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To Be a Media Expert on Economics, It Helps to Have the Right Politics Conor Smyth ([link removed])


“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” John Maynard Keynes made this observation ([link removed]) in 1936, in his masterwork The General Theory. Nearly a century later, readers and viewers of corporate media face the same fate.

The fundamental problem confronted by these news consumers is not that corporate news outlets consult economists in their reporting; as experts in their field, economists often have important and worthwhile contributions to make. The problem is that these outlets consistently elevate the views of specific economists who serve particular ideological interests over the views of other economists, or even the academic profession as a whole.


** The austerity gospel
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LRB: The Austerity Con

Simon Wren-Lewis (LRB, 2/19/15 ([link removed]) ): "'Mediamacro'...prefers simple stories to more complex analysis. As part of this, it is fond of analogies between governments and individuals, even when those analogies are generally seen to be false by macroeconomists."

Consider the case of the 2008 financial crisis ([link removed]) and the austerity mania that followed. The British economist Simon Wren-Lewis (London Review of Books, 2/9/15 ([link removed]) ) has documented how media depictions of austerity diverged sharply from professional economists’ understandings and textbooks’ explanations of macroeconomics. His term for the media’s unique understanding of macroeconomics is “mediamacro ([link removed]) ,” which is characterized by an obsession with cutting the deficit ([link removed]) over and above all other concerns.

In the wake of the banking crisis that followed the collapse of the housing bubble in 2007-08, and then the onset of the Eurozone crisis in 2010 ([link removed]) , standard textbook macroeconomics dictated a runup in the deficit to stimulate ([link removed]) the economy out of a downturn. Corporate media, however, bought the arguments of political conservatives and a fringe of academic economists (who nonetheless held positions ([link removed]) at prestigious universities), who maintained that austerity, specifically through spending cuts, could return the economy to health.

In the most notorious instance, corporate media outlets opportunistically promoted the findings of a 2010 paper ([link removed]) , written by two Harvard economists, that were later famously invalidated due to an Excel error. As Paul Krugman noted in 2013 (New York Times, 4/19/13 ([link removed]) ), this paper was controversial among economists from the start, but this did not stop corporate media from citing it—and its flimsy assertion that there existed a tipping-point for government debt at 90% of GDP, beyond which this debt supposedly imposed a major drag on economic growth—as gospel:

For example, a Washington Post editorial ([link removed]) earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90% mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.


** The view from finance
------------------------------------------------------------
Media Focus on Debt and Deficit in the US

As Mark Copelovitch (SSRN, 10/27/17 ([link removed]) ) has noted, “The single most important factor [in elevating falsehoods about austerity] has been the media’s willingness to embrace and promote these narratives, while largely ignoring the overwhelming empirical and historical evidence that austerity is deeply contractionary and counter-productive.”

In another instance recounted by Wren-Lewis (LRB, 2/9/15 ([link removed]) ), after the return of some growth in 2013 in Britain following the election of a Conservative government committed to austerity in 2010, the Financial Times editorial board (9/10/13 ([link removed]) ) declared the Conservatives victorious in their political argument for austerity. This despite the fact that “less than 20% of academic economists surveyed ([link removed]) by the Financial Times thought that the recovery of 2013 vindicated austerity.”

Such false right-wing narratives about macroeconomic policy came to dominate media discourse, not merely because political elites adopted these false narratives and thus made them newsworthy, but because corporate media outlets were compliant messengers for elite views ([link removed]) and prescriptions.

Why does the media adopt “mediamacro” as its approach to coverage of the economy? One reason proposed by Wren-Lewis (LRB, 2/9/15 ([link removed]) ) is the influence of City of London (or, in the US case, Wall Street) economists, whose

views tend to reflect the economic arguments of those on the right: Regulation is bad, top rates of tax should be low, the state is too large, and budget deficits are a serious and immediate concern.

Moreover, the political leanings ([link removed]) of corporate media outlets, whether or not they are made explicit, may encourage them to seek the expertise of economists of a particular ideological bent. These economists’ views may, in turn, be out of step ([link removed]) with the academic mainstream on topics like austerity.


** The inflation oracle
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The corporate media’s tendency to elevate economists of a specific type hasn’t disappeared in the 2020s. With the onset of Covid and the spike in inflation that followed, media broke out their familiar playbook of consulting prominent economists with extreme, and business-friendly, positions.

The infamous example was the elevation of Larry Summers, who slammed ([link removed]) Biden’s 2021 stimulus as “the least responsible macroeconomic policy we’ve had in the last 40 years” and warned stridently of inflation (Washington Post, 5/24/21 ([link removed]) ). When inflation rose to a high ([link removed]) of just over 9% the next year, Summers was hailed by the media as “an oracle: the man who saw it all coming,” as Jacobin editor Seth Ackerman ([link removed]) (2/13/23 ([link removed]) ) sarcastically put it.

In one sense, it was true that Summers had seen inflation as a strong possibility, and he did deserve some credit for that. Other economists, notably Paul Krugman, had downplayed the possibility of a jump in inflation and had to eat their words (New York Times, 7/21/22 ([link removed]) ). But the fact that Summers had gotten this one point right, after an illustrious career ([link removed]) of getting things wrong, did not exactly justify his skyrocketing status as the go-to voice on inflation, or the heaps of at times fawning media coverage thrown his way (Wall Street Journal, 6/27/22 ([link removed]) ; Fortune, 9/23/22 ([link removed]) ).

Cable TV Mentions of Larry Summers Far Outstripped Mentions of Paul Krugman From 2021-23

Did it justify, for example, Summers garnering six times as many mentions as Krugman ([link removed]) on top cable news channels from 2021 through 2023? A Nobel laureate ([link removed]) and widely respected commentator, Krugman also happened to be the most prominent proponent of a more dovish, less austere approach to inflation. Though he failed to foresee the initial rise in inflation, Krugman accurately predicted, in contrast to Summers, that the US economy could achieve a “soft landing ([link removed]) ,” a fall in inflation without a substantial rise in the unemployment rate (New York Times, 5/18/23 ([link removed]) ).

Meanwhile, Summers capitalized on his new status as economic prophet to insist that extreme pain was required to tame inflation. By mid-2022, he confidently proclaimed (Bloomberg, 6/20/22 ([link removed]) ):

We need five years of unemployment above 5% to contain inflation—in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment.


** Cherry-picking expertise
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Like the views of extreme austerity ([link removed]) advocates in the wake of the 2008 financial crisis, Summers’ views in 2022 were acutely out of sync with the mainstream among academic economists, as becomes apparent from surveys ([link removed]) of professional economists taken over the course of the inflationary outbreak.
What do you think will be the peak level of unemployment in the next recession?

Financial Times/Booth survey of macroeconomists (9/13/22 ([link removed]) )

One FT/Booth survey ([link removed]) taken in the fall of 2022 is particularly informative. It found that most economists thought that the Federal Reserve was on track to contain inflation with its pace of interest rate hikes. Specifically, when asked to react to the statement “Futures markets now suggest the Fed will raise the federal funds rate to about 3.9% by the end of 2022,” only 36% of economists classified the Fed’s actions as “too little too late and insufficient to help keep inflation under control.” The rest either thought that this policy path was sufficient to contain inflation (55%) or thought that it was overkill (9%).

When asked about the toll Fed policy would take on the labor market, academic economists took a moderate stance. Most agreed that the unemployment rate would peak below 6% and that a recession would last for less than a year. Incidentally, only a small minority of economists seem to have foreseen the possibility of inflation returning to target without a recession and with unemployment ([link removed]) rising no higher than 4.3%, which is what in fact has occurred ([link removed]) . But notwithstanding their apparent excess of pessimism, economists generally agreed that inflation would come under control with nowhere near the punishment Summers was prescribing.

To be fair, these economists were not asked directly what would be sufficient to contain inflation, and if asked directly, it is likely that some segment would have been in Summers’ camp—after all, about a third of the economists surveyed thought that the Fed was doing “too little too late.” But those backing Summers’ full diagnosis would be a fraction of those taking this minority view. So the central point that Summers was in the minority, and likely in quite a small minority, among professional economists is undoubtedly true.

Yet with his quasi-divine status granted by corporate media, Summers could pontificate freely about the need for mass suffering without fear of marginalization for lack of evidence or credibility. So when he prescribed 5% unemployment for five years, all that an outlet like Bloomberg (6/20/22 ([link removed]) ) did was report on his views, no skepticism necessary. And no warning label stating: This is completely out of step with the academic mainstream. In effect, corporate media decided to once again cherry-pick ([link removed]) expertise to legitimize austerity policies.


** 'Not sensible policy'
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Boston Globe: Harris’s fight against price gouging is good economics

James K. Galbraith and Isabella Weber (Boston Globe, 8/22/24 ([link removed]) ) : "Americans still have some common sense.... It shows that all of the efforts of free-market economists to beat it out of them have not yet worked."

At the same time, alternatives to the dominant austerity paradigm have been treated with caution, if not outright hostility. The New York Times (8/15/24 ([link removed]) ), for example, in a recent piece on Kamala Harris’s advocacy for anti-price-gouging legislation ([link removed]) , did consult Isabella Weber, a progressive economist who has become well known for her work on profit-driven inflation. But her testimony was overshadowed in the piece by that of economists with more conservative takes on the issue.

Most notably, the Times relied heavily on the insights of Harvard economist Jason Furman, who helped lead the push for extreme austerity alongside Summers (Wall Street Journal, 9/7/22 ([link removed]) ). His first quote in the article had a simple Econ 101 message: “Egg prices went up last year—it’s because there weren’t as many eggs, and it caused more egg production.” In other words, egg prices went up because of supply issues, and it’s good that prices went up because that spurred more egg production.

Unfortunately, this story doesn’t fit with the facts. Responding to this Furman quote, Weber and James Galbraith observed in a separate article (Boston Globe, 8/22/24 ([link removed]) ):

In fact, US egg production peaked in 2019 and then fell slightly, through last year. Egg prices spiked from early 2022 to $4.82 a dozen on average in January 2023, before falling back again, with no gain in production. High prices did not stimulate America’s hens to greater effort. On these points, Furman laid an egg.

It might be assumed that the Times would engage in this sort of basic factchecking of its sources, and not leave it to two progressive economists writing in the Boston Globe to do that for them. But when the source is a Harvard economist who not too long ago was suggesting (wildly incorrectly) that unemployment would have to jump over 6% for two years to tame inflation (Wall Street Journal, 9/7/22 ([link removed]) ), apparently skepticism is not in order.

Leaving little room to doubt the leanings of the Times reporters, the article ended with another quote from Furman, this time on Harris’s proposal to go after price gouging:

“This is not sensible policy, and I think the biggest hope is that it ends up being a lot of rhetoric and no reality,” he said. “There’s no upside here, and there is some downside.”


** Hand-picked by elites
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FAIR: Media That Benefit From Inequality Prefer to Talk About Other Things

Conor Smyth (FAIR.org, 2/14/24 ([link removed]) ): "For media outlets owned by the wealthy, there’s obvious utility in directing the conversation away from inequality and toward other concerns."

If one of the main functions of the media is agenda-setting—deeming certain topics, like government debt, newsworthy and others, like inequality, not so much (FAIR.org, 2/14/24 ([link removed]) )—another primary function is legitimization: letting audiences know who they should trust and who they should treat with skepticism. Over the course of the recent bout of inflation, corporate outlets have made it clear that those economists who erred on the side of far-reaching austerity were worth listening to. The ones who dissented most strongly from the austerity paradigm were, for the most part, sidelined or only tepidly consulted.

The result has been a constrained debate. Extreme pro-austerity positions have enjoyed high visibility, while progressives have been relegated to the background. This is not because of an imbalance in the evidence. If anything, the side that has been arguing for anti-austerity measures to fight inflation, like temporary price controls, has more evidence ([link removed]) for their claims than the side that’s backed harsh monetary austerity. They, at least, haven’t been proven embarrassingly wrong by the experience of the past couple years.

What could help explain the imbalance in coverage is instead the background of different sets of economists. Before being legitimized by corporate media, extremists for austerity like Summers and Furman were legitimized by political status—Summers served in top roles under Bill Clinton and Barack Obama, and Furman served as a key adviser to Obama. Progressives like Isabella Weber have not enjoyed similar political standing.

Thus, we can see a sort of chain of legitimization that runs from a political system dominated by economic elites to a media ecosystem owned by economic elites. If you can secure a top post in politics, it doesn’t matter whether you’re an extremist with views contradicting the consensus among academic economists. Your views should be taken seriously. For progressives, who have largely been excluded from elite politics in recent decades, serious skepticism is in order.

On the face of it, this system makes some sense. But think a little deeper and you can see an insidious chain servicing the dominant players in American society. That chain needs to be broken. Media outlets need to listen to the evidence, not the false wisdom of economists hand-picked by American elites.
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