One thing to note about the Yellen speech yesterday: it really annoyed a lot of Republicans. The Fed chair talked about the problems faced by local Chicago residents: Dorine Poole, Vicki Lira and Jermaine Brownlee. Explaining things in terms of personal stories of named individuals might seem like a good communication idea. She was trying to explain that the Fed’s goal is to help Main St, not just bail out big Wall Street institutions. So putting it in terms of personal experience might seem like a good way to do that.
But Republicans tend to be enraged when people use vivid particular stories to argue for general government intervention, because activists and campaigning journalists have used the rhetorical tactic so often against them.
Does it matter if the GOP is annoyed? It does if they take the Senate in November, as seems likely, and initial primary talk is being dominated by Rand Paul who is very hostile to the Fed. A Fed keeping rates low to help the unemployed might very quickly be seen as a Fed keeping rates low to help the Democrats.
The Fed does not respond to overt political pressure. But it is aware of political context, and the potential for distortion or backlash of the Fed message would be highest in 2015, when a new Republican Senate and the appeal-to-the-base phase of primary season would most likely coincide with the window for the first rate rise.
How much did you really learn about the Washington standoff from following it in the media in recent weeks, despite thousands of stories? The media distort as much as they report.
This is not just because of possible partisan bias, as Republicans sometimes argue. Yes, the establishment media in the US has a tendency to frame things in a progressive way.
But the problem lies much deeper in the nature of the news business. Stories have to be “interesting”, to have news value if they are going to gain space in the newspaper or on the evening news show. That means they have to stress the vivid, the dramatic, the unusual, the novel, the personal, or the unexpected.
Who is up, who is down, forging and breaking of alliances, pecking order, and allocation of blame is also fundamental for interesting stories, because human beings have evolved to be complex social creatures. We like gossip. We like feeling we are part of the “inside” group. People get absorbed by gossip because historically it had survival value in knowing who you could trust, who had influence, or who would return favors.
A journalist also has to write at a level the audience will understand, espescially in mass market media. You have to find a narrative, a story, an angle to make an issue appealing.
The result is a frothy cocktail of errors and biases. The vivid personal detail and the dramatic set-piece confrontation make for a good story, but have often have little or nothing to do with what is important. It turns into an instance of what the behavioral scientists call availability bias and representative bias.
The appeal of gossip means media coverage turns into shallow “horse-race” reporting with little attention to the underlying policy issues or drivers. Who is up and who is down in personal terms frequently has little to do with what happens.
For example, you can read plenty of dramatic and vivid celebrity stories about Hollywood in People or US magazine. Jennifer Aniston has a new boyfriend or Lindsey Lohan has been arrested, say. But they clearly tell you very little about what is really going on or who is making money in the entertainment industry. Intellectual property law or cable tv residuals do not have the same appeal. Gossip is often trivial, distracting, and irrelevant.
Much the same happens with political reporting (the old joke is DC is “Hollywood for ugly people.”) In political reporting attention focuses on the peak of the political system, the few star players and big openings, and less on state and local and regulatory issues.
“Government shutdown, fears of potential apocalypse” or “Speaker’s job at risk” makes a good story. “FDA issues proposal for comment” most definitely does not, except for a few very specialized DC outlets like BNA. The second story might actually be much more significant in the long run, however.
The most important factors for decision-makers and investors are often buried in tedious detail, covered in footnotes and appendix tables, or rooted in the assumptions that are too obvious to be news. Important is sometimes actually boring.
But if it doesn’t bleed, it doesn’t lead for the press. They want to know what Reid’s office leaked yesterday or whether WW2 vets have been stopped from visiting memorials on the Mall. The wire services want quotes and facts and want to break news on their terminals first.
Instead, you’re better off understanding the underlying game that is being played. Or you will be played. The trick is to recognize how much of the reporting is noise rather than signal.
The emphasis on novelty means the media also tend to ignore the “outside view” or typical base rates – which, as I’ve said before, is one of the reasons prediction or analysis most often fail. Reporters focus on the play-by-play instead of the underlying rules of the game. The use of statistical data or longer-run measures is usually anathema or mysterious in journalism. That is why Nate Silver’s coverage of US politics in the NYT was so unusual – and why he is now working for ESPN.
The need to find a narrative or angle leads journalists into the classic problems of confirmation bias. They see what they want to see. Bear this in mind when you have many Democratic journalists deciding the main angle in the debt limit confrontation is the suicidal stupidity of the Republican Party.
The emphasis on finding blame means actual decision-makers become reluctant to say anything meaningful on the record. “Breaking news” or scoops mean more for journalistic pecking order than for readers.
Journalism is a very wide world, of course, running from the National Inquirer to local papers to Reuters, to the NYT and news shows, to trade press and the New York Review of Books. There are plenty of exceptions, and many (well, some) journalists do a stellar job.
But it is a business, designed to deliver eyeballs to advertisers instead of understanding or recognizing issues. It pays never to forget the difference. It is also an increasingly desperate business, disintermediated by direct information, tweets and Google ads.
Journalistic instincts and pressures are often fatal for actually understanding what is really going on. Who really wants to make billion-dollar or life-and-death decisions based just on what they read in the newspaper?
Bad tempered exchanges between academic economists are about as common as rain clouds in London. Yet I notice there's one particular insult they frequently like to fling – the “Econ 101” accusation.
Here is Paul Krugman in his NYT blog today criticizing John Taylor, as a prime example.
Taylor suggests the Fed's quantitative easing is like a price cap. So, Krugman says, this means he wants rates to go up regardless of the evidence.
Now Taylor is doing the same thing. He claims that he can show that the Fed's low-rate policy is actually contractionary, using “basic microeconomic analysis”. Actually, as Miles Kimball points out, he's committing a basic microeconomic fallacy — a fallacy you usually identify with Econ 101 freshmen early in the semester (and as it happens the same fallacy committed by Rajan).
Remember, Taylor doesn't have a Nobel Prize in Economics like Krugman yet, but is almost certain to get one before long. So it is quite something to accuse him of being more clueless than a complete neophyte. And the other person Krugman attacks, Ragharam Rajan, is a Professor at the University of Chicago and former Chief Economist of the IMF.
For some reason this “Econ 101” insult is flung around a lot in the discipline.
It's curious, though, because much advanced thinking in many disciplines is precisely a matter of finding exceptions or more subtle framing of the basic principles you are taught in elementary classes. For example, the Newtonian mechanics taught in Physics 101 turns out to be qualified by general relativity.
I haven't read Taylor's original paper yet, but I'd be surprised if the Stanford Professor makes spectacular mistakes an average college student would avoid after taking a few weeks of a first economic course.
Rhetorical excess just suggests the need to take a more careful look at what divides people, not immediately assume bad faith and incompetence.