Receive the Bulldog Edition


Economic Blogosphere

Economic Journalists


economicprincipals.com banner

August 5, 2007
David Warsh, Proprietor


| contents |

Science, Economics and the News

These are dark times for newsfolk. The Wall Street Journal has been sold to Rupert Murdoch. The other international English-language papers, The New York Times, The Washington Post and the Financial Times, are under earnings pressure, too. General-interest magazines have become scarce. As a spiritual exercise, I spent part of  last week reading Nayan Chanda’s book, Bound Together: How Traders, Preachers, Adventurers and Warriors Shaped Globalization and, side-by-side, the June issue of the American Economic Review (AER).

Chanda is an exemplary newsman whom I’ve admired for decades, since he began reporting from Saigon for the Far East Economic Review in 1974. (He stayed behind when North Vietnamese tanks rolled into town and, more to the point, stayed interested in the ups and downs of the Vietnamese economy long after that.  The result, in 1986, was Brother Enemy: The War After The War.) For a quarter-century, he was as sharp a correspondent as could be found in South Asia, traveling back and forth between Hong Kong and Washington, serving for a time as editor of the Asian Wall Street Journal. Today he is director of publications for the Yale Center for the Study of Globalization. He deserves a wide audience as a pundit.

Bound Together resembles other, similar efforts to weave a grand philosophical history of our times, by Thomas Friedman and Jared Diamond, but in a certain sense it is even more ambitious than The World Is Flat or Guns, Germs and Steel.  I don’t suppose for a moment that Chanda’s world picture will acquire the same authority as that of a columnist for The New York Times or a star professor at the University of California at Los Angeles, but there are few better stories than humankind’s spread across the planet, and that is the way Chanda has framed his tale. The first chapter, based on the latest evidence from the analysis of mitochondrial DNA, describes the long march out of Africa to the farthest corners of the world. Chanda then organizes his account around the adventures of a quartet of types — the traders, preachers. adventurers and warriors of the subtitle.  A chapter for each (after the obligatory chapter on technological advance), a couple more on the age of imperialism and the growing awareness of globalization, and we reach the present. (Here’s an interview which provides a fuller sense of his drift.)

There are in Bound Together wonderful bits of information along the way, but none so compelling to me last week as the story of a Korean farmer named Lee Kyung-hae. After a decade of teaching scientific farming methods to agriculture students in the 1970s, Lee found himself, along with many others, unable to make a living as a farmer — the result of the opening of Korea’s food markets to global competition in the ’80s. Chanda writes, “As the world’s twelfth largest trading nation and supplier of industrial goods from giant container ships and cars to televisions and cell phones, South Korea had been forced to lower its barriers to agricultural imports. Korean industrialists raked in profits and urban workers made a good living, but farmers — who formed one-tenth of the population in the late twentieth century — were hurting.” By the time protests against globalization erupted at the World Trade Organization summit in Seattle in 1999, Lee was a seasoned protester. At the Cancun meetings in 2003, he committed suicide with a Swiss Army knife before a large audience during a demonstration.

Writers in the AER, too, are concerned with understanding globalization, but the flagship journal of the American Economic Association employs very different means to the pursuit of that end. Economics long ago gave up the dream of the grand treatise or the sweeping synthesis as main route to knowledge. Instead it adopted the convention of the scientific paper, with its deliberately restricted aims and its careful citation of the similarly limited work of others. Technical economics still permits, indeed encourages, the occasional personal statement, mostly by or about senior figures. Thus the June AER opens with a photograph of Yale University’s Donald Brown, accompanied by a citation describing the contributions to mathematical economics that made him a distinguished fellow of the association.  And the address that Edmund Phelps gave as part of Nobel ceremonies last year is the first article.

But otherwise, the reports in the AER are short and highly specific summaries of particular projects, almost all describing the properties of some formal model and its interaction with the real world. The aim is to accumulate reliable facts, testable hypotheses, proven mechanisms, widely-agreed-upon principles, such that increasingly, eventually, economics begins to exhibit the characteristic that the philosopher John Ziman called consensibility, the aspect of compelling consensus of rational opinion over the widest possible range, which is the measure of a successful science.

For instance, the lead paper in the June AER is “Relative Prices and Relative Prosperity” by Chang-Tai Hseih and Peter Klenow. It is an attempt to shed some new light on the familiar but very complicated question of why some countries are rich and others poor — in this case, specifically on the relationship between the investment rate and per-capita income. Wealthy countries invest as much as three times more than poor countries. But why? Because poor nations lack mechanisms to promote savings and investment and to seek out profitable opportunities?  Or because they are rife with other kinds of mechanisms — high taxes, punitive duties, graft, etc.– that serve as barriers to investment? The authors examine a wide variety of possibilities of measurement error and conclude that the basic answer is neither. The problem seems to have more to do with basic structure: tradable industrial goods are expensive in poor countries, relative to non-tradable consumption services. In other words, poor countries may be those in which industrialists have yet to gain the upper hand. No suicidal Korean farmer appears to humanize what happens when they do.

There are more than a dozen other major papers on vital subjects in the June AER, the top of the line in fundamental economics research — on various aspects of macroeconomics, a couple on labor markets as they are affected by the business cycle, on the mechanics of school voucher programs, on the importance of the thickness of community of donors when it comes to the exchange of kidney transplants whose suitability may be limited by tissue compatability. (A thin market is one with too few participants.) There are papers on political economy (How do politicians signal character?), on philosophical economics (three kinds of ideals of fairness) and behaviorial economics (“Meeting Strangers and Friends of Friends: How Random Are Social Networks?”). There’s even a juicy retraction. (A pair of economists explain that they pushed their data much too far when they argued it was cheaper to drill for oil on private property than on government land — and thank the anonymous referee who pointed out the problem when they tried to publish an extension of their work.)

For my money, the highlight is a paper by Matthew Gentzkow of the Graduate School of Business at the University of Chicago, which brings into sharper focus a key question in the economics of new goods:  do they crowd old goods for which they are substitutes (motor cars vs. buggies?) or do they supplement the usefulness of the original (act as complements to them)? The good in question in his article is a newspaper, The Washington Post; Gentzkow develops a new model in which an online version of the newspaper can serve to broaden the market. The good news was not only did consumers gain greatly from the availability of the free product, but that the advent of the online product does not threaten the print version. Indeed, the paper could even have added to its bottom line by charging for its online content, at least during the period he studied, Gentzkow wrote.  

True, there was nothing remotely final in any of these AER papers, no result so robust that it could be said to have been settled once and for all, no finding so important to merit a next-day story, no tool so well-proven that the report of its use was ready to be introduced to newspaper readers with no further investigation (the possible exception being the kidney-matching story). In contrast, nearly every week Science magazine, the principal journal of the American Association for the Advancement of Science, reports results in some field or other both significant and sufficiently certain as to make the daily news report.  This reflects the fact that biology is much further along in its development than economics. And most of the AER papers point in the direction of a pretty good story.  

Indeed, if anything, the gap has been narrowing somewhat between what economists say among themselves and what the press reports, and what pundits (including professional economists who assume that role) write in their various omnibus accounts. I have no real evidence for this proposition. It is mostly a hunch. I will, however, venture two examples. I think the distance between the authors of The World Is Flat and Freakonomics and professional opinion is substantially less than between, say, Barbara Ward (The Rich Nations and the Poor Nations) and Robert Heilbroner (The Worldly Philosophers) and most economists half a century ago.

Alas, gradual convergence towards a generally-accepted view of the world is not what I see happening in the news business.  The inevitable disassembly of the greatest meritocracy the industry has ever known was officially begun last week when the Dow Jones board shook hands with Rupert Murdoch over his purchase of The Wall Street Journal. Sufficient numbers of the controlling Bancroft family accepted the offer to guarantee that the sale will be consummated at a shareholders’ meeting in the fall. Many of the best reporters on the paper long ago put themselves on the (thinner) market.

Instead of writing footnotes, newsfolk tell stories about various exploits — their own and others. Does anyone think it curious that the WSJ news pages played no famous part in Vietnam, the Pentagon Papers, Watergate, or any of the other  famous battles that the Fourth Estate has fought with government in the past fifty years? The reason has to do with the ambition of the news pages of the paper to present a version of reality subtly different from that of other, more crusading newspapers.  In the words of a famous advertising slogan it used for a time, the paper sought to be “the daily diary of the American dream.” The stories on its front page as likely were to concern carrots, a milk bottle shortage, hemlines or pot-holes as the most recent crisis in Washington or overseas. Reporters with strong views (Jonathan Kwitney, David McClintock, James Stewart, Bryan Burroughs among many others) peeled off to write books or joined other papers.

That doesn’t mean the news side of WSJ was docile or lazy.  It led great campaigns against gun proliferation, the cigarette lobby, predatory practices in the fast food industry, pharmaceutical jiggery-pokery, government bond auction-rigging, the abuse of human rights in China, options back-dating practices and the like. But it was left to the editorial pages to foment controversy in the civic realm, and so they did: resisting US entry into World War II (until Pearl Harbor), battling government waste, celebrating laissez-faire, criticizing communism, espousing the gold standard, preaching “supply-side economics,” demanding the impeachment of Bill Clinton, the invasion of Iraq and, not entirely incidentally along the way, aggressively supporting the Supreme Court’s 1954 decision in Brown v. Board of Education to end segregation and championing the rights of immigrants.

The division of labor between the news columns and the editorial page dates back at least to 1941, when Bernard (Barney) Kilgore replaced William Grimes as managing editor and Grimes was kicked upstairs to the editorial page. Within a decade, Grimes would write, “On our editorial page, we make no pretense of walking down the middle of the road. Our comments and interpretations are made from a definite point of view.” Gradually the cocksure radicalism turned the news pages of the WSJ into the opposite — a church for a certain kind of knowledgeable, fair and balanced reporting. Wonderment, occasionally bordering on mutual detestation, became the rule. If the editorial page knew the answer, chances are that the reporter in the field freely acknowledged doubts, and worked steadily to diminish them. Take the case of Peter Kann, who as a young reporter, after a long trip around Vietnam in 1967, wrote, “Vietnam seems to defy analysis. The war remains a kaleidoscopic conflict over a splintered society in a fragmented nation, and the bits of Vietnam one man sees probably are no more typical — and no less valid — than the fragments perceived by another.”

Last week, Washington Post columnist David Ignatius — one of those reporters with too strong a sense of personal identity to remain for long at the WSJwrote, “The rising chief executive when I left the paper in 1985 was the best writer any of us knew, Peter Kann. We used to study his dispatches from Asia to see how the master had done it: how he reported on a case of elephanticide at a Vietnamese zoo in the months after the Tet Offensive; how he was ordered to leave the besieged city of Dhaka during the India-Pakistan war and cabled back, ‘Message unreceived.’ He won a Pulitzer Prize for that coverage. He was destined to run the company, too.”

Sure enough, Kann presided for 25 years over a newspaper whose editorial page became, for better or worse (and sometimes both) the straw that stirred the drink; but whose internal customs on the news side were probably as close to the serious, modest norms of science as any newspaper is ever going to come — a set of methods in which the goal was to achieve agreement nearly complete as possible among the parties to a story, in even the most confrontational circumstances. This is the tradition for which the reporter Daniel Pearl laid down his life in Pakistan.  He was not pursuing some airy-fairy dream of objectivity, but rather following in Kann’s footsteps, and those of others like him, pursuing a difficult matter where it led, in the hope of ultimately participating in the governance of a nitty-gritty republic of fairness, of eventually perhaps even succeeding Kann himself, since, after all, in a company run for a century by news professionals, it was any reporter’s legitimate dream — if the shoe-bomber story panned out, if the recitation of his exploits endured.

And now it’s gone. Reporters’ expectations are as rational as those of anyone else. WSJ staffers will recognize quickly that what it takes to succeed under Murdoch, especially at the upper reaches, will not be remotely the same. Nobody is likely to get killed for Rupert, or even deliberately put themselves in harm’s way. For all their flaws as business strategists, Kann and his managing editor Paul Steiger were the best editors of their day, on a par with A.M. Rosenthal of the Times and Benjamin Bradlee of the Post. The end of the WSJ‘s independence is an incalculable loss. The news business will go on, regroup and eventually prosper again.  Meanwhile, though, for people in the business, these are dark times.

| contents |


Skim past columns here.


Support Economic Principals by subscribing to its bulldog edition—receive the weekly via email a day before it is posted on the Web, and, as well, a quarterly Report to Subscribers.

To reach the proprietor, ask a question about the website or report a problem email warsh@economicprincipals.com.