Category Archive for: Media [Return to Main]

Friday, January 06, 2017

Paul Krugman: The Age of Fake Policy

Don't let Trump distract you from his real agenda:

The Age of Fake Policy, by Paul Krugman, NY Times: On Thursday, at a rough estimate, 75,000 Americans were laid off or fired by their employers. Some of those workers will find good new jobs, but many will end up earning less, and some will remain unemployed for months or years.
If that sounds terrible to you..., I’m just assuming that Thursday was a normal day in the job market. ... In an average month, there are 1.5 million “involuntary” job separations (as opposed to voluntary quits), or 75,000 per working day. Hence my number. ...
Real policy ... involves large sums of money and affects broad swathes of the economy. Repealing the Affordable Care Act ... would certainly qualify.
Consider, by contrast, the story that dominated several news cycles a few weeks ago: Donald Trump’s intervention to stop Carrier from moving jobs to Mexico. Some reports say that 800 U.S. jobs were saved; others suggest that the company will simply replace workers with machines. But even accepting the most positive spin, for every worker whose job was saved in that deal, around a hundred others lost their jobs the same day. ...
This was fake policy — a show intended to impress the rubes, not to achieve real results.
The same goes for the hyping of Ford’s decision to add 700 jobs in Michigan...
The incoming administration’s incentive to engage in fake policy is obvious... Mr. Trump won overwhelming support from white working-class voters, who believed that he was on their side. Yet his real policy agenda, aside from the looming trade war, is standard-issue modern Republicanism: huge tax cuts for billionaires and savage cuts to public programs, including those essential to many Trump voters. ...
Still, none of this would work without the complicity of the news media. ...
Sorry, folks, but headlines that repeat Trump claims about jobs saved, without conveying the essential fakeness of those claims, are a betrayal of journalism. This is true even if ... the articles eventually, quite a few paragraphs in, get around to debunking the hype: many if not most readers will take the headline as validation of the claim.
And it’s even worse if headlines inspired by fake policy crowd out coverage of real policy.
It is, I suppose, possible that fake policy will eventually produce a media backlash — that news organizations will begin treating stunts like the Carrier episode with the ridicule they deserve. But nothing we’ve seen so far inspires optimism.

Monday, September 19, 2016

It’s Not Too Late to Fix Fox News

Bruce Bartlett:

It’s Not Too Late to Fix Fox News: For the first time in its 20-year history, Fox News is stumbling. ... Fox News has long been a double-edged sword for Republicans..., it ... boxes in candidates with the narrow, cosseted views of its audience, making it almost impossible to reach out to more moderate Republicans during the general election.
Now some conservative intellectuals ... are asking whether Fox is a net plus or minus for their movement. They wonder what good it accomplishes when it leads to the nominations of Republicans like Mr. Trump, who have a low chance of winning a general election....
The sealed universe of Fox News might be an excellent strategy for a niche television audience, but it’s a disastrous one for presidential candidates who have to appeal to swing voters. Mr. Trump continues to double down on his most outrageous opinions and proposals, like the Mexican wall, cutting his campaign off from the support of moderate Republicans, undecided voters and disaffected Democrats.
Ten years ago I stopped watching Fox because I found that it distorted my worldview... Since at least 1969..., conservatives have believed that the media is overwhelmingly liberal and hostile to their values. I thought so myself for a long time, but no longer. I think it hews pretty much to the objective center, with Fox well to the right.
Could Fox News be that outlet that a broader coalition of conservatives wants? The recent ouster of Mr. Ailes and the inevitable takeover of the company by the sons of 85-year-old Rupert Murdoch mean that some change will come. Opening Fox to broader political views could be a plus for both it and the conservative movement. If Fox News remains an entrenched part of the conservative extreme, the result will be more Republican candidates like Mr. Trump and more defeats at the polls.

Wednesday, May 25, 2016

Matthew Gentzkow on Newspapers and Politics

In case you missed this in yesterday's links (the full interview is much longer):

Interview with Matthew Gentzkow, by Douglas Clement. Editor, The Region: Before Matthew Gentzkow entered the field, the economics of media was largely uncharted territory. Today, media economics is flourishing thanks largely to him and his co-authors—particularly Jesse Shapiro... But Gentzkow’s expertise is not confined to media; he’s also a pioneer in methodology, empirical procedure and economic theory with landmark research on communication, social influence and marketing.
With unique insights, innovative technique, methodological rigor and massive databases he often creates for an express purpose, Gentzkow has answered questions about television, newspapers, product branding, competition, persuasion and politics that many scholars had asked but no one had answered convincingly.
Due to this work, we now know that newspaper media slant is driven mostly by the preferences of readers, not newspaper owners. And by examining browser data, he discovered that people don’t largely live in internet “echo chambers”—that is, they don’t exclusively visit sites that align with their political bent. Product brand preferences, he found, are established early in life and endure long after exposure to essentially identical, less expensive alternatives. These and dozens of other economic mysteries have yielded to his curiosity, insight and skill.
Gentzkow received the John Bates Clark Medal in 2014...
... Newspapers and politics Region: You’ve done a great deal of research on newspapers and particularly their relationship to politics. There certainly isn’t time to get to it all. But in a key, early paper with Shapiro, you build a model in which media bias emerges because firms slant their coverage toward their audience to build a reputation for quality. I’m curious to know how that holds up empirically
I’d also like to ask about your findings on the role of newspaper owners in driving media slant, and what that implies for competition policy for media.
Gentzkow: ...One of the things we found in looking at newspapers is that their political slant or political content seems to be driven very strongly by demand from their readers, the fact that people in conservative places want to hear conservative stuff and the converse for liberals. And that slant is basically uncorrelated with anything about their owners, the ownership of the paper.
So if you look at two newspapers that are owned by the same company, or the same individual, they are no more similar to each other than two unconnected newspapers in those same places. For instance, the New York Times Company at one time owned a bunch of newspapers all over the country. Those newspapers did not all look like the New York Times; they looked like other newspapers in the places where they were located.
That speaks directly to regulation because much of the way we regulate media is by regulating media ownership. The premise of a lot of that regulation has explicitly been that having diverse viewpoints, diverse ideas and independent reporting is important for democracy. And that in order to guarantee, we need to have diverse ownership because owners are going to put their own imprint on the content of their media.
Region: The concern that if Rupert Murdoch, for instance, or William Hearst in an earlier era, controls newspapers, radio, et cetera, he’ll use that platform to push his political agenda.
Gentzkow: Right, if Murdoch takes over everything, we’re not going to like it because everything will look like Fox News.
Our research results push back on that and say that, at least in this particular context, ownership is not really the key driver of slant and, in fact, a lot of the driver is actually coming from consumer demand. Not only does that say that you might not need to be as worried about ownership, but it also says that the welfare implications of this are a little more complicated because now consumers are getting what they want.
We might think from a political, democratic point of view that it would be better if the public got different, more diverse information. But there’s going to be a welfare trade-off because we would be giving them content they would prefer less. If we want to give people diverse content that we think is good for democracy, then we have to get them to actually read, watch or consume it. And, you know, giving a bunch of people in conservative places some liberal newspaper—well, our results would suggest they’re not going to read it. So, that seems to have important implications for policy.
But it comes with a really important caveat. The finding that ownership doesn’t matter in terms of a newspaper’s political slant is not a universal result. It doesn’t apply everywhere. It’s a statement about newspaper markets in the United States—a highly commercialized, relatively competitive setting, and a place where the political returns to manipulating the average content of a newspaper might not be all that big.
It could be entirely consistent with those results that in other countries, in other contexts, it may well differ. Does Silvio Berlusconi influence the media in Italy? A lot of evidence suggests yes. Does control by the government of Russia affect the content of the media in Russia? Or even if we were to look at national cable outlets in the U.S., would we be confident that ownership doesn’t matter? I think that’s a pretty big leap; you need to be careful.
My own view would be that, probably more than is often assumed, the fact that Fox News has conservative content in the U.S. is related more to the fact that that’s a very profitable business strategy than to any personal political agenda of Rupert Murdoch. But our results don’t settle that question, and it’s an important question.
People in different places and different backgrounds can have such persistently different beliefs about even factual issues, beliefs that never seem to converge. How do people end up with such different beliefs? Why don’t they converge? The sharp empirical test that’s going to pin [this] down—that, I think, we’re still looking for.
Region: And your earlier paper with Shapiro in which you developed a model about newspapers and political slant: Could you tell us a bit about it and how it fares empirically?
Gentzkow: The theory paper that Jesse and I wrote makes the point that, first of all, there’s a mechanism by which even rational consumers, even consumers who really care about getting the truth, are nevertheless going to demand news in a way that matches what we see empirically. That is, they’re going to demand news that matches their own ideology.
Why is that true? Well, suppose you live in a world where you don’t know ahead of time which sources have accurate information and can be trusted, and which don’t have accurate information and can’t be trusted. In that world, a correct, rational, Bayesian inference is that if you say a bunch of stuff that I think a priori is incredibly unlikely to be true, I’m going to trust you less. And if you say stuff that sounds to me like it’s probably right, that is consistent with my prior beliefs about what’s most likely to be true, I’ll trust you more.
It’s obvious in the extremes. If we go into a supermarket and see a tabloid newspaper reporting that Elvis Presley was spotted in New York or that aliens came down from outer space, and you have a strong prior belief that that’s not true, then even if we’ve never seen that newspaper before, we’ll infer that it’s probably not a very accurate newspaper. It’s a totally reasonable judgment that nobody would take issue with.
That same kind of judgment leads to things such as, if I’m somebody who believes very strongly that global warming is a hoax or that the evidence for it is weak, and a lot of people I’ve talked to believe that global warming has been exaggerated, then if I see news outlets that are arguing otherwise, I’m going to trust them less. And if I see news outlets that are skeptical about global warming, I’m going to trust them more.
You can see that playing out on lots and lots of political issues. So, on net, if I’m conservative, I will sincerely believe that Fox News is a more trustworthy source of information. I’m not simply watching Fox News because, “Well, I know that it’s distorted, but it makes me feel better.” That is, I’m not watching it because it confirms my biases and makes me feel good by telling me that I’m right even though I sort of know that it’s less accurate. Rather, I’m watching it because I genuinely think it’s the most accurate source of information there is.
So, that’s what’s true in the world of that model but, as you asked, does that match the facts? Has that been confirmed? I think it resonates very strongly with my casual, anecdotal impression of how people feel about the media choices they make, and it resonates with a lot of survey evidence.
Surveys show that people who, for instance, happen to be liberal and are also consistent readers of the New York Times (including many of our friends in academia) sincerely believe that the New York Times is a trustworthy and accurate newspaper. True, it happens to agree with their political point of view, but if you ask them to bet on a factual question, they would put money on the New York Times being accurate. And surveys also show that people who are conservatives believe exactly the same thing about Fox News.
But that’s all anecdotal, survey-type evidence. We haven’t figured out a way to confirm it empirically, so it remains kind of an open question. We need sharper empirical tests that separate how much of the demand for like-minded information comes from this kind of mechanism versus a variety of other psychological mechanisms that we know are operating.
For example, there’s good evidence that we remember things better when they’re consistent with our prior point of view. There is also a sense of enjoyment at hearing confirmatory information. It’s really fun if you’re a conservative, for instance, to listen to Rush Limbaugh, and it’s really fun if you’re a liberal to listen to Jon Stewart or the “Daily Show”—people making fun of the people you disagree with is really enjoyable. So, there’s definitely that element; the pleasure of hearing somebody reinforce your beliefs is a very real thing.
That tendency of people to seek out like-minded information is so pervasive. You see it in absolutely every context that anyone has ever looked at; you see it for well-educated people and those who are far less-educated. You see it when the stakes are low as well as when they’re high. You see it everywhere and all the time. And some big component of that fact that it’s so robust and pervasive is related to this underlying fact that it’s also rationally what you would do if you were genuinely trying to figure out what is true.
There’s a broader question that is part of what first got me interested in all of this, which is, how is it that people in different places and different backgrounds can have such persistently different beliefs about even factual issues, beliefs that never seem to converge.
We’ve talked about liberals and conservatives in the U.S., but there are also huge differences across countries. Jesse and I looked at some Gallup data where following 9/11, 75 percent of people across nine Islamic countries believed that the World Trade Center was not destroyed by an airplane—that was hijacked by Arab terrorists. They had a variety of other explanations: The CIA did it, Mossad did it or something else. In stark contrast, basically 100 percent of people in the U.S would agree that 9/11 was a terrorist attack.
How do people end up with such different beliefs? Why don’t they converge? Is it all because people are deceiving themselves, or they’re biased, or they want to be told that they’re right? Maybe that’s part of it, but at the root of it, I think, is that figuring out who you can trust is a really, really hard thing. We all start out surrounded by information coming from all these different sources—from our friends, our parents, different media outlets, from the government. We need some point of reference to judge who we’re going to listen to.
So it seems obvious—if you’re sitting in America—that, “Well, of course, the World Trade Center was destroyed by terrorists. Every single news organization that we’ve ever seen agrees with that; every single expert we’ve ever heard from agrees with that.”
But if you’re sitting in Pakistan, it’s not crazy to say, “Well, those are all Western news organizations, they share the same bias, they’re part of the same conspiracy, they’re controlled by the same people. Telling me that a hundred of them say this or that isn’t so different from telling me that one of them says it. And I’ve heard from a bunch of other people and seen some videos on YouTube. There’s actually a lot of evidence on the other side, and so I’m going to make a different judgment.”
So that core question of trust has seemed to me for a long time to be really important, but the sharp empirical test that’s going to pin down how much is due to a particular thing— that, I think, we’re still looking for. ...

Monday, September 14, 2015

Paul Krugman: Labour’s Dead Center

"Mr. Corbyn’s triumph isn’t that surprising":

Labour’s Dead Center, by Paul Krugman, Commentary, NY Times: Jeremy Corbyn, a long-time leftist dissident, has won a stunning victory in the contest for leadership of Britain’s Labour Party. Political pundits say that this means doom for Labour’s electoral prospects; they could be right, although I’m not the only person wondering why commentators who completely failed to predict the Corbyn phenomenon have so much confidence in their analyses...
But I won’t ... get into that game. What I want to do instead is talk about one crucial piece of background to the Corbyn surge — the implosion of Labour’s moderates. On economic policy, in particular, the striking thing ... was that every candidate other than Mr. Corbyn essentially supported the Conservative government’s austerity policies.
Worse, they all implicitly accepted the bogus justification for those policies, in effect pleading guilty to policy crimes that Labour did not ... commit. If you want a U.S. analogy, it’s as if all the leading candidates for the Democratic nomination in 2004 had gone around declaring, “We were weak on national security, and 9/11 was our fault.” Would we have been surprised if Democratic primary voters had turned to a candidate who rejected that canard, whatever other views he or she held?
In the British case, the false accusations against Labour involve ... claims that the Labour governments that ruled Britain from 1997 to 2010 spent far beyond their means, creating a ... debt crisis that..., in turn, supposedly left no alternative to severe cuts in spending, especially spending that helps the poor.
These claims have ... echoed by almost all British news media ... as facts. It has been an amazing thing to watch —... every piece of this conventional narrative is ... nonsense. ... And all of Mr. Corbyn’s rivals for Labour leadership bought fully into that conventional nonsense, in effect accepting the Conservative case that their party did a terrible job of managing the economy, which simply isn’t true. So as I said, Mr. Corbyn’s triumph isn’t that surprising given the determination of moderate Labour politicians to accept false claims about past malfeasance.
This still leaves the question of why Labour’s moderates have been so hapless.... Labour’s political establishment seems to lack all conviction, for reasons I don’t fully understand. And this means that the Corbyn upset isn’t about a sudden left turn on the part of Labour supporters. It’s mainly about the strange, sad moral and intellectual collapse of Labour moderates.

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]

Monday, March 23, 2015

Paul Krugman: This Snookered Isle


This Snookered Isle, by Paul Krugman, Commentary, NY Times: The 2016 election is still 19 mind-numbing, soul-killing months away. There is, however, another important election in just six weeks, as Britain goes to the polls. And many of the same issues are on the table.
Unfortunately, economic discourse in Britain is dominated by a misleading fixation on budget deficits. Worse, this bogus narrative has infected supposedly objective reporting; media organizations routinely present as fact propositions that are contentious if not just plain wrong.
Needless to say, Britain isn’t the only place where things like this happen. A few years ago, at the height of our own deficit fetishism, the American news media showed some of the same vices. ... Reporters would drop all pretense of neutrality and cheer on proposals for entitlement cuts.
In the United States, however, we seem to have gotten past that. Britain hasn’t.
The narrative I’m talking about goes like this: In the years before the financial crisis, the British government borrowed irresponsibly... As a result, by 2010 Britain was at imminent risk of a Greek-style crisis; austerity policies, slashing spending in particular, were essential. And this turn to austerity is vindicated by Britain’s low borrowing costs, coupled with the fact that the economy, after several rough years, is now growing quite quickly.
Simon Wren-Lewis of Oxford University has dubbed this narrative “mediamacro.” As his coinage suggests, this is what you hear all the time on TV and read in British newspapers, presented not as the view of one side of the political debate but as simple fact.
Yet none of it is true. ...
Given all this, you might wonder how mediamacro gained such a hold on British discourse. Don’t blame economists. ... This media orthodoxy has become entrenched despite, not because of, what serious economists had to say.
Still, you can say the same of Bowles-Simpsonism in the United States... It was all about posturing, about influential people believing that pontificating about the need to make sacrifices — or, actually, for other people to make sacrifices — is how you sound wise and serious. ...
As I said, in the United States we have mainly gotten past that, for a variety of reasons — among them, I suspect, the rise of analytical journalism, in places like The Times’s The Upshot. But Britain hasn’t; an election that should be about real problems will, all too likely, be dominated by mediamacro fantasies.

Monday, December 31, 2012

Paul Krugman: Brewing Up Confusion

Some well-funded groups are trying to "exploit the fiscal cliff to push a benefit-cutting agenda":

Brewing Up Confusion, by Paul Krugman, Commentary, NY Times: Howard Schultz, the C.E.O. of Starbucks,... posted an open letter urging his employees to promote fiscal bipartisanship by writing “Come together” on coffee cups. ... In the letter, Mr. Schultz warned that elected officials “have been unable to come together and compromise to solve the tremendously important, time-sensitive issue to fix the national debt,” and suggested that readers further inform themselves at the Web site of the organization Fix the Debt. Let’s parse that, shall we?
First of all,... the fiscal cliff ... doesn’t reflect a failure to “fix the debt” by reducing the budget deficit — on the contrary, the danger is that we’ll cut the deficit too fast.
How could someone as well connected as Mr. Schultz get such a basic point wrong? By talking to the wrong people — in particular, the people at Fix the Debt... For example,... Maya MacGuineas, the organization’s public face,... was trying to confuse readers on that point, and she apparently confused Mr. Schultz too. More about Fix the Debt in a moment..., let’s move on to Mr. Schultz’s misdiagnosis of the political problem we face.
Look, it’s true that elected politicians have been unable to “come together and compromise.” But ... implying a symmetry between Republicans and Democrats, isn’t just misleading, it’s actively harmful. The reality is that President Obama has made huge concessions. ... In return, the Republicans have offered essentially nothing. ... Given that reality,... when people like Mr. Schultz respond by blaming both sides equally ... they’re ... rewarding intransigence and extremism...
I’m willing to believe that Mr. Schultz doesn’t know what he’s doing. The same can’t be said, however, about Fix the Debt. You might not know it reading some credulous reporting, but Fix the Debt isn’t some kind of new gathering of concerned citizens..., it’s ... the usual suspects ... backed by an impressive amount of corporate cash.
Like all the Peterson-funded groups, Fix the Debt seems much more concerned with cutting Social Security and Medicare than with fighting deficits in general... What’s happening now is that all the Peterson-funded groups are trying to exploit the fiscal cliff to push a benefit-cutting agenda that has nothing to do with the current crisis, using artfully deceptive language — as in that MacGuineas letter — to hide the bait and switch.
Mr. Schultz apparently fell for the con. But the rest of us shouldn’t.

Saturday, August 06, 2011

"There They Go Again"

I think it would be safe to say that David Glasner is not a big fan of the WSJ's editorial page:

There They Go Again, by David Glasner: ...[T]he Wall Street Journal in its editorial today summed up its approach to economic policy making rather well. ... If Obama is for it, we’re against it. Simple as that. Leave your brain at the door.

He is responding an op-ed by former Reagan administration official David Malpass calling for, among other things, a strong dollar policy.

Wednesday, September 22, 2010

"The Story That Would Have Been Spun"

Arin Dube wonders how an alternative world might have played in the press:

Counterfactual: Or a Story that would have been Spun, by Arindrajit Dube: Six weeks before the midterm elections, the Democratic Party is facing major losses in both the House and the Senate, and is looking increasingly likely to lose control of the House altogether.
What is behind this rapid change in fortunes from only two years ago, when the Democrats swept into power? Based on extensive interviews with sources in both parties, including anonymous sources within the White House, it appears that an over-reach by the Obama administration pursuing a progressive and populist platform may have played an important role. Instead of an incrementalist, business-friendly strategy, the administration went to the hilt with policies focused on a greater role of government in providing jobs and healthcare, and perhaps pre-maturely ended American military involvement in both Iraq and Afghanistan.
Sources both inside and outside the administration agree that the pursuit of a health care policy with a strong role of the federal government (a “public option”) played a large role in solidifying the image of the administration as one that did not spend enough time courting moderate Republicans such as Senator Chuck Grassley. Had the administration not insisted on a strategy that fundamentally ended the control of the health insurance market by a handful of key companies, these sources say that a bipartisan compromise on universal healthcare would most certainly have been reached.
The pursuit of a second stimulus in late 2009 measuring $700 billion dollars was likely the second reason behind the quick turnaround in public opinion. While economists largely credit the second stimulus for lowering the unemployment rate to below 7% through a focus on aid to states and direct hiring initiatives, the political reality remains that there is increasing concern about burgeoning government debt. Although interest rates on treasury bills have not risen – yet – experts we spoke with worry about a sudden increase in such rates at any time. A more measured approach which let the structural problems arising from the bubble sort themselves out though the private market may have not lowered the unemployment rate at the short term. However, politically, our sources say, such an approach would have demonstrated a hard-headed approach that eschews populism, and would have calmed both the markets and an increasingly nervous electorate worried about countercyclical deficit financing.
Finally, while the administration’s economic advisors successfully pushed for a stringent and punishing regulatory policy with respect to the financial sector, some insiders grumble about the early decision by this administration to not recruit more palatable figures such as Timothy Geithner and Lawrence Summers. Lacking the “soft touch” approach championed by Clinoton-era protégé’s of Robert Rubin, the brash economic team under Obama moved quickly to cap bank size, impose draconian capital reserve requirements, re-instate Glass-Steagall, and strong-arm Congress to impose stringent limits on financial sector pay. While possibly creating a less risky financial market, it no doubt led to a flight of talent from the financial sector. Today, the financial sector’s share of employment is back closer to the late 1980s, which some believe is a cause for concern as financial innovations are unnecessarily stymied through regulatory pressure.
As a result of these and other factors, today’s electorate is taking a hard look at the Democratic Party and its brand of economic policies. Looking back with the advantage of hindsight, perhaps the Democratic Party leaders will decide that pursuing a less populist and redistributive strategy would have secured it a lock on both the Congress and the Presidency for generations to come. And that it was the focus on reducing unemployment and providing affordable healthcare – at the cost of securing bipartisan agreements – that lay the foundations for a resurgent Republican party.

There's another possibility. If Obama had fought harder for some of these things, he probably wouldn't have made much more progress than he did -- perhaps a little, but not much. But the battle would have been worth having as a means of signaling to the base that the things they care about are worth standing up for, and for painting the other side as obstructionists standing in the way of moving forward. I think there are alternative histories where the administration is more combative and less devoted to bipartisanship that would have turned out much better than the reality we are seeing today. But the Obama I want isn't the Obama I have.

Tuesday, June 22, 2010

Brief Note

I will be on the Paul Mann Show (KHSU), Arcata, CA from 7:30-8:30 p.m. Tim Duy will be on the show as well.

Saturday, December 05, 2009

"Can Science Fight Media Disinformation?"

Is better science education the answer to our "media disinformation" problem?:

War Is Peace: Can Science Fight Media Disinformation?, by Lawrence M. Krauss, Commentary, Scientific American: ...The rise of a ubiquitous Internet, along with 24-hour news channels has, in some sense, had the opposite effect from what many might have hoped such free and open access to information would have had. It has instead provided free and open access, without the traditional media filters, to a barrage of disinformation. Nonsense claims had more difficulty gaining traction in the days when print journalism held sway and newspaper editors had the final word on what made its way into homes and when television news consisted of a half-hour summary of what a trained producer thought were the most essential stories of the day.
Now fabrications about “death panels” and oxymoronic claims that ”government needs to keep its hands off of Medicare” flow freely on the Internet, driving thousands of zombielike protesters to Washington to argue that access to health care will undermine their fundamental freedom to have their insurance canceled if they get sick. And 24-hour news channels, desperate to provide ”breaking” coverage at all hours, end up serving as public relations vehicles for any celebrity who happens to make an outrageous claim or, worse, decide that the competition for ratings requires them to be anything but ”fair and balanced” in their reporting.
“Fair and balanced,” however, doesn’t mean putting all viewpoints, regardless of their underlying logic or validity, on an equal footing. Discerning the merits of competing claims is where the empirical basis of science should play a role. I cannot stress often enough that what science is all about is not proving things to be true but proving them to be false. What fails the test of empirical reality, as determined by observation and experiment, gets thrown out like yesterday’s newspaper. One doesn’t need to debate about whether the earth is flat or 6,000 years old. These claims can safely be discarded, and have been, by the scientific method.
What makes people so susceptible to nonsense in public discourse? Is it because we do such a miserable job in schools teaching what science is all about—that it is not a collection of facts or stories but a process for weeding out nonsense to get closer to the underlying beautiful reality of nature? Perhaps not. But I worry for the future of our democracy if a combination of a free press and democratically elected leaders cannot together somehow more effectively defend empirical reality against the onslaught of ideology and fanaticism. [full version]

There was plenty of nonsense long before the internet and 24 hour news, but it's probably true that these developments helped to amplify and speed the spread of nonsensical claims, though I'd assert that 24 hour news (plus radio to some extent) is more responsible than the internet.

As for solving the nonsense problem through better science education, I do agree that better critical thinking skills would be helpful, that's true by definition I suppose, but that's not enough. Nobody can be an expert on health care, global warming, and all the other important issues they face. The underlying scientific, economic, political, sociological, etc. issues are too difficult (in some cases even for the experts). To overcome that, we have to rely upon people we can trust, often experts who can help to guide us to the correct decisions, but sometimes it's a trusted intermediary. Critical thinking skills can help us determine who to listen to, but it still comes down to trusting that you are getting the best possible analysis of the problem

For good or bad -- I'm still making up my mind about that -- I think that a trust that was once there is gone, at least to some degree. People believed Walter Cronkite, they trusted scientists, Dr. Spock had all the answers about how to raise your kids, but trust in the media, scientists, politicians, doctors, and so on has eroded (yes, economists too). I'd cite 24 hours news and its ilk as part of the reason, but I'm not sure that's been the fundamental driving force behind the change.

Maybe people are right to be more skeptical of the information they receive -- maybe they trusted too much in the past (and there could be an overreaction during the adjustment, causing trust to fall even further). If so, then the increase in uncertainty brought about by declining trust in experts and other sources of information would be consistent with the appearance of more nonsense in the public discourse attempting to fill the void.

Friday, September 18, 2009

"Regulating for an Independent Media"

This research says that advertising has "seriously interfered with the quality, accuracy, and breadth of content and programming in the media." The proposed solution is to ensure that there is "vigorous competition in media markets," and to provide "public funding of informative media as a public good":

Regulating for an independent media: The problems of political and commercial bias, by Matthew Ellman and Fabrizio Germano, Vox EU: There is a crisis in media and journalism, and policymakers have to tackle both political and commercial influence in the media.

Continue reading ""Regulating for an Independent Media"" »

Tuesday, September 01, 2009

Ideas versus Discipline

"This is just the latest chapter of a long saga":

The Guns of August, and Why the Republican Right Was So Adept at Using Them on Health Care, by Robert Reich: What we learned in August is something we've long known but keep forgetting: The most important difference between America's Democratic left and Republican right is that the left has ideas and the right has discipline. Obama and progressive supporters of health care were outmaneuvered in August -- not because the right had any better idea for solving the health care mess but because the rights' attack on the Democrats' idea was far more disciplined than was the Democrats' ability to sell it.
I say the Democrats' "idea" but in fact there was no single idea. Obama never sent any detailed plan to Congress. Meanwhile, congressional Dems were so creative and undisciplined before the August recess they came up with a kaleidoscope of health-care plans. The resulting incoherence served as an open invitation to the Republican right to focus with great precision on convincing the public of their own demonic version of what the Democrats were up to -- that it would take away their Medicare, require "death panels," raise their taxes, and lead to a government takeover of medicine, and so on. ...
This is just the latest chapter of a long saga. Over the last twenty years, as progressives have gushed new ideas, the right has became ever more organized and mobilized in resistance -- capable of executing increasingly consistent and focused attacks, moving in ever more perfect lockstep, imposing an exact discipline often extending even to the phrases and words used repeatedly by Hate Radio, Fox News, and the oped pages of The Wall Street Journal ("death tax," "weapons of mass destruction," "government takeover of health care.") I saw it in 1993 and 1994 as the Clinton healthcare plan -- as creatively and wildly convoluted as any policy proposal before or since -- was defeated both by a Democratic majority in congress incapable of coming together around any single bill and a Republican right dedicated to Clinton's destruction. ...
You want to know why the left has ideas and the right has discipline? Because people who like ideas and dislike authority tend to identify with the Democratic left, while people who feel threatened by new ideas and more comfortable in a disciplined and ordered world tend to identify with the Republican right. Democrats and progressives let a thousand flowers bloom. Republicans and the right issue directives. This has been the yin and yang of American politics and culture. But it means that the Democratic left's new ideas often fall victim to its own notorious lack of organization and to the right's highly-organized fear mongering. ...
August is coming to a close, and congressional recess is about over. History is not destiny, and Democrats and progressives can yet enact meaningful health care reform... But to do so, we'll need to be far more disciplined about it. All of us, from Obama on down.

[On another issue - people "who like ideas and dislike authority" are the types who tend to end up in universities, so this would also explain how self-selection could lead to a disproportionate number of Democrats in academia.]

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Update: Andrew Samwick says this all sounds familiar:

Robert Reich Is Having Deja Vu, Too, by Andrew Samwick: But he doesn't quite realize it.  In his latest post..., he laments the way Democrat "ideas" couldn't persevere against the onslaught of Republican "discipline."  Change a few details, and he's talking about failed Social Security reform in 2005:

I say the Democrats' "idea" but in fact there was no single idea. Obama never sent any detailed plan to Congress. Meanwhile, congressional Dems were so creative and undisciplined ... they came up with a kaleidoscope of health-care plans. The resulting incoherence served as an open invitation to the Republican right to focus with great precision on convincing the public of their own demonic version of what the Democrats were up to... The Obama White House -- a veritable idea factory brimming with ingenuity -- thereafter proved unable to come up with a single, convincing narrative to counteract this right-wing hokum. Whatever discipline Obama had mustered during the campaign somehow disappeared.

Being "coherent" enough to overcome "hokum" ought to be the minimum standard for legislation on this scale.  Like it or not, if you want to use the tools of a democratic government to reorganize markets for health care, you need more than an idea factory and staged townhall meetings.  You need some discipline yourself.  And we're not talking about Ironman triathlon level discipline.  We're only talking about government level discipline: white papers, Congressional hearings, and, critically, a forum in which the ideas in the bills that are moving through Congress are shown to be better ideas than the alternatives.  We haven't seen that at all.  In particular, show me why the bills moving through Congress, with all of their attendant costs, are better than a simple reform consisting only of:

  1. Community rating
  2. Guaranteed issue
  3. Ex post risk adjustment
  4. An individual mandate, with Medicaid for a fee as the backup option

And spare me the whining about how the Republicans don't have a better plan.  They don't have the White House.  They don't have the Senate.  They don't have the House.  They don't have to have a better argument than the claim that the Democrats' plan isn't better than the status quo.  It's not as if the Democrats shot down Social Security in 2005 and have now done something better.

Wednesday, July 15, 2009

How Should We Interpret Goldman Sach's Unexpectedly Large Earnings?

The NY Times Room for Debate is discussing how we should interpret Goldman Sach's compensation pool, which will be an $11.36 billion set aside for the first half of 2009. Here's the unedited version of my entry (you may like the shorter, edited version better):  

Returning to High-Risk Strategies, Room for Debate, NY Times, by Mark Thoma: What does the size of Goldman's compensation pool tell us? It signals several things. First, it gives some indication that the financial sector is improving, and that is good news. There's no guarantee, however, that the overall economy will follow anytime soon. Even with improvements in the financial sector, the recovery of the broader economy is likely to be a slow process.

One of the reasons I expect the recovery to be slow despite improvements in the financial sector is that the economy cannot go back to where it was before the crisis hit. The financial and housing sectors need to shrink, too many economic resources were used unproductively in support of these activities, and the automobile sector is also in transition.

And it's not just that the financial sector needs to get smaller so that resources can be used productively elsewhere, the financial sector also needs to change its ways so that risk accumulations do not threaten the financial system and the broader economy. As Robert Reich notes today, Goldman's chief financial officer tells Bloomberg News that "Our model really never changed, we’ve said very consistently that our business model remained the same." Thus, a second signal from Goldman's unexpectedly large earnings is that firms such as Goldman Sachs are returning to the same high-risk strategies backed by too big to fail government guarantees that got us into trouble in the first place, and that aspect of Goldman's success is worrisome. It's a signal that the excesses that led to the high incomes of financial executives have not ended.

Why aren't the profits and the bonuses paid to executives justifiable? Don't they signal the superior talents of Goldman employees, and don't those talents deserve to be rewarded by the marketplace? I think we can legitimately question whether this is a reward for superior talent. Goldman was helped by bailout funds -- there's some debate about whether it actually needed a direct infusion of funds -- but it's certainly true that Goldman benefitted when its counterparties such as AIG were bailed out. Goldman is also benefitting from its early escape from government constraints that still inhibit the ability of other firms to compete on equal - though perhaps overly slippery and risky - footing.

 So Goldman's earnings are not simply the product of the superior talent of Goldman's executives, there is more to the story. In addition, the bad incentives that executive compensation structures provide was one of the factors that caused the crisis, and the size of the compensation pool tells us there is work yet to be done to fix this problem.

Other entries from William K. Black, Yves Smith, Charles Geisst, David Merkel, and Jeffrey Miron.

Thursday, July 02, 2009

Tom Keene's "On the Economy"

From earlier today:

Thoma Says Fiscal Policy Needs 6 to 9 Months to Take Effect
July 2 (Bloomberg) -- Mark Thoma, professor of economics at the University of Oregon, talks with Bloomberg's Tom Keene about U.S. employment, consumer confidence and the fiscal stimulus. Listen/Download

[Recent podcasts include: DeLong, Roubini, Eichengreen, Ritholtz, and Blinder.]

Tuesday, May 19, 2009


This is just for my records:

The Paul Mann Show, Arcata, CA  KHSU May 19, 7:30-8:30 p.m.
The Mark and Dave Show, Portland, OR  KEX May 12, 3:30-3:40 p.m.
The Mark Martinez Show, Bakersfield, CA  KGEO May 9, 3:30-4:00 p.m.

I also, on occasion, do the Mark Thoma show in Springfield, Illinois.

I've been wondering why most of the hosts who call me are named Mark, or even share my name completely, and if that's the main reason they call (it's definitely the reason I was called in one case). So I was glad when Paul Mann called me to do his show again.

Wednesday, April 15, 2009

On the Economy with Tom Keene

Here's an interview I did yesterday for "On the Economy" with Bloomberg's Tom Keene: Listen/Download.[Alternate link: "Thoma Says Politics Limiting U.S. Efforts to Aid Banks. April 14 (Bloomberg)"]

Tuesday, April 14, 2009

Regulating Risk

More Blog Wars:

Don’t Leave the Door Open to Another Financial Crisis: ...perhaps the work on complexity analysis used in analyzing network connections in fields like physics and computer science can be used to analyze  the connectedness of financial firms. The mathematics to do this are already well-developed, and this should be feasible. Both the number and size of the connections would need to be tracked, and a risk index could then be developed.

Then, and this is the regulation part, I would propose developing something like the measures used to assess market or monopoly power discussed here. To determine if a firm is too large and powerful, a measure of its market share is constructed, and if that share crosses a predetermined threshold, further action is pursued by regulators. There’s no reason we can’t do the same with measures of connectedness among financial firms...

Response from Houman Shadab: Why Too Much Regulation Increases Risk.

Sunday, April 12, 2009


I was on KLCC's Sunday at Noon earlier today (there is also a taped interview of Tim Duy about halfway through). The interview is archived here.