Wednesday, July 13, 2011

How influential are (economic) journalists?

Australian Conference of Economists, Canberra
Wednesday, July 13, 2011

I take my title, How influential are journalists?, to be a reference to economic journalists, particularly economic commentators. My answer has changed little since a paper I wrote on the topic was published in the Australian Economic Review in 1995: not nearly as influential as you might imagine. But in preparation for defending that view, let me make a few clarifying points.
First, economic journalists distinguish themselves sharply from business (formerly known as financial) journalists. We write about macro and micro issues, they write about the adventures of listed companies.

Second, economic journalists - those who specialise in writing about macro and micro issues, and usually bring some university-level economic training to bear - are relatively rare. There are a few at the ABC (eg Stephen Long), but most work for the quality press.

Third, the economic content in the press can be divided into reporting of news and commentary on that news. News covers such things as ABS statistics, RBA announcements and speeches, speeches by the treasurer and treasury heavies, government reports, the budget and mid-year reviews, and developments in financial markets. Most of that economic reporting is done from the Canberra press gallery. This means that, in practice (and unlike in the US and elsewhere) economic journalism tends to be a specialty within political journalism, making it more focused on political economy issues. Except for the quality press, much economic reporting is done by political reporters - which means, for instance, that if the opposition seems to be making political headway in criticising deficits and debt, the political journalists will take it a lot more seriously and uncritically than economic journalists would. Issues are judged on their political potency, not their economic merits.

Fourth, the role of the news media is much misunderstood by many people. They assume the media’s role is to give their audience a balanced picture of what’s happening in the world beyond people’s personal experience. In fact, because the media is directly or indirectly selling its news, we limit our reporting of what’s happening in the world to those things we believe our audience will find particularly interesting. This imparts considerable biases to what we report: we pay a lot more attention to bad news than good, to problems rather than solutions, and to conflict and controversy (so that, for instance, dissenters from the dominant view on climate change among scientists get a lot more space than their numbers warrant). The media are more interested in people than concepts, and more interested in concrete case studies than abstract principles. In political and economic reporting there is much resort to ‘race-calling’: which side’s doing well in the polls and which isn’t, which leaders are secure and which under threat; which economic indicators are up this month and which are down (or, for the share market and the exchange rate, which are a bit up or a bit down today). The media tend to pander to what they assume to be their audience’s prejudices: so rises in interest rates and the dollar are always good, falls are always bad. Deficits are always bad, surpluses are always good.

So, how influential are economic commentators? Well, not sufficiently influential to discourage their editors from the eternal race-call. They try to discuss indicators in a longer and broader context, but fight an uphill battle. Similarly, they stand against the political journalists’ misconceptions (eg references to the budget deficit as ‘Australia’s deficit’; the notion that the carbon tax package’s funding shortfall of ‘$4 billion over four years’ is a huge discrepancy, or belief that a budget surplus of $1 billion is significantly different from a deficit of $1 billion), but in this they don’t seem to have any impact on the political journalists’ judgements. They don’t have much success in resisting pressure for unending idle speculation about the timing and direction of the next move in the official interest rate.

Economic commentators, in sharp distinction to political commentators, don’t hesitate to take a position in the policy debate and to campaign for particular policies. It’s intended to be a constant and logically consistent position - not one that keeps adjusting so that whatever a government does can be criticised - based on their school of economic thought and personal values, not on partisan loyalties. The bane of an economic commentator’s life is people always trying to consign him or her to a party-political box. In the past most of them have tended to be pretty orthodox in their views - pretty rationalist - but some of us have been trying to offer a wider range of views. The commentators’ paper’s emphasis on race-calling means macroeconomic issues tend to crowd out microeconomic issues, which are often more important. The journalistic profession’s obsession with timeliness - with never being ‘off the pace’ - limits their ability to continue pursuing issues once the political caravan has moved on.

Economic commentators are not great original thinkers. They don’t keep up with the literature. As with most economists, most of the arguments they mount and policy solutions they espouse are pretty derivative. I’ve never deluded myself I’ve been giving the pollies policy advice that was significantly different to and superior to the official advice they were getting. Economic commentators spend a lot of time talking to senior econocrats, and much of what they write echoes the views of the particular econocrats they talk to. They don’t talk to academic economists as much as they probably should, mainly because so few academics keep up with the policy debate. My emphasis has been more on explaining economic policies to my readers than on telling pollies or central bankers how to run the country. And these days I’m trying to offer my readers a critique of economists and economics.

One factor that hugely limits the influence of economic commentators is that all of us read more for reinforcement of our existing views than for enlightenment. We generally avoid reading the opinions of people we know we’ll disagree with, though psychological studies find that, where we do persevere with an article that doesn’t fit with our views, it serves only to confirm the rightness of those views.

I guess that where the economic commentators all sing the same song, a song that’s being sung also by the econocrats and many academics, and we go on doing that for long enough, it is possible to make certain views the conventional wisdom among elite opinion. Of course, my opinion on the extent of our influence is hardly objective, but from my perspective it’s pretty limited.