On mediamacro

What do I mean by mediamacro? I realised reading this post from Tony Yates that I had never really defined what I meant by the term, so when some people started implying that it was just a conspiracy theory I thought it was time I should. A formal definition could be a set of ideas about macroeconomics promulgated by the media that seem very different to the macro taught to economic students. A clear example would be the idea that the 2013 UK recovery vindicated 2010 austerity, which was my mediamacro myth number six. I wrote a post in the form of a tutorial to illustrate this some time back.

Although the term mediamacro might have been new, the idea was not. Paul Krugman has for some time talked about VSPs, or Very Serious People, and I think we are talking about much the same thing. In particular, a common feature is to argue in the immediate aftermath of a large recession that reducing the deficit should be the top priority. Why did I use a different term? I think part of the reason was that I felt this was not a problem about individuals, but about a system. As Tony says, many economic journalists are “clever and opinionated and fiercely independent”, and are hardly material for a grand conspiracy.

In any case I think mediamacro has much more to do with how political commentators rather than economic journalists interpret macro issues. This is one reason why the mediamacro problem is different from well known issues about the reporting of scientific questions. Political commentators rarely talk about science, but they are talking about economics all the time, because so much of politics is about economics.

Again any conspiracy theory would just be silly. If we were only talking about the output of the right wing press, there would be little to remark upon. However, the idea that reducing the deficit is the overriding priority (and that we were in crisis in 2010 because of it) seems almost universal among political commentators whatever their political leaning, which is why my first post title using mediamacro was about Jon Snow berating Miliband for not mentioning the deficit.

The contrast between political and economic journalists can perhaps best be seen on the issue of Labour profligacy. The idea that fiscal policy under Labour was profligate (as opposed to mildly imprudent) would not be something that most economic journalists would sign up to. They know that the 2007-8 budget deficit of 2.7% of GDP is only about 1% of GDP away from the sustainable deficit with a 40% GDP target, and 1% of GDP is very little given the errors involved in predicting deficits. They also probably recall that in 2007 the consensus view was that the UK economy was pretty close to trend. So the profligacy charge is nonsense. But you would not know that from seeing political commentators routinely allowing charges of profligacy to go unchallenged and asking for apologies from Labour politicians. Partly as a result, many members of the ordinary public just know that Labour was profligate, and accuse either Labour politicians or academic bloggers of lying when they suggest otherwise.

This leads to another point, which is the link between mediamacro and politics in a party political sense. When many people see me make the point above, they assume that I am doing so because I am being politically partisan. The reality is that fiscal policy is probably my main specialism within academic macro, and I have written an academic study of fiscal policy under Labour, so I feel it is almost a duty to point out the truth. If this were not the case, maybe I would just shrug my shoulders and let it pass. But there is a more general issue here: is mediamacro something that could only happen because it supports a particular political point of view?

This raises the issue of why mediamacro exists. I do not have a well worked out theory on this. In the UK it is natural to think the dominance of the right wing press is important, but that is less of an issue in the US, which suggests it is not a necessary existence condition. I have also talked about the influence of City economists in the reporting of macroeconomic issues, which is obviously true on both sides of the Atlantic. The absence of a clear locus for received academic wisdom on fiscal policy, in contrast to monetary policy and central banks, could be important. Is the fact that all three political parties in the UK are signed up to the unconditional importance of deficit reduction important? That depends a bit on whether you think Labour chose to go that way or were pushed by the media.

How important you think the mediamacro problem is seems to depend on how bad you think the 2010 austerity mistake was. But it should not be like this. Even if you think, as Tony Yates does for example (and there are many good macroeconomists who would take a similar view), that 2010 UK austerity was justified because of the particular situation of the time, the mediamacro problem is more generic. In the UK, all the major parties are currently committed to unconditional targets for deficit reduction, even though interest rates remain at their lower bound. That is just dumb macro, as Tony has argued elsewhere, but it remains unquestioned in the media. In a world where fiscal policy decisions are made by politicians, this matters.