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 has.as 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. .