Sunday, July 02, 2006

The Economics of Journalism of Economics

In a post that uncharacteristically portrays a (former) member of the Bush administration in a positive light, Brad DeLong continues his criticism of the mainstream media:

The world is a complex and intricate place. How is anyone to understand it--even a particular piece of it, for example the United States government in Washington DC and its economic policies? It is a big problem, for the standard sources that I was taught (perhaps wrongly) as a child to rely on--the Washington Post, the New York Times, Walter Cronkhite on the evening news--are breaking down.

I will suggest that he was in fact taught wrongly. But first I note that he later makes some important exceptions:

If you want to understand Washington DC, the American government, and American economic policy, then: trust the news pages of the Wall Street Journal, trust the Financial Times, trust the political and lobbying coverage of the National Journal. Trust Bloomberg and Knight-Ridder to try as best they can to get the story straight under immense time pressure.

I know very little about the National Journal, so I won’t comment on that, but the other four media outlets mentioned here have something obvious in common: they are all business and financial media. That orientation stands in contrast to those mentioned disparagingly in the earlier citation.

I am regular reader of the Wall Street Journal myself. (To be honest, I usually only make it through column 2 of the front page, and perhaps column 3, depending on how much fiber I ate the previous day.) The Journal’s coverage is far from perfect, but since it is the only paper that I read (even one column of) regularly, revealed preference would suggest that I tend to agree with Brad.

But even if I had never read the New York Times, it wouldn’t surprise me that the Journal has more reliable coverage. Business media are designed to provide news as useful information; general media are designed to provide news as a form of entertainment. Times readers want to find out what’s happening in the world because they enjoy finding out what’s happening in the world. In principle it doesn’t make much difference whether what they find out is what’s actually happening or some contrived alternate reality. In practice the distinction matters only to the extent that readers are likely to check the information against other sources.

Journal readers want to find out what’s happening in the world because they are going to make practical decisions based on that information – not just ineffectual decisions (from the individual perspective) like who to vote for, but decisions – like what investments to choose, how many widgets to produce, or whether to accept a merger offer – that will have noticeable effects on their lives. If the Journal gets a story wrong, it makes a practical difference to readers. Unlike the case of the Times, whether a story is substantively accurate makes more difference than whether the story is enjoyable to read. Naturally it is in the Journal’s interest to allocate more of its resources toward getting the stories right.

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Anonymous Anonymous said...

knzn - good post. I also read De Long's post but my memory "deleted" his post in my mind, probably because I thought he was bias to Mankiw. I have the same reaction when I read something about Krugman in Mankiw's post.

I have been puzzling about Mankiw: why did he choose 2004, the sensitive time to publish his "outsourcing" paper? Hasn't he thought of the political consequence? If he wants to tell the truth which he believes, he could wait till 2005. That paper may cost him being the chair of the Fed, if that's what he wants.

I just wonder what you think...

Sun Jul 02, 05:33:00 PM EDT  
Blogger knzn said...

Just an error in real-time judgment, I think, given his limited political experience. One thing I’ve discovered from introspection is that it’s easy to make errors in judgment in real time even if you’re smart enough to know better. (Think of what Ben Bernanke said to Maria Bartiromo. He was just lucky he already had the job.)

Sun Jul 02, 08:18:00 PM EDT  
Anonymous Anonymous said...

"The world is a complex and intricate place."

You need a Harvard Phd to tell us this, knzn.

Anyway. Dont ya just love the pyschological mind games Delong plays on ManQ. Just imagine how poor ManQ feels when he logs on there in the morning; like, uh, whatll it be today.

I think the interesting story here is how media distorts stories for readership. Like the way they never, ever refer to a capital account surplus. Instead, its all a current account deficits. Sensationalism is the name of the game.

Also, I was at talk by Stiglitz once and he remarked how there basically was a deal between the White House and the media. The White House "leaked" stories to the media, who dutifully spinned them to the White Houses desires; else, they wouldnt get any more "leaks". Rough justice, but it all sounded right to me. (Of course Stiglitz said *he* never engaged in this kinda thing. Not at all).
Also, journalists have to sell newspaper, hence the sensationalism. So, inaccurate stories is just a rational response to economic incentives.

Youd think DeLong would understand that, wouldnt ya?

Sun Jul 02, 11:57:00 PM EDT  
Anonymous Anonymous said...

knzn - Your introspection is so true in real life…

I have been wondering if the Maria Bartiromo incident was really offhand. I believe Bernanke wants to control inflationary pressure with minimum sacrifice of growth and employment. Standing at the time when he tipped Maria, the Street had been treated him as a dove with the elevated Dow. By tipping Maria that he was no dove, he created a negative wealth effect without raising the interest rate that may trim down jobs. That’s why at the time I heard Maria said that Bernanke told her in the dinner about the Street’s misinterpretation on him, I thought – wow, shooting two birds with one stone, what a good game player!

I am not confident that the incident was intentional because I do not know Bernanke. If he is a bureaucratic type that always follows rules, it would be more likely that the incident is careless. Also the game is very dangerous.

Mon Jul 03, 09:52:00 AM EDT  
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