequent risks for the domestic and international economies, via demands and threats out of scale with what previous Congresses have done. This second version is what's happening. ...

What's going on now is ... like the 1970s-era hijackers Brendan Koerner describes in his recent book, who would threaten to blow up the plane unless they got the ride to Cuba they wanted. Or, if you want a less violent analogy, it's like me walking into a restaurant, ordering and enjoying a meal, and then when I finished just tearing up the check and saying that I was "digging in my heels" about whether I should pay. ...

Decent reporting on these issues that places the blame where it belongs would help immensely, but I probably shouldn't hold my breath waiting for this to change.

Thursday, July 04, 2013

'The Knowledge Transmission Mechanism'

Ha, visiting Belize during the rainy season may not have been the best idea I ever had. It's pouring rain, thunder, lightening, all tours are canceled, internet, phone, and TV are out (at least we have electricity now), and the roads (mostly dirt/gravel) are horrid. So instead of taking my mind off of things, nothing to do but sit in my room and think.

So I called a cab, went to the BTL (phone) store, got a sim chip, many gigs of data, and finally connected to the outside world once again.

This is supposed to continue for several more days and I want to preserve my data -- so, quickly, from Simon Wren-Lewis:

The Knowledge Transmission Mechanism: In a comment on my last post, Joseph Grossman asks “If the vast majority grasp and support the basic shape of the [fiscal] stimulus solution, and if we live in democracies, isn't it time to shift the analysis to expose the exact and precise mechanisms by which our electoral systems are failing miserably?” This is the question which, since 2010, I have asked myself almost every day. The question becomes even more relevant as the intellectual case for austerity crumbles, but the policy continues, and in some cases even appears to gain ground. ... I want to use this example to look at the question of the transmission of economic ideas more generally. So let’s break the question down.
First, do the vast majority of economists agree? In the case of fiscal policy, I think the honest answer here is: majority, probably yes, vast, almost certainly no. ...
However, what the majority - vast or not - of economists think would be irrelevant if no one listened to them. The transmission mechanism from economists to economic policy works along many channels. It may be direct. It may be mediated through the civil service. It may work through economists influencing popular opinion, which then influences policymakers. I think the last of these is the least important. ...

After a discussion of some of the problems in the transmission of ideas to policymakers, he Simon Wren-Lewis concludes:

My own current view is that these structural weaknesses are to a large extent inherent in liberal democratic societies, where restrictions on what money can do are very limited. That has led me to be much more favourably disposed to the delegation of economic decisions, even though this appears less democratic, and can be seen as representing arrogance and self-interest by the academic community. Yet the problem is real enough. And it is personal: when you study, teach and research in a subject where some of its most basic findings - understood for more than half a century- can be brushed aside so easily, and millions of people are worse off as a result, you have to ask yourself what the point is.

Friday, March 15, 2013

Journal News (BE Journal of Theoretical Economics)

Resignations at the BE Journal of Theoretical Economics

Thursday, March 14, 2013

Inflation is *Not* What We Should Be Worried About

Dave Henderson responds to an article called "If There's No Inflation, Why are Prices Up So Much?":

...the main thing he does in the ... article is look selectively at relative prices that have increased a lot...

I had started a response to the same article a couple of days ago, and then decided to let it go. But I may as well resurrect it. As noted, the article looks selectively at a few prices that have gone up a lot, and then asks "why haven’t these more rapid increases shown up in the Consumer Price Index?" They have, but they are offset by falling prices elsewhere. This is easy to see in the underlying data.

This is the PCE rather than the CPI, but the story is the same (this is what the Fed monitors, and it's a better measure to look at anyway -- I used month-to-month data because it seems like the article used a similar measure -- year over year is less volatile, but again the story is basically the same). Shown below is a list of the inflation rates for the individual components that make up the PCE (the changes are from December to January, the latest data available). Notice how many prices of the goods and services consumed by a typical household fell on a month-to-month basis. You rarely hear people talking about how well they made out due to falling prices, but you hear a lot --- see the article -- about prices that are going up (the overall month-to-month figure, where prices are weighted by their share of a typical consumption basket, was 0.2 percent, i.e. less than one percent -- that means price increases and price decreases nearly canceled each other out).

Despite scare stories in the media about all the hidden inflation, it's just not there. Thus, there's no reason for the Fed to start raising interest rates to combat this phantom threat. If inflation (or the threat of inflation) does kick-up, we'll have to balance the costs of higher than expected inflation with the costs of fighting it and prolonging the recovery of output and employment -- even then, relative to a moderate outbreak of inflation I think unemployment is the more important problem to address -- but presently it's not a close call at all. Alleviating unemployment and all the struggles that come with it ought to be our top priority.

[Note: The entries marked in yellow are the trim points for the Dallas Fed's trimmed mean estimate of the inflation rate (which is similar to excluding food and energy). Inflation was 1.3 percent from December to January according to the trimmed-mean measure (excluding food and energy gives an estimate of 1.8 percent). People usually complain that trimming volatile prices from the inflation measure hides inflation that hits households, e.g. it hides increases in the price of gas. But in this case excluding volatile prices such as food and energy increases the measured inflation rate from .2 percent to either 1.3 percent or 1.8 percent depending on which prices are excluded. The very first entry in the table helps to explain why.]

Component Annualized 1-month % change
PCE: Gasoline & Other Motor Fuel Price Index   -32.7
Personal Consumption Expenditures: Clothing Materials Price Index   -30.9
Personal Consumption Expenditures: Sewing Items Price Index   -30.9
Personal Consumption Expenditures: Commercial Banks Price Index   -26.1
Sales Receipts: Foundatns/Grant Making/Giving Svcs to HH Price Idx  -25.8
Personal Consumption Expenditures: Eggs  Price Index   -21.0
Personal Consumption Expenditures: Photographic Equip Price Index   -20.4
Personal Consumption Expenditures: Natural Gas  Price Index   -18.7
Personal Consumption Expenditures: Fresh Fruit  Price Index   -18.6
PCE: Film & Photographic Supplies Price Index   -15.7
PCE: Othr Depository Instns & Regulated Invest Companies Price Idx  -12.8
PCE: Sporting Equip, Supplies, Guns & Ammunition Price Index   -12.0
PCE: Employment Agcy Services Price Index   -10.3
PCE: Computer Software & Acc Price Index   -10.0
PCE: Net Health Insurance Price Index   -9.5
Personal Consumption Expenditures: Tires Price Index   -9.2
PCE: Personal Computers & Peripheral Equip Price Index   -8.2
Personal Consumption Expenditures: Other Meats  Price Index   -8.1
Personal Consumption Expenditures: Furniture Price Index   -7.5
PCE: Household Cleaning Products Price Index   -7.3
Personal Consumption Expenditures: Fats and Oils Price Index   -7.2
PCE: Coffee, Tea & Other Beverage Mtls Price Index   -7.1
PCE: Children's & Infants' Clothing Price Index   -7.0
Personal Consumption Expenditures: Nursing Homes  Price Index   -6.8
PCE: Mineral Waters, Soft Drinks & Vegetable Juices Price Index   -6.7
PCE: Moving, Storage & Freight Services Price Index   -6.5
PCE: Hair/Dental/Shave/Misc Pers Care Prods ex Elec Prod Price Idx  -6.0
PCE: Elec Appliances for Personal Care Price Index   -6.0
PCE: Motor Vehicle Leasing Price Index   -6.0
Personal Consumption Expenditures: Cereals Price Index   -5.9
PCE: Flowers, Seeds & Potted Plants Price Index   -5.8
Personal Consumption Expenditures: Fresh Milk  Price Index   -5.4
PCE: Food Products, Not Elsewhere Classified Price Index   -5.2
Personal Consumption Expenditures: Window Coverings  Price Index   -5.1
Personal Consumption Expenditures: Wine Price Index   -5.0
Personal Consumption Expenditures: Lubricants & Fluids Price Index  -4.7
Personal Consumption Expenditures: Air Transportation Price Index   -4.6
PCE: Nonprescription Drugs Price Index   -4.0
Personal Consumption Expenditures: Social Assistance Price Index   -4.0
PCE: Stationery & Misc Printed Mtls Price Index   -3.9
Personal Consumption Expenditures: Televisions Price Index   -3.1
PCE: Maintenance & Repair of Rec Vehicles & Sports Eqpt Price Idx  -2.6
PCE: Processed Dairy Products Price Index   -2.5
PCE: Cosmetic/Perfumes/Bath/Nail Preparatns & Implements Price Idx  -2.3
Personal Consumption Expenditures: Fuel Oil  Price Index   -2.0
Personal Consumption Expenditures: Beef and Veal  Price Index   -2.0
PCE: Tax Preparation & Other Related Services Price Index   -1.8
PCE: Misc Household Products Price Index   -1.7
Personal Consumption Expenditures: Other Video Equip Price Index   -1.6
Personal Consumption Expenditures: Physician Services Price Index   -1.0
PCE: Veterinary & Other Services for Pets Price Index   -1.0
PCE: Household Paper Products Price Index   -0.7
PCE: Tools, Hardware & Supplies Price Index   -0.6
Personal Consumption Expenditures: Jewelry  Price Index   -0.6
PCE: Major Household Appliances Price Index   -0.2
Personal Consumption Expenditures: Accessories & Parts Price Index  0.0
Personal Consumption Expenditures: Prescription Drugs Price Index   0.1
PCE: Other Medical Products Price Index   0.3
PCE: Therapeutic Medical Equip Price Index   0.3
Personal Consumption Expenditures: Casino Gambling Price Index   0.3
Personal Consumption Expenditures: Lotteries  Price Index   0.3
PCE: Pari-Mutuel Net Receipts Price Index   0.3
Personal Consumption Expenditures: Legal Services Price Index   0.6
Personal Consumption Expenditures: Prof Assn Dues Price Index   0.6
PCE: Net Motor Vehicle & Other Transportation Insur Price Index   0.6
Personal Consumption Expenditures: New Light Trucks Price Index   0.9
PCE: Motion Picture Theaters Price Index   0.9
Personal Consumption Expenditures: Used Autos Price Index   0.9
Personal Consumption Expenditures: Museums & Libraries Price Index  0.9
PCE: Live Entertainment, ex Sports Price Index   0.9
PCE: Nonprofit Hospitals' Services to Households Price Index   1.0
PCE: Proprietary Hospitals Price Index   1.0
Personal Consumption Expenditures: Spirits  Price Index   1.0
Personal Consumption Expenditures: Govt Hospitals Price Index   1.0
Personal Consumption Expenditures: Taxicabs  Price Index   1.0
PCE: Intercity Mass Transit Price Index   1.0
PCE: Financial Service Charges, Fees & Commissions Price Index   1.1
Personal Consumption Expenditures: Used Light Trucks Price Index   1.3
PCE: Paramedical Services Price Index   1.4
Personal Consumption Expenditures: Motorcycles  Price Index   1.4
PCE: Other Purchased Meals Price Index   1.5
PCE: Video Cassettes & Discs, Blank & Prerecorded Price Index   1.5
Personal Consumption Expenditures: Beer  Price Index   1.5
Personal Consumption Expenditures: Pleasure Aircraft Price Index   1.6
Personal Consumption Expenditures: Pleasure Boats Price Index   1.6
PCE: Other Recreational Vehicles Price Index   1.6
Personal Consumption Expenditures: Bicycles & Acc Price Index   1.6
PCE: Pets & Related Products Price Index   1.8
Personal Consumption Expenditures: Watches Price Index   2.0
Final Consumptn Exps of Nonprofit Instns Serving HH Price Idx  2.0
PCE: Alcohol in Purchased Meals Price Index   2.1
PCE: Amusement Parks, Campgrounds & Related Recral Svcs Price Idx   2.1
PCE: Garbage & Trash Collection Price Index   2.1
Personal Consumption Expenditures: Package Tours  Price Index   2.1
PCE: Owner-Occupied Mobile Homes Price Index   2.2
PCE: Rental Value of Farm Dwellings Price Index   2.2
PCE: Owner-Occupied Stationary Homes Price Index   2.2
Personal Consumption Expenditures: Recreational Books Price Index   2.2
Personal Consumption Expenditures: Spectator Sports  Price Index   2.3
PCE: Other Household Services Price Index   2.3
PCE: Standard Clothing Issued to Military Personnel Price Index   2.6
PCE: Tenant-Occupied Stationary Homes Price Index   2.7
PCE: Tenant-Occupied Mobile Homes Price Index   2.7
Personal Consumption Expenditures: Group Housing   Price Index   2.7
PCE: Other Personal Business Services Price Index   2.8
PCE: Hairdressing Salons & Personal Grooming Estab Price Idx  3.0
PCE: Membership Clubs & Participant Sports Centers Price Index   3.1
PCE: Luggage & Similar Personal Items Price Index   3.2
Personal Consumption Expenditures: Communication Price Index   3.5
PCE: Shoes & Other Footwear Price Index   3.5
Personal Consumption Expenditures: Domestic Services Price Index   3.7
PCE: Food Supplied to Military Price Index   3.7
PCE: Elementary & Secondary School Lunches Price Index   3.7
PCE: Food Supplied to Civilians Price Index   3.7
PCE: Higher Education School Lunches Price Index   3.7
PCE: Elementary & Secondary Schools Price Index   3.8
PCE: Outdoor Equip & Supplies Price Index   4.0
Personal Consumption Expenditures: Fish and Seafood  Price Index   4.1
PCE: Motor Vehicle Maintenance & Repair Price Index   4.3
Personal Consumption Expenditures: New Domestic Autos Price Index   4.3
Personal Consumption Expenditures: New Foreign Autos Price Index   4.3
PCE: Parking Fees & Tolls Price Index   4.3
PCE: Net Household Insurance Price Index   4.5
Personal Consumption Expenditures: Pork Price Index   4.7
Personal Consumption Expenditures: Child Care  Price Index   4.8
PCE: Day Care & Nursery Schools Price Index   4.8
PCE: Corrective Eyeglasses & Contact Lenses Price Index   4.9
PCE: Water Supply & Sewage Maintenance Price Index   5.2
Personal Consumption Expenditures: Housing at Schools Price Index   5.3
Personal Consumption Expenditures: Dental Services  Price Index   5.3
PCE: Audio-Video, Photographic & Info Processing Svcs Price Index   5.5
Personal Consumption Expenditures: Life Insurance  Price Index   5.7
PCE: Water Transportation Price Index   5.7
PCE: Prerec/Blank Audio Disc/Tape/Digital Files/Download Price Idx  6.1
Personal Consumption Expenditures: Bakery Products  Price Index   6.4
PCE: Telephone & Facsimile Equip Price Index   6.5
PCE: Calculators/Typewriters/Othr Info Processing Eqpt Price Idx  6.5
Personal Consumption Expenditures: Musical Instruments Price Index  6.5
Personal Consumption Expenditures: Tobacco  Price Index   6.7
PCE: Funeral & Burial Services Price Index   7.0
PCE: Processed Fruits & Vegetables Price Index   7.0
PCE: Social Advocacy & Civic & Social Organizations Price Index   7.9
PCE: Religious Organizations' Services to Households Price Index   8.2
PCE: Laundry & Dry Cleaning Services Price Index   8.2
PCE: Tenant Landlord Durables Price Index   8.3
Personal Consumption Expenditures: Sugar and Sweets  Price Index   8.5
Personal Consumption Expenditures: Educational Books Price Index   8.7
Personal Consumption Expenditures: Poultry Price Index   9.1
PCE: Carpets & Other Floor Coverings Price Index   9.3
PCE: Proprietary & Public Higher Education Price Index   9.8
PCE: Nonprofit Pvt Higher Education Svcs to Households Price Index  9.8
PCE: Nonelectric Cookware & Tableware Price Index   10.3
PCE: Labor Organization Dues Price Index   11.2
Personal Consumption Expenditures: Other Fuels Price Index   11.4
PCE: Railway Transportation Price Index   11.5
PCE: Clock/Lamp/Lighting Fixture/Othr HH Decorative Item Price Idx  11.7
PCE: Men's & Boys' Clothing Price Index   12.2
Personal Consumption Expenditures: Household Linens  Price Index   13.0
PCE: Repair of Household Appliances Price Index   13.8
PCE: Repair of Furn, Furnishings & Floor Coverings Price Index   13.8
Personal Consumption Expenditures: Electricity   Price Index   14.0
PCE: Commercial & Vocational Schools Price Index   15.1
Personal Consumption Expenditures: Audio Equipment Price Index   16.8
PCE: Women's & Girls' Clothing Price Index   17.4
Personal Consumption Expenditures: Intercity Buses Price Index   18.0
PCE: Other Road Transportation Service Price Index   18.0
Personal Consumption Expenditures: Hotels and Motels Price Index   18.0
PCE: Clothing Repair, Rental & Alterations Price Index   18.4
PCE: Repair & Hire of Footwear Price Index   18.4
PCE: Misc Personal Care Services Price Index   18.4
Personal Consumption Expenditures: Pension Funds Price Index   20.5
PCE: Small Elec Household Appliances Price Index   21.6
PCE: Games, Toys & Hobbies Price Index   21.8
Personal Consumption Expenditures: Fresh Vegetables Price Index   32.2
PCE: Newspapers & Periodicals Price Index   37.6
Personal Consumption Expenditures: Dishes and Flatware Price Index  66.2
PCE: Motor Vehicle Rental Price Index   78.6
PCE: Food Produced & Consumed on Farms Price Index   124.4

Tuesday, March 12, 2013

'When Will Glenn Kessler Question the Counterfactuals of the Deficit Hawks?'

Budget hawks and those playing the role of budget hawk in order to make ideological gains tells us that if we don't cut the budget now, something terrible will happen in the future. Dean Baker wonders why fact-checkers don't address this claim:

When Will Glenn Kessler Question the Counterfactuals of the Deficit Hawks?, by Dean Baker: Glenn Kessler has been doing a good job scrutinizing the claims of horrors of sequester in his job as the Washington Post fact checker. ... These are reasonable points to raise. They imply that steps can be taken to prevent the sequester from being as harmful as simple across the board cuts may first appear.
In fact this is a reasonable way to assess any claim about budgets. Unfortunately this critical approach does not get applied to standard framework in which Washington budget debates are taking place.
This framework holds that we must commit the country to now to achieving some debt target (e.g. 73 percent of GDP) as of 2023, with the country then on a stable path of a debt to GDP ratio, or something really bad will happen. The implicit counter-factual in this framework is that even as the budget situation deteriorates later in this decade and early in the next decade, and financial markets get ever more antsy demanding ever higher interest rates, Congress does nothing.
This has never happened in U.S. history. There has never been a prolonged stretch in which the budget situation has deteriorated with a response from Congress. Nor have the financial markets ever panicked to the point where the government had any difficulty selling its debt.
In other words, the horror stories of exploding deficits and debt and resulting financial market panic have no historical precedent. They assume that future congresses will be far more irresponsible that any we have seen in the past.
This is of course possible, but it is a very strong assumption. It certainly would be worth pointing out to readers. ... This confusion is far more important to current policy debates than the exact number of vaccines that will not be given due to the sequester.

The point is, we don't have to engage in immediate, harmful austerity that will slow the recovery, make it harder for people to find jobs when millions are still unemployed, and so on. We have time to wait until the economy is on better footing (and some of the temporary effects of the recession that are being used to bang the drum for deficit reduction go away) before taking steps to address the long-run budget imbalance. The "now or never" argument is convenient for the hawks and ideologues, but there is little reason to think this is the case.

Friday, March 01, 2013

Economics Professor Mark Thoma Makes Me Wonder about the Other Nuts that are Teaching our Kids...

I was on the radio with conservative radio host Lars Larson earlier this week. Here's a link to the interview:

Economics Professor Mark Thoma makes me wonder about the other nuts that are teaching our kids...

(I haven't listened to it, and won't...)

Thursday, February 21, 2013

'It's an Affinity Thing'

The other day I asked why anyone listens to Bowles/Simpson. After all:

Simpson is, demonstrably, grossly ignorant on precisely the subjects on which he is treated as a guru, not understanding the finances of Social Security, the truth about life expectancy, and much more. He is also a reliably terrible forecaster, having predicted an imminent fiscal crisis — within two years — um, two years ago.

In addition, he is:

cantankerous, potty-mouthed individual, who evidently feels not a bit of empathy for those less fortunate.

He's also partisan, and has a clear agenda. Yet "he’s lionized" by the media. Paul Krugman tries to explain the attraction, and what it says about those who hold him in such high regard.

Saturday, February 16, 2013

'Has the Mainstream Media Finally Had Enough?'

Kevin Drum has a question:

Has the Mainstream Media Finally Had Enough?, by Kevin Drum: I'm curious. It seems to me that something has happened over the past three months: the nonpartisan media has finally started to internalize the idea that the modern Republican Party has gone off the rails. Their leaders can't control their backbenchers. They throw pointless temper tantrums about everything President Obama proposes. They have no serious ideas of their own aside from wanting to keep taxes low on the rich. They're serially obsessed with a few hobby horses — Fast & Furious! Obamacare! Benghazi! — that no one else cares about. Their fundraising is controlled by scam artists. They're rudderless and consumed with infighting. They're demographically doomed. ...

The framing of even straight new reports feels just a little bit jaded, as if veteran reporters just can't bring themselves to pretend one more time that climate change is a hoax, Benghazi is a scandal, and federal spending is spiraling out of control. It's getting harder and harder to pretend that the same old shrieking over the same old issues is really newsworthy.

Question: Am I just imagining this? Or has there really been a small but noticeable shift in the tone of recent reporting?

Paul Krugman says:

On both sides of the Atlantic, the austerians seem to be freaking out. And that has to be good news, an indication that they realize, at some level, that they’re losing the debate. ... Unfortunately, these people have already done immense damage, and still retain the power to do a lot more.

The last sentence is my answer to Kevin Drum's question. Even if there is a lull, I expect it to be temporary and I wonder if they've learned anything along the way.

Tuesday, January 15, 2013

'Egregious in its Misuse of Data'

Jeff Sachs is unhappy with the WSJ's editorial page (and not for the first time):

Wall Street Journal: Get a Fact Checker, by Jeffrey Sachs: ...I ... want to talk about fact checking. The [Wall Street] Journal editorial board is egregious in its misuse of data. It writes what it wants without fact checking. Where is the journalistic profession to call them out?
There are two editorial pieces this weekend of note. The story on "Europe's Bankrupt Welfare State" asserts that, "the European way of welfare is bankrupt." This is easy to check. Look at European countries with large welfare states, and see how they are doing in terms of debt, deficits, unemployment, and other indicators of "bankruptcy." I do this in Table 1 here comparing the US with Europe's five leading welfare states: the Netherlands, Denmark, Norway, Sweden, and Germany. ...
Looking at Table 1..., the conclusion is simple. The European welfare states tax and spend more than the US as a percent of GDP, yet also have lower budget deficits as a share of GDP, lower debt-GDP ratios, and lower unemployment rates. Note that the government sectors of Norway and Sweden have net assets rather than net debt. Some bankruptcy!
The second comment is by editorial board member Holman Jenkins, Jr. Mr. Jenkins tries to debunk global warming by writing that "the warmest year on record globally is still 1998 and no trend has been apparent globally since then."
His claim is both false and irrelevant. It is false because most data point to more recent years as being warmer than 1998. ... The claim is also irrelevant, since 1998 was an exceptionally strong El Nino (essentially, a tilt of Pacific warm water towards the west coast of Latin America). ... Comparing subsequent years to a very strong El Nino year mixes up trends and inter-annual variability. ...
The Wall Street Journal editors have failed to notice that even the climate skeptics have come around. ...
The Wall Street Journal editorial board needs a fact checker plain and simple. It's a major paper, with excellent news coverage, and should not destroy its integrity by an editorial board that flouts the basic process of checking the facts.

Wednesday, November 21, 2012

'What the Audience Wants'

Paul Krugman:

C Is For Class Warfare, by Paul Krugman: Ryan Chittum has a great piece about CNBC’s decision to drop even the pretense of journalistic objectivity and throw its weight behind the deficit scolds. Basically, the network has gone all in on behalf of the 0.01 percent.
One question Chittum doesn’t really get at, however, is why CNBC takes this tilt — why, in fact, it has been so dominated by the fake deficit hawk faction, the people who say that the debt is terrible, terrible, and that’s why we have to cut taxes on the rich. After all, the network’s audience does not consists mainly of the very rich; rather, it’s the 1 percent wannabees, who imagine that watching many hours of talking heads will somehow let them absorb the secrets of getting rich. ...
I ... think ... the main story ... is ... this is what the audience wants. And it’s what they want even though the Austerian stuff the network peddles has been wrong, wrong, wrong, wrong... Never mind that the Keynesians have been right about interest rates, inflation, austerity, and more; the audience wants to hear about the debt crisis and hyperinflation coming any day now unless we cut taxes on the rich, or something. ...

Only thing I'd say is that those preferences -- what viewers want to hear -- are unlikely to be independent of what they've heard from the media.

Tuesday, October 30, 2012

'Romney Expands False Jeep-to-China Ad Campaign'

Contra Romney's claims:

Marchionne Weighs In on Jeep Flap, Washington Wire: Fiat/Chrysler Group Chief Executive Sergio Marchionne told company employees in an email that production of Jeep sport utility vehicles will not be moved from the U.S. to China, in his first formal response to a controversy ignited last week when Republican presidential candidate Mitt Romney told a rally in Ohio that Chrysler was contemplating such a move. ...

The Romney campaign has been told this is false. The response:

Romney expands false Jeep-to-China ad campaign, by Greg Sargent: Mitt Romney’s new television ad suggesting that the auto bailout will result in American jeep jobs getting shipped to China has been widely pilloried by news organizations, both nationally and in Ohio. The Romney campaign’s response: It is expanding the ad campaign.
A Dem source familiar with ad buy info tells me that the Romney campaign has now put a version of the spot on the radio in Toledo, Ohio — the site of a Jeep plant. The buy is roughly $100,000, the source says.
The move seems to confirm that the Romney campaign is making the Jeep-to-China falsehood central to its final push to turn things around in the state. The Romney campaign has explicitly said in the past that it will not let fact checking constrain its messaging, so perhaps it’s not surprising that it appears to be expanding an ad campaign based on a claim that has been widely pilloried by fact checkers. ...

As Steve Benen put it, this episode demonstrates more clearly than any other yet that Romney “believes we’ve entered a post-truth era and the disincentive has disappeared — he can repeat falsehoods with impunity without fear of consequences.”

This falsehood is particularly pernicious — it plays on people’s fears for their livelihoods. As I noted earlier today, the president of a United Auto Workers local that oversees workers at the Jeep plant says that after Romney first claimed Jeep was moving production to China, the union received a bunch of calls from workers worried about their jobs.

Ultimately, this may be Romney’s only recourse. ...

The mainstream media is getting dissed big time by the Romney campaign. Romney and company do not appear to have any fear that the media will be able to counter their false assertions (and this is far from the only example). I worry that the media is not up to the task, but nevertheless I hope this one bites back.

Monday, October 08, 2012

One and Done

I don't have much to say, just sitting here wondering why I let the election coverage, particularly on TV, drive me so crazy. One thing that really bothers me is to watch a guest lie outright -- these are cases where the facts are not in doubt -- and then see the guest invited back again and again just because he or she is entertaining and attracts viewers. The rule should be lie once, and you are done (if we don't book the entertaining liars, someone else will!). And "I didn't know" -- the convenient ignorance of the facts that allows false statements -- is no excuse. They are coming on the shows as experts and ought to know when the facts are in obvious disagreement with their claims.

And the eruption on Friday over the employment numbers, and the reporting that actually allowed there to be some doubt about whether manipulation of the report could occur, should have been embarrassing:

Enabling the jobs report conspiracy theory, by Brendan Nyhan: Media ethics pop quiz: When conspiracy theories started circulating on Twitter claiming that Friday’s jobs report had been politically manipulated, what should reporters have done?
(a) Avoid covering a baseless and unsubstantiated charge and focus instead on the mainstream debate over the meaning and significance of the jobs report.
(b) Carefully cover the conspiracy theory as news, making clear that no credible evidence exists to support the claim.
(c) Write up “he said,” “she said” news reports that treat the conspiracy theory as a matter of partisan dispute.
One can make a reasonable case for either (a) or (b), but several outlets chose (c) instead, writing up the charges in a format that is likely to help spread the myth and encourage more like it in the future. With incentives like these, should we be surprised that politicians and commentators keep making false claims? ...
The most significant damage was done ... when the meme jumped to mainstream news coverage and was treated credulously by reporters and commentators, who often framed it as a plausible contention that was in dispute between the parties. In particular, the lede to an appalling story by Abby Ellin appeared to give credence to Welch’s claim. Ellin stated that the surprisingly large decrease in unemployment “has raised suspicions that the White House might be cooking the books ahead of the election” and then spent five additional paragraphs detailing the charges before bothering to start refuting the claim in the seventh paragraph...
Another story described the report as an “October surprise” —a term that usually connotes pre-election dirty tricks—and failed to directly refute claims it briefly described as “conspiracy theories,” while a Reuters report framed the dispute as a “he said,” “she said” dispute between Welch and his critics, even giving him the last word. ...
Reporters shouldn’t be expected to avoid covering controversial claims in the news, but they can exercise judgment in the way they report on those claims. In doing so, the media can weaken the incentives for political elites to promote misinformation...

I don't have any grand points to make about this, no novel solutions to suggest, just frustration. I suppose I should take into account whether the generated controversy over the employment numbers actually helped the right, and I'm not sure it did. It gave the true believers -- the truthers of one form or another -- some red meat to chew on, but for reasonable, undecided voters it may have simply looked like one more example of the right becoming unhinged. After doing so much to overcome the perception of extremism by moving to the middle during the debate, the Romney camp may not have been very happy with that development.

But whether it helped, hurt, or didn't much matter, the news agencies still ought to be embarrassed that a claim with no evidence whatsoever backing it up -- just something some clown said on Twitter -- could end up being treated and reported on as if it is a question with some merit.

Friday, September 21, 2012

'Primetime Fox News And WSJ Editorial Climate Coverage Mostly Wrong'

Climate scientists document News Corporation's distortions on climate change:

Brenda Ekwurzel is a climate scientist with the Union of Concerned Scientists. She announced in New York City on September 21st the results of an analysis of climate change coverage at two major properties of the News Corporation, the Fox News Channel and the Wall Street Journal.
“What we found in our analysis was that a staggering 93 percent of all occurrences in the last six months in the prime time news of Fox News were misleading occurrences of climate science. Okay, for the Wall Street Journal opinion section in the last year, we found a surprising 81 percent of the occurrences were misleading. And of the accurate ones, these were all letters to the editor that were submitted in response to misrepresentations in editorials or other letters. So, a broad swath of News Corporation viewers and readership are being misled about the science.”

Tuesday, September 11, 2012

'Is Medicare Really Going Bankrupt? Definitely Not'

Trudy Lieberman of the Columbia Journalism Review catches CNN getting something right:

Medicare ‘bankruptcy’: CNN gets it right, by Trudy Lieberman: Hooray for, for fact checking the often-heard claim of Medicare’s “impending” bankruptcy. CNN’s contribution sets a high bar...
The “bankruptcy” language comes up a lot. ... But is Medicare really going bankrupt? Definitely not, says CNN. The network is correct, and the point is crucial.
How did CNN pull away from the fact-checking pack on this one? ... First, CNN reported, as CJR has urged news outlets to do, that only one part of Medicare is in potential trouble—the Hospital Trust Fund, which is financed by payroll taxes. The other parts of Medicare, including Part B, which finances doctor visits, lab tests, and outpatient services, “are adequately financed for now,” Medicare trustees have said. ...
CNN pushed further and asked a logical question that most reporters writing about Medicare have missed. When the magic date for “bankruptcy” arrives—2024 according to the Dems, or 2016 if the ACA disappears in a Romney presidency—would Medicare really disappear? Jonathan Oberlander, a health policy expert at the University of North Carolina, told CNN that ... “Medicare is not going bankrupt. Medicare would still have most of the necessary funds to pay those expenses and other parts of the program would be unaffected. Medicare won’t go bankrupt in the literal sense in 2016 or 2024 or 2064—or ever.” The Centers for Medicare and Medicaid Services, which runs the Medicare program, said this year that even in 2024 the Medicare hospital trust fund could still pay 87 percent of its estimated expenditures, and noted that, “in practice, Congress has never allowed a Medicare trust fund to exhaust its assets.” ...
That’s not to say that Medicare’s cost explosion is not a problem. How to control cost—not just for Medicare but for al the rest of the healthcare system, too—is a central issue that the press needs to clarify. ...

Friday, August 31, 2012

Bad Political Discourse Drives Out Good

Chris Dillow tries to explain the poor quality of political discourse:

Adverse selection in political discourse, by Chris Dillow: ...there is adverse selection in political debate: fanatics are given attention whilst sober, rational voices are overlooked. There are four channels through which this happens:
- Fanatics think their beliefs are so important and true that they set up lobbying groups and "thinktanks" to promote them, whilst rational people devote less time and organization to pushing their opinions. ...
- Producers want "good" TV/radio, and this means having a violent debate between people with well-defined positions who can talk in soundbites. ...
- People mistake confidence for knowledge, and so give too much credence to the irrationally overconfident.
- A tendency has emerged for people to respect strongly-held opinions... This, of course, in the opposite of what should be the case. The fact that someone believes strongly in something is a reason for us to disrespect their belief and to discount it as the product of a fevered, fanatical and irrational mind.
What I'm suggesting here is an adjunct to something Mancur Olson said in the 1960s. He pointed out that small numbers of people with large interests would organize themselves better than large numbers with smaller interests. The upshot, he said, was that politics would give too much weight to small vested interests to the detriment of aggregate well-being. ... Small groups with strongly-held beliefs are given more credence and deference than they should have.
And this, in turn, implies that the mass media can sometimes undermine rational political discourse rather than promote it.

Thursday, August 30, 2012

Agents of Misinformation

Steve Benen:

A pass-fail test, by Steve Benen: At the Republican National Convention last night, Paul Ryan told so many demonstrable lies, he raised important questions about his character and what's left of his integrity. What matters next, however, is whether anyone notices.
It's come as something of a relief to see so many media professionals go after Ryan for his dishonesty last night. ... I'm well aware of the fact that the vast majority of Americans will never see any of this scrutiny, but other reporters, editors, and producers will, and if a consensus begins to emerge that Romney/Ryan is fundamentally dishonest, this is likely to influence the public's perceptions of the race.
But let's not ignore those inclined to give Ryan a pass. ...
Not to put too fine a point on this, Ryan, like his running mate, tells obvious falsehoods because he's confident there will be no consequences. He simply assumes he can lie with impunity because the media doesn't care to separate fact from fiction.
This is a critical test of the political world, and a few too many are failing.

They have been doing this with economics for a long time, but it has been difficult for reporters to figure out the difference between legitimate disputes about theory and evidence within the profession, and outright misrepresentations (it's not that hard in every case, and it's frustrating reporters still don't do better than this, but it's at least understandable in some instances).

But this year it is rising to a different level, and what used to bug me about the right's presentation of economics has now been extended to their discussion of everything. The campaign is pretty much laughing at the fact checkers and saying, so what?

The press is supposed to be helping America understand, not helping to mislead them, and it's time for reporters -- political reporters in particular -- to take a long, hard look inward and figure out where they've gone so wrong.

Sunday, August 26, 2012

David Brooks is 'a Slippery Fellow'

David Warsh on David Brooks:

Brooks is a prestidigitator, that wonderful word borrowed from the French, descended from the Latin, meaning juggler, deceiver. He is all the more successful because of his earnest nice-guy manner. But he’s a slippery fellow, frequently passing off Tea Party sleight-of-hand as moderate magic. That’s what makes him fun to read. It also drives his NYT stable-mate Paul Krugman to distraction.

More here.

Friday, August 24, 2012

'Evidence vs. Ideology' and 'Romney’s Lying Machine'

Laura D’Andrea Tyson:

Evidence vs. Ideology in the Medicare Debate, by Laura D’Andrea Tyson, Commentary, NY Times: When formulating public policy, evidence should be accorded more weight than ideology, and facts should matter... The ... Romney campaign has been deliberately misrepresenting President Obama’s Medicare record.
Mitt Romney characterizes the $716 billion of Medicare savings over the next 10 years, contained in the Affordable Care Act, as President Obama’s “raid” on the Medicare program to pay for his health care program. This fear-mongering is simply untrue. These savings result from reforms to slow the growth of Medicare spending per enrollee – there are no cuts in Medicare benefits. ...
Both Governor Romney and Representative Paul D. Ryan have promised to repeal the Affordable Care Act and with it the reforms behind the $716 billion in Medicare savings (although Mr. Ryan duplicitously counts the savings from these reforms in his deficit-reduction plan). Medicare beneficiaries would ... lose the benefits..., and they would be forced to pay higher premiums and co-pays as a result of faster growth in Medicare costs.
President Obama’s health care plan is not a raid on Medicare; it is an investment in a stronger system. If the Affordable Care Act had not met this standard, the AARP would not have endorsed it. ...
Now Mr. Ryan has espoused – and Governor Romney has embraced — a proposal to transform Medicare into a premium support system. ... There is no evidence that such a system would control Medicare spending more effectively than the current Medicare program strengthened by Affordable Care Act reforms. Indeed,...the C.B.O. has concluded that ... such plans would drive up total health-care spending per Medicare beneficiary...
A voucher system would do little to control the growth of health care costs, but it would shift their burden onto Medicare beneficiaries in the form of higher premiums and reduced care. Cost-shifting should not be confused with cost containment. ...
A “serious” deficit hawk committed to saving and strengthening Medicare, not one whose primary goals are repealing health-care reform and cutting taxes for the wealthy, would base his Medicare plan on the evidence. ...

Robert Reich is astounded at the Romney-Ryan campaign:

Romney’s Lying Machine, by Robert Reich: I’ve been struck by the baldness of Romney’s repetitive lies about Obama — that Obama ended the work requirement under welfare, for example, or that Obama’s Affordable Care Act cuts $716 billion from Medicare benefits. ...
Every campaign is guilty of exaggerations, embellishments, distortions, and half-truths. But this is another thing altogether. I’ve been directly involved in seven presidential campaigns, and I don’t recall a presidential candidate lying with such audacity, over and over again. Why does he do it, and how can he get away with it?
The obvious answer is such lies are effective. Polls show voters are starting to believe them... Romney’s lying machine is extraordinarily well financed. ... Romney’s lying machine is working.
But what does all this tell us about the man who is running this lying machine? (Or if Romney’s not running it, what does it tell us about a man who would select the people who are?)
We knew he was a cypher — that he’ll say and do whatever is expedient, change positions like a chameleon, eschew any core principles.
Yet resorting to outright lies — and organizing a presidential campaign around a series of lies — reveals a whole new level of cynicism, a profound disdain for what remains of civility in public life, and a disrespect of the democratic process.
The question is whether someone who is willing to resort to such calculated lies, and build a campaign machine around them, can be worthy of the public’s trust with the most powerful office in the world.

The press is completely dropping the ball in its duty to inform voters (surprise!). If stories consistently opened up with something along the lines of "The Romney campaign continued to make lies and misleading inferences the centerpiece of its campaign today...," this would stop. (It would also be worth noting, I think, that making lies about the other side the most prominent feature of a campaign is a pretty good indication that the candidate has no new ideas of his own to present. But simply pointing out the lies -- and the massive number of flip-flops of convenience -- would go a long way toward fulfilling the duty of the press to inform voters rather than mislead them by presenting false claims as legitimate debate.)

Wednesday, May 30, 2012

Economic Dark Ages?

Stan Collender is driven to shrillness:

Is This The Economic Dark Ages In The U.S?, by Stan Collender: ...a behavior -- bald-face lying --... has become so blatant and commonplace among Republican policymakers on economic issues that any one of them who is even slightly honest and candid now would be both an absolute rarity and a welcome relief.
And the fact that the GOP lying about the economy...and especially the so accepted and expected means that any Republican who wasn't jump-the-shark ridiculous on these issues wouldn't be allowed to stay in the party much longer. ...
House Speaker John Boehner (R-OH) ... easily qualifies as the weakest and least effective Speaker in my lifetime and has to be included on the list of the all-time worst in U.S. history, demonstrated yet again that he'll say and do anything to stay speaker even when what he's saying about the budget can easily be shown to be nonsense and when he knowingly and without giving it a second thought  threatens the well-being of the U.S. economy.
I'd say this doesn't bode well for the outcome of this year's federal budget debate, but that's both obvious and an understatement. It actually points to the a period in U.S. history that is very likely to be labeled by historians as its economic dark ages.

I think that reporting on economic issues has improved, and that blogs have something to do with that. But when it comes to political reporting on economic (and other) issues, it's just as disappointing as ever. If there's no reputational or other costs associated with this behavior, why stop?

Sunday, April 15, 2012

Turmoil in the Daily Newspaper Business

David Warsh on the viability of the newspaper business:

The Daily Melody, Economic Principals: Turmoil continues in the daily newspaper business. The once-mighty Philadelphia Inquirer was sold last week for a paltry $55 million. The Denver Post decided to put its proprietary local news on the front page and move its commodified national items to the second section. And another hopped-up hedge fund operator explained to gullible Forbes readers why The New York Times “as we know it” would disappear by 2015. (How do I keep track of this stuff?  Like everyone else interested or involved in the industry, I read Jim Romenesko.)

Newspaper publishers should think a little harder about the distinction between searching and browsing.  Leon Wieseltier framed the distinction nicely the other day in Going to Melody, a poignant little essay in The New Republic about Melody Records, an old-fashioned music store near Dupont Circle in Washington.,D.C., that had gone out of business.

Wieseltier was bereft. For thirty years, he had regularly prowled Melody Record’s aisles, looking for new releases, schmoozing with its knowledgeable clerks, discovering items of chamber music and jazz he otherwise might not had known existed, defending his affection for Rihanna. His visits had been motivated not so much by acquisitiveness, he wrote, but by inquisitiveness.  He went “to engage in the time-honored intellectual and cultural activity known as browsing.”   He elaborated:

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