Turned up to eleven: Fair and Balanced

Thursday, April 11, 2002

Ross Nordeen has responded to my econ post below, and I would like to rebut his argument, just a bit.

Mr. Orwin's post is mostly about asymmetric information and elasticity, but this gem in particular stood out:
Econ is often portrayed as a scientific analysis of broad patterns of money flow and production of goods.
Well, who cares how economics is portrayed? Shouldn't we care about what economics actually is rather than its portrayal? I have no formal training in economics, but it is a subject that fascinates me so I have read quite a bit on my own and in my humble opinion, the more one strays from the fundamental definition of economics as the study of the allocation of scarce resources that have alternative uses, the more one starts to say dumb things.

The last part I am not so sure about, because it seems a bit limiting of a definition, but the first part of his response is more important. In fact, how economics is portrayed is very important (although it wasn't my original point). Increasingly, economic news (jobs reports, consumer confidence, interest rate moves, GDP growth) drives decisions made by individual investors rather than just major investment firms. The slowdown and market meltdown may change this, but for now, economic news portrayal in the media is absolutely crucial. In fact, this broadening of the scope of economic reports may be in large part responsible for my hypothesis that, as I said, economics is really psychology on a grand scale. The economic report is increasingly self-referential (do I hear a feedback loop coming?), as the results of the report drive the actions of business owners and shareholders, which in turn affect the next report. As I noted in my e-mail correspondence with Ross, the economics expert (chief economist) on CNBC is now an attractive 20-something by the name of Marci Rossell. I could be wrong, but I don't think her chief advantage over other economists is experience or skill! (not that I am complaining)