Winner of the New Statesman SPERI Prize in Political Economy 2016

Tuesday 17 January 2017

Fake Economics and the media

If there is Fake News, is there such a thing as Fake Economics? I thought about this as a result of two studies that have received considerable publicity in the press and broadcast media over the last few weeks. Both, needless to say, involve Brexit. The first are two bits of analysis by ‘Change Britain’, saying Brexit would generate 400,000 new jobs and “boost the UK by £450 million a week”. The second is a more substantial piece of work by economists at the Centre for Business Research (CBR) in Cambridge, which was both very critical of the Treasury’s own analysis of the long term costs of Brexit and came up with much smaller estimates of its own for these costs.

Defining exactly what Fake News is can be difficult, although we can point to examples which undoubtedly are fake, in the sense of reporting things to be true when it is clear they are not. Fake News often constitutes made up facts that are designed for a political purpose. You could define Fake economics in a similar way: economic analysis or research that is obviously flawed but whose purpose is to support a particular policy. (Cue left wing heterodox economists to say the whole of mainstream economics is fake economics.) We can equally talk about evidence based policy and its fake version, policy based evidence.

The study by Change Britain seems to fit into that category. In looking at the impact on jobs of potential new export markets once Brexit has happened, it counts the jobs from any extra exports but ignores the jobs lost from extra imports. It adds the extra value of exports sold to the direct budgetary saving, which is a meaningless thing to do.

The CBR analysis is less obviously fake. However Ben Chu has gathered the views of some academics who are experts in trade theory, including Richard Baldwin (who has just written a definitive and widely praised book on the ‘new globalisation’) and AlanWinters, both hugely respected with immense experience, who pour some very cold water over the study.

My key point is that both of these studies were given considerable exposure in the media, and not just in the part devoted to pro-Brexit propaganda. Here is Larry Elliott in the Guardian on the CBR study. In all the cases I’ve seen the reporting has been uncritical, with no attempt to get the opinion of experts in the field. (The Guardian in their coverage of the ‘Change Britain’ report did note that the organisation was backed by pro-Leave campaigners, but it still published the claims without any criticisms of the analysis.)

It is not difficult to understand why this happens. It is a combination of two problems: lack of journalistic resources and the concept of old news. It is the latter that means a report has to be reported on the day of publication, leaving little time to get critical reactions (particularly from academics). But these factors do mean that the non-partisan mainstream media is wide open to fake economics. (Columnists like Elliott should be able to do better, but he did support Brexit.)

This is how the public, and to be honest, journalists themselves get a distorted view of the economics of Brexit. The impression is given that, as usual, economists are divided over the issue, whereas in reality academics are pretty well united in their view that Brexit will reduce UK living standards. (And of course it already the depreciation leads to inflation and lower real wages.)

Journalist resources and culture are not going to change anytime soon. Which is why economists have to think seriously as a collective about how they can best counter fake economics. This has to involve doing something individual academics are not very good at: giving fast responses if journalists ask whether some new report is serious economics or fake economics. .


  1. But note that the original report in the Independent itself (linked near the end of Ben Chu's article) merely wrote that the Cambridge study gave a lower cost than the Treasury's, and that for the case of "hard Brexit" was in the same ball-park. So,it seems that the major part of problem was the way that others summarised the study's results and, from Ben Chu's article,the interviews given by one of the CBR's members. (Disclaimer: I haven't yet got round to looking at the Cambridge study.)

    By the way,I think that it would have been far better if the Treasury and OECD had not published any studies themselves, and had merely referenced others' work. People would have been less sceptical and more inclined to assume lack of bias if referred to the LSE and NIESR results.


  2. I do have a slight concern about the faster response from economists solution.

    Do economists actually have the time to read research before passing on a view? Can they really give it the attention needed to weigh in in time for a response to be published? What is lost here?

    I worry that economists will quickly resort to rules of thumb for judging these things, certain authors are unreliable, certain institutions are jokes, certain methodologies rarely give robust empirical results. Once economists can be in a position to dismiss work without reading it, or at least without giving it thorough thought there is little incentive for these more political pieces to even pretend to be good economics. What little incentive there is to try and do good work will diminish.

    Admittedly this takes the slightly cynical view that currently the threshold for publication is "not so obviously terrible that it can be seen to be worthless in less time than it takes to be old news".

  3. The whole of mainstream economics is fake economics, eh comrades?

    1. It merely misses most of what makes economies work, largely because unlike money, it's not amenable to quantification. It's got more in common with tasseography than hard science.

  4. Economics ― worse than fake
    Comment on Simon Wren-Lewis on ‘Fake Economics and the media’

    There is political economics and theoretical economics. The founding fathers called themselves political economists, that is, they left no doubt that their main business was agenda pushing. Economists NEVER got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda pushing). And this is how economics became one of the most embarrassing scientific failures of all times.#1

    The fact of the matter is that economists do not know how the actual economy works. They do not even understand the foundational concepts of their subject matter, that is, profit and income.#2

    The current state of economics is that of a failed science or what Feynman famously called a cargo cult science. The point is this: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum, 1991)

    Economists do NOT have the true theory, that is, the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory and axiomatically false. In other words, since Adam Smith economic policy guidance has NO sound scientific foundation.

    Because of this, the claim as expressed in the title ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’ is false. The Bank of Sweden is, of course, entitled to award prizes but is in NO position to upgrade a cargo cult science to a science. Actually, the Bank is misleading the general public about the dismal state of economics.#3

    In their scientific incompetence both orthodox and heterodox economists are ultimately responsible for the enormous social devastations of mass unemployment.#4 Economists are not only fake scientists but a hazard to their fellow citizens.

    Egmont Kakarot-Handtke

    #1 See ‘Failed economics: The losers’ long list of lame excuses’
    #2 For details and proof see cross-references
    #3 See also ‘FakeNews, FakeScience: economics in the information age’
    #4 See ‘How economists murdered the economy and got away with it’

    1. Also see the book "Economyths" by mathematician David Orrell.

  5. When you say "fake economics" this implies that there is a "correct" version. However, you yourself have indicated that this is not true.

    You say, and I'm sure you are correct, that most economists say that the result of Brexit will be a reduction in living standards. But most is not all and they may be united on the direction of change but not on its magnitude and it is the magnitude that counts in the long run. The fact that there are disputes - and I'm sure you would not deny that these disputes are genuine - indicates to me the difficulty of applying the perjorative term "fake news" to this subject. The term can only be used where there is a "correct" version and there cannot be such in a case like this.

  6. Dear colleagues! From perception of Ukraine, Russia and even Poland i shell admit that fake economics is encourahed at the state level by rulling forces. It takes time to realise the REAL meaning of minesterial or national banks' reports as explanations are not in line with figures. Also, wide public thought manipulation comes with percents and macroindicators in conditions of hiperinflation and long time exchange rates fluctuations. However, often fake economics occurs as a result of lack of expertise among journalists and newasmakers. Another thing is censorship and not equal access to media of a part of research and expert comunity.
    Not to be anonymous ) :
    thanks to your interesting posts,
    Dr. Nadiya Matviychuk-Soskina

  7. Lol, Donald Trump also calls everyone fake news. Just because you call it fake news doesn't mean it's fake.

  8. Some economic models make more accurate predictions than others depending on situation.
    Some prefer the economic model that is likely to give the most accurate predictions.
    Others prefer economic models that support their policy preferences irrespective of how inaccurate the predictions.
    Some want economics to suggest the best policy solutions
    Others want economics to support their policies irrespective of bad outcomes
    Some use economics as a model to inform
    Others abuse economics to back their argument
    There is no fake economics, only fake uses of economic models
    -jonny bakho

  9. Hi Simon, thanks for your take on the issue. I suspect that when economics has a licensing body and some sort of arbitration authority you will be able to separate wheat from chaff. Until then, as with many things in life, caveat emptor applies.

  10. All I know is that the rich are getting richer and that ain't no fake news. Everything else is a game about what shell the peanut is under. That is the fake news. It won't be long before nobody will know or trust anything about what to believe, if it is fake or real, nobody will really know. It will become like blind betting on the stock market. Sometimes you win, sometimes loose, nobody will care.

  11. William Ryan

    The statement ‘William Ryan killed JFK’ is true or false and nothing in between. What is likewise obvious is that it can be practically very difficult to establish the truth.

    But you announce: “It won’t be long before nobody will know or trust anything about what to believe nobody will really know.”

    This may be the case or not but your prophesy of a state of perfect disinformation is entirely misplaced in the present context. What is at issue here is economics understood as science. In science truth is well-defined by material and formal consistency (Klant, 1994). From history we know that it by no means an easy task to establish scientific truth but this does not invalidate the concept: “Tarski’s theory shows that we are fully entitled to use, without any qualms, the words ‘true’ and ‘false’ in their ordinary senses.” (Popper, 1994)

    Science is NOT AT ALL about trust or belief or credibility, science is about proof. The problem in economics is that there is political economics and theoretical economics. Political economics has nothing to do with consistency and proof, it is plain and simple storytelling or rhetoric. Political economics is the realm of the Sophist who is since Plato defined by his claim to win any case INDEPENDENTLY of the truth or falsehood of the matter.

    Accordingly, the ancient Greeks introduced the distinction between opinion (= doxa) and knowledge (= episteme). This distinction parallels the distinction between political economics and theoretical economics and it parallels the distinction between the pseudo and the genuine inquirer: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. ... A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack, 1997)

    Can there be any doubt that Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Varoufakis and almost everybody in-between falls into the category of political economist or fake scientist? Fake scientists thrive in the swamp between the rocks of true and false where ‘nothing is clear and everything is possible’ (Keynes).

    There is not much use whining about the gigantic heap of rubbish and fake that is called economics. Nothing hinders an economist from leaving the swamp except his own scientific incompetence.

    Egmont Kakarot-Handtke

  12. Standard practice is to send embargoed report to press 24hrs before publication on website. This period is when the article gets written, and writig time is in all likelihood much shorter than 24 hrs because of the need to have proofs ready to run for the printed version well in advance of the distribution date.

    A journalist seeking advice from academics in this period would either have to breach the agreement by which they get an advance copy, or get scooped by all the other journalists who get their story in a day before theirs and get told by their editor "sorry mate, this is old news".

    I dont know what the solution is, but it's a little unfair to blame the journos. The demand for fresh news and 24hr embargos are a significant constraint.

  13. Some of Ben Chu's article is strange.

    '“There’s absolutely no controversy about gravity models,” said Swati Dhingra, assistant professor at the London School of Economics, also pointing out that gravity models are the subject of the second chapter of the new handbook of international economics.'

    C&G merely said HMT's use of *a* gravity model was poor. Did Dhingra read the CBR study or not?

    '“The gravity model has a great deal of predictive power and the exercise that they [Cambridge] did to show that it was fragile was not very valid,” said Alan Winter'

    Why was it not very valid? And is Winter defending gravity models overall, or HMT's specifically?

    "The view that UK trade volumes will benefit from leaving the single market is held by only a tiny minority of trade economists." -- Yes. C&G assume we will lose some EU trade from Brexit, and only re-grow that amount of trade with the rest of the world over about fifteen years.

    'Even the Cambridge study shows a negative long-term effect ...' Quite.

    Simon, if you have not read C&G's paper I really, really hope you'll do so. If you're responding only to Chu's reporting of the matter then that is "non-kosher" as one source said.


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