Economics and the media

The QuarterlyReviewof Economics and France, Vol. 36, Special Issue, 1996, pages 161-168 Copyight 0 1996 Trustees of the Universityof Illinois All riglm of reproduction in any form reserved. ISSN 1062-9769

Economics and the Media PAUL W. BOLTZ Chief Economist, T. Rowe Price Associates, Inc., Baltimore, MD

I.

INTRODUCTION

I am delighted

to be here

Department

of Economics.

comparative

advantage.

distant

matters

comparative

trade,

over which

right into my home,

or rake leaves. My devotion centennial.

occasion

I will leave it to other

to tell about the marvelous

advantage

and better

to have useful

recent

decades.

advances

insights

into

The development

alized world and most especially person.

Economists

to talk about

economic

over the decades.

However, I will modestly

development

in economics

to which I refer is the appearance in the United

to interpret

I am a foot soldier

I bring

I do not mow the grass

economics

advantages.

a remarkable

States of the economist

as a media

now stand ready every business

economists

will even confidently

in that proud army of economists

working

over

in the industriday, at the

for the public any and every economic

and policy issue. For no extra charge, future.

only to such

no influence.

is also on display today at this

theoreticians

in quantitative

all over the country

drop of a “record” button,

of

years. I will leave it to other and better econometricians

No, these are assuredly not my comparative claim

of the

to the concept

to be applied

I have exactly

so, for example,

to comparative

theory over the last hundred

of the centennial

I am deeply devoted

I do not view it as an abstraction

as foreign

advantage

on this wonderful As an economist

variable

predict

the

in the media,

and today I would like to talk about this phenomenon.

II.

THE NOT-SO-GAY NINETIES

Since this is a centennial

celebration,

me tell you about the economy The unemployment rate of 18.4 percent. was in recession

I would like to begin my story back in 1895. Let

a century

rate was 13.7%,

ago. Labor market conditions

a substantial

improvement

The fact is the 1890s were an economic

for 51 of the 120 months

over the prior year’s

nightmare.

that made up the decade,

161

were horrific. The economy or almost

half

162

QUARTERLY REVIEW OF ECONOMICS

the time. Labor unrest was ferocious

AND FINANCE

as struggling

labor unions fought for acceptance.

The militia was called in to put down the Homestead militiamen strike

shot down fellow Americans

unfolded

became

with similar

horror

known as “The Gay Nineties,”

The financial

markets

mass bankruptcies. insofar

depression

as it existed the

in 1896,

students

or their teachers

in U.S.

history

subject

Bryan

comprehended

the gold standard

lican who ardently

of school

Bryan’s opponent

to me, was that there

among

working

the media

reached

to straighten

gold left the country,

The WallStreetJournaland

to turn to for instant

analysis.

III.

I suspect

in

that few

but he was complaina Repub-

Mr. McKin-

handily beat Mr. Bryan, of that election,

the general

of tariffs and the gold standard. had already

would

convention

was William McKinley,

The problem

economist

children

policy it imposed.

who I think was right about the gold standard.

States

and

policymaking,

at the Democratic

Mr. Bryan’s meaning,

was no understanding

decade

600 banks failed,

Economic

never read Adam Smith or David Ricardo,

consequences

Pullman

panics

high tariffs to protect American businesses.

supported

ley, who evidently

of the United

to periodic

on a cross of gold.”

and the monetary

campaign,

began.

Generations

Jennings

“I shall not be crucified

In the Presidential

economic

infamous

that appalling

imagine.

grim, being

at all, was confused.

cry of William

Chicago ing about

The

How on earth

I cannot

were equally

they stood.

strike in 1892, and the

In the Panic of 1893, the stock market collapsed,

and the second-worst memorize

where

in 1894.

Mining

public

Although

69,000,OOO in 1895, things out. When

it seems about

the

the population

there

was not one

tariffs were raised or

the New York Timeshad

no economist

TO THE RESCUE

But help was on the way! In 1895, the Department at the University of Economics better

of Illinois.

was founded.

way to manage

Across the Atlantic

of Economics

Clearly, the Anglophone

our economic

was established

in the same year, the London world perceived

affairs, a way that required

here School

the need for a

careful

thought

and

analysis. Now, please

forward

to 1995. It is a relief to be back. The unemployment

this year has been bouncing continuously

between

5l/2 and 6%. The economy

rate

has been expanding

for four years. Over the last ten years, the economy

was in recession

a

grand total of eight, count ‘em, eight months. The violent labor unrest so characteristic of the late nineteenth nineteenth

century

century financial

has almost vanished panics that periodically

as well. In the 1980s when the checks government economy.

prudently

socialized

were clearing

from American wreaked

life. The kind of

havoc has disappeared

and the S&Ls were bouncing,

the losses and contained

the damage

to the real

ECONOMICS

So, why are things so much and a century economists

better?

ago? One of the major

What is the crucial

differences

in public life now. Economists

television, without

newspaper

are quoted

including

coming

are enthralled

or magazine.

across some economist by economists,

soberly

economists,

who, indeed,

now of

pop up regularly

every

on radio and

on CNN for an hour or two

telling you what it all means.

If you

already watch CNBC all day long and are

eagerly awaiting the new CNN all-business-news not appreciate

between

in virtually every daily newspa-

Try turning

you probably

163

is the prominence

you read, not to mention

Economists

WILL here on campus.

difference

that I notice

per you pick up and in every weekly news magazine single financial

AND THE MEDIA

network.

To the rest of you who may

may feel a startlingly

different

emotion

toward us, to you I say, ‘You can run from us but you can’t hide.” I would like to discuss this phenomenon asked by other

economists

by addressing

and by noneconomists

function.

My answers should

thoughts.

My questions

be considered

three questions

who are intrigued

works in progress,

I am often

by this public

and I welcome

your

are:

1.

Why, alone among

2.

When

3.

Which

social scientists,

do economists

receive such intense

media

coverage? did economists economists

begin

to emerge

work the media,

so prominently

in the media?

and how did they acquire

such a role?

IV. WHY ECONOMISTS ARE DARLINGS OF THE MEDIA Do you recall ever hearing this: “Please sociologists Probably

stay tuned

society

is heading

the forecasts

at all? Probably

The

public

among

disciplines.

more intense.

things

economic

reporters,

the markets.

is unique If anything,

and financial newspapers

are beefing

While

other

leading

six to nine

a newspaper political

like when

months.”

and finding

scientists

about

social scientists,

demand

and perhaps

for economic

bon

mats

is

Radio

and newsletters

networks

up their coverage

to economists

are adding

are coming

eco-

out all the

of the economy

and

and not other social scientists?

reasons.

First, the public is acutely interested outlook.

through

among

is insatiable.

magazines

So why all the attention

can suggest four interrelated on employment,

in the next

segment,

With the rise of mutual funds, the curiosity of householders

new financial

time, and traditional

of American’s

for our next

not.

role of economists

all academic

becoming

impact

break

not. Have you ever found yourself flipping

anything

nomic

our commercial

will tell us where

a table that summarized

about

Stuart Varney or Bobbi Batista of CNN say something after

real income,

in the economic and wealth-and,

social and physical scientists

outlook

because

thus, their

of its direct

own personal

talk about very important

things,

I

164

QUARTERLY

REVIEW OF ECONOMICS

their areas of concern

do not begin

AND FINANCE

to hit home

quite so directly.

The media know

this. Second, forecasts

citizens believe-rightly

into rational

of Social Security,

and successful

of Americans

about investment Third,

would

strategies.

Economists

economic

unemployment

policies

ability

members,

plans, all have forced

to many anxious

people.

future,

more

today. Voters

controversially,

Since Adam Smith’s

of the

economy.

studies and re-studies

improving

forecasts

pronouncements

on economic

three.

of his writing,

Keynes to the

John

devoted general

policies.

are gradually

The

Blue

its accuracy

our stock

improving

Chip

through

Consensus time, and it

flawlessly chart

of knowledge

about

the

show that.

policies,

Maynard

the health

markets,

in academia.

who have made

of the economy,

and the outlook

for example,

amount

As such,

for most economists

in financial

economists

wrote extensively

not all, was accessible

a considerable public.

has produced

Keynes,

though

life, especially

to the general

of time and energy

he was more

work than that of most of his contemporaries.

few and far between

sound

to provide a professional,

at all levels, and, of course,

time, each generation

markets.

the federal

GOT INTO THE LIMELIGHT

firms, government

for financial

economist’s

believe

exchange

economists

now have a high profile in American

Much

firmly

fiscal, and foreign

movements

WHEN ECONOMISTS

but also in nonfinancial

States in 1936

the business cycle and must construct

but we are improving

The gradually

Economists

FDR could be re-elected

* To be sure, there will never be a time when economists

the economy’s

Act of

bound up in the United

rate of 25% and again in 1940 with a 21% rate, such

of monetary,

to forecast

is impressive. economy.

inextricably

inconceivable

if not compulsively

message

a lifeline

to do so. The media look to economists

evaluation

Finally, and perhaps

Indeed,

retirement

world. Whereas

has the power to ameliorate

disinterested

V.

extend

have become

be altogether

government

their

Anxiety over the viability

family that cared for retired

and self-directed

in the industrialized

with a nonfarm

their

strategies.

can translate

since the end of World War II and passage of the Full Employment

and elsewhere

endlessly

economists

to think long and hard, many for the first time in their lives,

1946, politics and economics

feats

investment

the demise of the extended

and the rise of largely self-funded millions

or wrongly-that

of Keynes’s

in tune Bridges

on all reader.

to getting

his

with a modern to the media were

time who lacked

his singular

writing skill. After World War II, the creation economists Chairman

in the U.S. with such

of the Council

of Economic

a link to the media.

of the CEA in the Kennedy

Administration,

Some,

Advisers provided like Walter

early sought

and used his keen wit to make points. It was he, for example,

Heller,

out the media

who saidjournalists

who

ECONOMICS cover economic While

pass it.

many economists

I believe

have had a flair for publicity

modern

economists

1970s with the appearance and Albert Wojnilower, Boston.

These

but wrong-headed and interviews financial

to Henry Kaufman,

chief economist

two distinguished monetary

aimed

their nicknames

Their

policy of the 1970s.

Dr. Gloom

to the oil price

expansionary changes

monetary

1980s

Reserve

shocks policy

was ineluctably a general

inflation.

who became

and Wojnilower

of Fed officials.

bond

firm was obvious

recognition

VI.

talking

or nonfinancial

firms,

pointedly

when different

one

templates

The

in the

of the Federal

the inflationary

for media

spiral

economists

public figure

nearly every major

economy,

appreciate

developments

economists’

at

financial

cannot

abroad,

employers,

the opportunity

to gain

the

whether

the

kind

of

always buy.

in the media,

and how did they get there?

economist

on television

I often

who regularly group

at Morgan

includes

I know who

wonder

confidently

from my own. How did this little leaguer

type or another. Steve Roach

Chairman

recessions

A MEDIA ECONOMIST

I see some

Most of the economists Lynch,

In fact, easy money set off

often moved the bond market,

they are, but I am not really sure how they got there. particularly

an

price

rates that went along with it. So

Nowadays

and so on. The

that advertising

HOW TO BECOME

Reserve’s

The Fed pursued

of having a distinguished

the domestic

market,

So, who are the economists

hence

to the press, and at some larger firms, several media

the stock

and respect

became

benefit

to Wall Street.

divide duties among

market,

financial

two economists

The business

firm has an economist

first by the

allow for relative

predicted

interest

to the great discomfiture

economists

essays, speeches,

also quite bleak,

inflationary.

that their pronouncements

a securities

They produced

that it would

great was their influence

them.

now CS First

the well-intentioned

The key to their success was that their

in the hope

by Paul Volcker,

of these

Brothers,

to be closely followed

were unfortunately

of the 1970s and foresaw the sharply higher

who followed

Corporation,

that was finally ended by two brutal back-to-back

engineered

careers

at Salomon

diagnosed

the

and Dr.

theory and history, both saw that the Federal

in 1979. Messrs. Kaufman

The

Dr. Gloom

and Dr. Doom.

to take place without igniting

a spiral of inflation early

that came

conclusions

Deeply read in monetary response

chief economist

correctly

press and then by the mass media.

analysis was correct.

the late twentieth

dubbed

at the First Boston

gentlemen

at their clients

before

came into their own in the media during

of what the press solemnly

They were referring

Doom.

165

matters should do two things: first, take a course in introductory

economics; second, century,

AND THE MEDW

about

asserting

ever get on TV?

talk to the media are at securities people

Stanley, Roseanne

like Don

this, a view

Strazsheim

Kahn at CS First Boston,

firms of of Merrill and Dick

166

QUARTERLY REVIJW OF ECONOMICS AND FINANCE

Rippe at Prudential

Securities.

Incidentally,

all these are on what is called the sell side

of the street, which means they are at firms whose primary business is to sell securities to institutions

and the general

Hale at Kemper at Scudder,

Securities,

Stevens,

firms. Gail Foster University,

Generalizing 1.

Clark.

On the buy side of the street, you have David

Hoey at Dreyfus Corporation,

Not all the economists

at the Conference

for example,

five common

public.

Richard

Board

in the media

and Donald

from the platoon

of economists

characteristic

of economic

universities.

terminology

but now the competition

is too fierce. It is extremely business

at a major

Second,

almost,

public

at the beginning

but later become

available

Third,

especially

purpose

to keep

at graduate

“current

and the endless

at the Fed also teaches about the economy Fourth,

above

producers to speak

school,

about

of mutual

refinement an economist

or making

in the media,

I should

the

for

public.

I

An

way to do so. seen in the media had

Board

is the interpretation

of a near-term

forecast

to be extremely

Reserve

in Washington.

many of these economists

by the general

also note

No hardware

investing

at one of the Federal

recommendations

is usually

funds, such as the firm where

before

Reserve

to work the media an economist’s

all, understandable

person

the supply and demand

of the economists

school

which

analysis,”

are with organizations

relations

the obvious,

its name

large number

stay right after graduate

an economic

in trying to get publicity.

to the media

to

observer,

degree.

(or anybody else’s) career

the New York Fed, or the Federal

to what was learned

economists

to the press is a cost-effective

a surprisingly

the Fed called statistics

desire

a respected

A public

belaboring

and nails, but a mass marketer

a protracted

learned of recent

Banks, Adding

to do what economic

based on them. A stint

careful

in making

statements

to policy makers. remarks public.

must be short, to the point, Otherwise,

reporters

and

will not call back. We speak in sound bites. In fact, I just did. The ability in sound

appreciated

bites,

particularly

by the media.

politicians.

Incidentally,

politicians.

The motto

5.

business

talking

has an intense

4.

Without

Nowadays nearly all

difficult to become

without

effort.

of an economist’s

has an economist

economist

and,

relations

superfluous.

that there must be a specific

3.

or institute

but not quite all media

that have an aggressive

hammers

State

Years ago it was possible

into status as an economic

spokesperson

work,

at Georgia

that I know on media beat, I see

is a fine education.

have Ph.D.s from top-tier

parlay a knowledge

store

are with securities

Ratajczak

characteristics.

media economists

essential

Allyn

are widely quoted.

The first and foremost

2.

and Maureen

if garnished

In that regard,

with vivid metaphors,

alas, media

we have a motto that illustrates

economists another

is greatly

share a skill with

quality we share with

is, “Often wrong, but never in doubt.”

Finally, the journalists

at the other end of the phone

or on the other

side of

the camera are intelligent, careful people. They rely on the economists who they believe are the most reliable. They do not want their story to be upstaged by another on the same topic that has a sharply different but more accurate analysis. Conse-

ECONOMICS AND THE MEDIA quently, being a media economist

is like taking an extraordinarily

day. Worse, the test results are publicly released have been declared

changed

as the result

immediately.

of incoming

“inoperative.”

As the poet put it so well:

Moving

writes;

The

Finger

long oral test every

Worse yet, forecasts

information

167

cannot

that

be recalled

or

and, having writ,

Moves on: nor all thy Piety nor Wit Shall lure it back to cancel

half a Line,

Nor all they Tears wash out a Word of it.’

So, to work the media,

an economist

There

law at work, and media economists’

is no Gresham’s

truth that I am exceedingly

VII.

must develop

a reasonably

sorry to have to report

good track record. are never secure,

jobs

a

to you today.

CONCLUSION

But the real conclusion degrees

in economics

economists because

that I am coming have immeasurably

have gained unusual

the country

especially Generations hundreds

of other

The economic

community

of students

has soared

have learned

(lesser)

The

of economic effect

appreciate

institutions

jargon.

now found evident

anything

to create

discussions

economists

a large

The

markets.

or junk

The existence the actions government publicly.

impact

Investors,

of economic

our

of government

can

topics shrouded

that created

of rising

which

economic

whose parents

in

the supply of literacy

is

shied away from

and paid-up life insurance, stocks and bonds,

financial

analysis contributes

or even

markets

policymakers

agreed

in the world, and part of our continuing endlessly

of our well-educated

investors.

talking to the media means that

suffer penetrating

are also taking constant Nigel Lawson’s

to their sophistica-

States have what are almost universally

of a band of economists

people

but to advance

risk and reward as well as most of the market

is the high level of competence

I remember

and

bonds.

I know. We in the United

I believe,

in history.

of Economics

audience

recondite

their savings in blue-chip

availability

to be the most efficient strength,

public and

system works. For their

and ever-growing

from this audience

tion. Small investors seem to understand professionals

Department

than a bank savings account

placing

markets

The widespread

unprecedented

how our economic

in the media.

more complicated

into emerging

literacy of the general

to a degree

of what were formerly

in financial

now feel comfortable

life. My point is that

not only to teach students

It was the demand

particularly

with

affairs.

has been

serious

technical

American

heads

in the last three or four decades

at this excellent

part, the faculty has tirelessly worked knowledge

enhanced

public prominence

has changed.

the business

to today is not that talking

reviews at all times. The

oral exams whose results are announced

comment

about British

economists

a few years

168

QUARTERLY

back.

As Chancellor

Lawson’s lashed

policies

REVIEW

of the Exchequer

were being

out by dismissing

(unquote).

OF ECONOMICS

in one

and, therefore,

This is how the intellectual tradition

of Margaret

by the economists

the economists

To me, this meant

to the criticism

pilloried

AND FINANCE

as a group of (quote)

the honorable the economists’

chancellor critique

heirs of Adam Smith he started

He

scribblers” response

was likely correct.

the proud

And now we have the media available to trumpet

interest,

“teenage

on both sides of the Atlantic

nurtured.

and our own Department

this perfectly

cabinets, Street.

had no coherent

maintain

Adam Smith would have understood

Thatcher’s

on Lombard

of Economics

our message

because

everywhere.

it is in the media’s

best

and ours too.

NOTES 1.

See, for example, “Blue Chip Real Economic

Chip Implicit 10,1995, 2.

Price Deflator

Consensus

Accuracy”

Growth Consensus

Accuracy”

and “Blue

in Blue Chip Economic Zndicaton, February

pp. 10-11. Rubiyat of Omar Khayyam, translated

City, New York, p. 46.

by Edward

FitzGerald,

Dolphin

Books,

Garden