Why accurate economics coverage matters

A number of people, including editor Ray Hartley, have taken me to task for criticising The Times‘ coverage of the gross domestic product data released this week. I singled out The Times – as I have before – partly because it is the first newspaper I see every weekday, and one of four I read every day (the other three on the web). As such, it is an easy target for me, but readers shouldn’t assume I have a vendetta against the paper (I am, after all, still a subscriber, which means I continue to find value in reading it every day).

However, I also singled out The Times yesterday because it did get things wrong. I have already responded to comments by Hartley and others, and won’t repeat myself here. Suffice it to say that, by interpreting the GDP data as a leading rather than a trailing indicator, The Times painted an incorrect picture of the economy and made itself guilty of alarmist reporting.

Why does that matter?

Neil Gavin, a political scientist at the University of Liverpool, has researched media coverage of economics in the UK, and found that economics coverage has a measurable effect on public knowledge of the economy. That may sound obvious, but it isn’t really. It is very difficult to determine exactly how people form their opinions about things such as the economy. From watching television? From talking to their bank manager? From listening to the guy sitting next to them at the bar? Gavin’s research provides emperical evidence that the news media do influence people’s thinking on the economy (probably in addition to other factors). So if The Times tells its readers that South Africa’s economy is “down the tubes” (the banner headline in the print edition yesterday), that we are “now officially in recession”, and that they should “cut up (their) credit cards”, the newspaper is influencing economic thinking and behaviour.

The problem is, that we can think and talk ourselves into a deeper hole that we are in already. If everyone stops spending now, the economy will probably go down the tubes. If people believe we are entering a “deep recession”, that may become self-fulfilling, and stifle whatever hope we have of a recovery in the immediate future. That is why it is important for general news media to report accurately on the economy (or on anything, for that matter).

Yes, we are probably still in a recession (though the GDP data can’t tell us that), and I don’t think anyone would disagree that consumers should be wary, in these circumstances, of taking on unnecessary debt. But, as I said before, that is good advice in any circumstances, and people who saved and spent prudently in the past won’t be in any particular trouble now. Yes, our economy has been shrinking, but far less than those of most developed economies; and the worst is probably over.

The fact is, the reaction of the markets to yesterday’s GDP data shows that people who know something about economics are far less pessimistic than The Times. If South Africa’s economy were indeed going “down the tubes”, or entering a “deep recession”, investors would be selling shares, buying bonds and offloading rand. The opposite happened. Could my critics please explain why that was the case?

Lastly, a question: why are journalists so touchy about criticism? If you dish it out, you should be willing to take it.


One Response to Why accurate economics coverage matters

  1. slamdunk says:

    Good post–accuracy in reporting ecomomic news does matter no matter what country an individual resides.

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