The Media and the Public

If you take note of the growing evidence that the partisan media can influence public opinion rather than simply reflect it, then this new book by Mike Berry (full title ‘The Media, The Public and the Great Financial Crisis’) is a must read. At its heart is content analysis (what the media said) and audience studies of two key periods: the Global Financial Crisis (GFC) and Austerity.

There is a wealth of fascinating material here, which I couldn’t possibly summarise with any adequacy in a single post. Instead I want to focus on the two final chapters. The first helps explains why large sections of the public were so receptive to the 'Labour profligacy caused the crisis' myth. The second involves discussions with journalists.

I have written in the past (and also in my own book) about why the suggestion that Labour profligacy caused the deficit is simply untrue. The deficit was unremarkable in 2007, and exploded because of the GFC. I have focused on how this untruth was repeated endlessly by Coalition politicians and the right wing press, and how it was not challenged by the broadcast media or the Labour party.

What Chapter 6 of Mike’s book shows is why this idea of Labour profligacy caught on so easily. Between the early 2000s and 2010 the right wing press (in Mike’s sample the Telegraph, Mail and Sun) began to publish more and more stories about public sector waste. Now defenders of the press might argue that there was more waste because of a Labour government, but the number of stories in these papers increased over the period by 600%. A much more plausible explanation was that these papers were trying to undermine what the Labour government was doing, particularly as it was popular.

In this way readers of these papers were primed for the idea that Labour was being profligate. As a result, something that was clearly false could be sold as true. The idea that the media is ‘only reflecting the views of their readers’ is so obviously false in this case, because any journalist worth their salt could look up deficit figures, see that the recession caused the deficit to rise, and inform their readers. In reality these papers promoted the lies, and the non-partisan media did not bother to correct them.

I found the chapter where prominent journalists were interviewed fascinating. Again I will focus on austerity. One of those interviewed was Kevin Maguire, political editor of the Mirror. He talks about how the real reasons for the deficit were presented in the Mirror, but

“You very rarely saw full appreciation of it on TV or heard it on radio and you felt you were running uphill with heavy boots whenever you made the argument”

So why did the broadcast media start obsessing with the need to reduce the deficit? What is clear from Mike’s interviews with Robert Peston and Evan Davis is that the broadcasters really believed a large deficit was a problem of the utmost importance that needed to be tackled. The book contains extracts from his interview with Evan which I abbreviate here.

Evan: “Simon Wren-Lewis comes with a very strong Keynesian view, which is I think incidentally perfectly sensible …. But that’s quite different from saying that we should just blithely come and just say don’t worry about the deficit”

Interviewer: “Do you think you fairly represented all of these opinions, because he thinks you focused far too much on …

Evan: “Yes, but … people who hold a strong and rigid position on an issue find it very difficult not to see that we’re biased against them on anything, and Simon Wren-Lewis is in that …

Mike then writes

“However as the analysis in Chap. 2 demonstrated during the sample period in 2009 when the deficit became a major political issue there were no sources - outside of Labour - who were given space to put the Keynesian view in comparison to a range of sources who put the case for a faster pace of fiscal consolidation.”

A journalist might say gotcha. So it wasn't the imagination of a 'rigid' Keynesian: the BBC really did promote austerity. You can see why I also treat BBC claims that they told everyone that more than 90% of economists thought Brexit would be harmful with a large pinch of salt.

If you want to understand political developments since the GFC you have to understand the media, and that means collecting and analysing hard data in the way that Mike and others media studies academics do. What Mike does so successfully in this book is show how stories in the press were reflected in people’s attitudes and how this can have a profound influence on the political climate and therefore what politicians do.

Dani Rodrik talks straight on trade

Dani Rodrik’s new book is a challenging read (in the good sense) for any liberal in the UK living through Brexit, or in the US contemplating whether Trump will destroy NAFTA. For example Chapter 2 starts with Theresa May’s statement about a citizen of the world is a citizen of nowhere, and the rest of the chapter is about how that statement contains an essential truth. Although Rodrik admits he himself looks like the perfect specimen of a global citizen, he argues convincingly that for most people the nation state represents their feelings of identity, of economic inequality, and provides their security (or not) after global shocks. Furthermore, he argues, that is how it should be.

His enemy in this Chapter is what he calls hyperglobalisation. To quote:

“We push markets beyond what their governance can support. We set global rules that defy the underlying diversity in needs and preferences. We downgrade the nation-state without compensating improvements in governance elsewhere. The failure lies at the heart of globalisation’s unaddressed ills as well as the decline in our democracies’ health”

The next chapter considers the Eurozone as a case study of failing to appreciate these points. He argues, as many economists do, that this means either a much fuller political union or abandoning the monetary union. My own view is that the latter will not happen, and the former should not happen for all the reasons he gives in the previous chapter. What I think needs to be explored is combining a monetary union with national autonomy over fiscal policy in such a way that both prevents bailouts, by allowing default when inevitable, and otherwise allows the ECB to act as a sovereign lender of last resort. Only if that fails can we conclude that that the Eurozone has to go to political union or different currencies.

Returning to this reader being challenged, in a chapter entitled ‘The Perils of Economic Consensus’ he writes:

“Even in the case of Brexit, where the weight of both evidence and theory predicts adverse economic results, economists would have been well advised to emphasize their uncertainty over their confidence.”

If we mean ‘well advised’ in the sense of being more convincing, I doubt very much if this is true. Here I am always reminded of debates I have often seen on TV between a climate change scientist and a climate change skeptic. The scientist typically expresses exactly the uncertainties in the way Rodrik suggests they should, while the skeptic on the other hand, who is normally not a scientist, seem totally confident in the views they express. Unfortunately most viewers of this debate are not scientists, and we know people are attracted to those who are confident and self assured. The contrast is between scientific and political discourse: here is another example. But given this, doesn’t the ‘be modest’ imperative need to be modified by context?

Of course one of the things Rodrik is best known for is in challenging the economists' consensus that trade agreements are always good, which I mentioned here and which he discusses in the book. As more and more economists are now realising, he was right to make that challenge. Perhaps the two perspectives can be reconciled as follows. The problem with the free trade advocates is that they were keeping quiet about known issues with their analysis because they thought it would give ammunition to ‘the other side’. As far as academic analysis of Brexit is concerned, and confining ourselves to the economic impact alone, I do not think the same applies.

There are plenty more challenges in the book to what often goes as established economic wisdom. For example he argues against the idea that development would be hindered by worrying about workers rights in developing countries. He argues that state or crony capitalism has in many cases been a successful route to economic development. But mainly there is a wealth of intelligent, informed and often enlightening discussion about routes to economic development, the power of ideas over interests, why current unrest has generally not benefited the left and so on and so on.

In that sense the title of the book is rather misleading. Although it is discussed a lot, this is hardly just a book about trade. Indeed the subtitle “Ideas for a sane world economy” conveys a better picture of what it is about. The book is based on a collection of articles written for Project Syndicate and elsewhere, and occasionally the joins show. But that feeling quickly gets lost in a wealth of stimulating arguments and ideas that I defy anyone to find dull. This is a fascinating book to read, and I cannot think of anyone who would not learn a great deal from reading it.

Economics Rules by Dani Rodrik

I didn’t want to talk about this book before I had finished it: I somehow think Noah’s contrary approach has its shortcomings! The first and most important thing to say is this is a great book. Not because it gave me some huge new insight or knowledge, although I did learn quite a bit about other parts of economics, but because it had a way of putting things which was illuminating and eminently sensible. Illuminating is I think the right word: seeing my own subject in a new light, which is something that has not happened to me for a long time. There was nothing I could think of where I disagreed (which given the book’s wide scope is quite something), and plenty where the inner blogger in me said I wish I’d written that.

So who should read it? To be honest I cannot think of anyone who should not, as I think most of the material could be understood by interested non-economists. His writing style is enviable - it seems so effortless! (That’s me as blogger again.) The people who should especially read it are those who interact with economics or economists and are either unclear or distrustful about what economists are about (other social scientists particularly).

The first part of the book sets out a way of thinking about economics, and in particular to the models that economists could not live without. The key idea is that there are many valid models, and the goal is to know when they are applicable to the problem in hand. This idea has already attracted some attention, including Noah Smith’s post I linked to earlier.

I must admit when I first read it I thought well of course, doesn’t everyone understand that? I remember way back when I did my undergraduate degree, hearing a lecture from a young David Newbury I think, who said the days of big models (models of everything) were over in economics, and that today economists focused more on small but focused models, looking at particular problems or issues. But then as I read on I began to realise that I typically did not employ this knowledge into how I discuss the subject, which is exactly what Rodrik does. 

One area of economics that you might think this would not apply is macro, but it does. It is routine, for example, to split issues up by time: the famous short, medium and long run. A New Keynesian model is not going to tell you much about long run growth, but a Solow growth model does not tell you much about involuntary unemployment. The point here is not that an all encompassing model could not be built - it could, and sometimes individuals or institutions try to do that - but if it was it would be unwieldy, and we would want to break it up in our minds to understand how it works. (I used a related idea of ‘theoretical deconstruction’ in an EJ paper some time ago.) An important point that follows from that is that although we work with different models, it is important that we know how they interconnect, or at least how they relate to each other.  

Rodrik spends a good part of the book describing how you ‘navigate among models’. He warns that these methods are as much a craft as a science. Many have picked up on that, presuming that this is something that a proper science would not do. But as I have often said, the best analogies for economics are with medicine rather than physics. When a doctor diagnoses an illness based on symptoms, they could also be said to be using craft rather than science.

Let me give you a simple example from macro. How do we know if most economic cycles are described by Real Business Cycles (RBC) or Keynesian dynamics. One big clue is layoffs: if employment is falling because workers are choosing not to work we could have an RBC mechanism, but if workers are being laid off (and are deeply unhappy about it) this is more characteristic of a Keynesian downturn. This simple test beats any amount of formal econometric comparison. Craft maybe, but not a very difficult craft in this case.    

Lots of people get hung up on the assumptions behind models: are they true or false, etc. An analogy I had not seen before but which I think is very illuminating is with experiments. Models are like experiments. Experiments are designed to abstract from all kinds of features of the real world, to focus on a particular process or mechanism (or set of the same). The assumptions of models are designed to do the same thing.

Although I found that Rodrik’s discussion of how you select the right model familiar and sensible, it remains vague in the philosophical sense, as Emrah Aydinonat points out. But he also finds them instructive, so they are a work in progress that hopefully philosophers and economists can interact on. (It is worth passing on a point which Aydinonat makes, which is that unlike many economists who write about methodology, Rodrik has read the relevant literature!) Thinking about alternative models that differ in their applicability to particular problems is certainly a more insightful approach than the kind of Popperian stuff that most economists remember.

If this makes the book sound like a philosophical tome, that is quite wrong. It is a very readable account of how economists do what they do: the philosophical grounding is there but it is not intrusive, and instead the book focuses on practical examples. What Rodrik then does with this perspective of many models is to think about a lot of the issues outsiders have about economists: how ideological are they, for example. Towards the end he discusses what went wrong in the financial crisis. Once again the perspective is illuminating: there were for sure models that said a crisis should not happen, but also plenty of models around at the time that explained pretty well why it could. The mistake many economists made was to choose the wrong models, and he discusses why that might have happened. This perspective shows why a simple ‘the crisis shows economics must be flawed’ misses the point.

Hopefully that is enough to make you read this book.