Science journalism recently took two huge hits, resulting in two major retractions. One article, which made national headlines upon initial publication, was revealed as an apparent fraud perpetrated by graduate student Mike LaCour. The other, a hoax and media experiment cooked up by John Bohannon, confirmed that even a sketchy result by a fictional professor in a non-existent institute can get global press.
Journalism suffers from similar weaknesses in the field of economics. Widespread reporting on an International Monetary Fund (IMF) staff discussion note last week provided a clinic in how unscientific ideas spread under the guise of science.
The original paper was, begging the authors’ pardon, unexciting. It consisted of a theoretical exercise, a few regressions, and some hand-waving by the authors, who wanted to get a little more mileage out of their narrow theoretical result. For what it’s worth, I largely agree with the paper’s recommendation: countries should not try to quickly retire their debts, because doing so would require harmful tax increases. Instead, they should narrow their deficits enough that debt ratios “organically” decrease over time.
But the paper was not reported as a moderate restatement of a simple theoretical result, designed to encourage clearer thinking about debt dynamics. Instead, the press presented it as a point scored in a global political contest over spending levels. How do reporters make this stuff up?
1. Free Associate
The paper argued against an extreme policy: running surpluses large enough to pay down the national debt. But in the hands of reporters, ruling out that extreme was equivalent to supporting policies on the opposite extreme. For example, the Wall Street Journal’s Ian Talley wrote of the IMF paper, “It’s akin to the argument proposed by Brad Delong, a University of California at Berkeley economist, who says government debt isn’t yet high enough to jumpstart strong growth.”
Debt does not “jumpstart” growth in the IMF model; it hinders it. Talley even puts DeLong’s ideas in the IMF researchers’ mouths: “they contend that some countries have room in their budgets to spend more to stimulate growth.” But the IMF model has no role at all for government stimulus. In fact, in the model, a government ought to spend and invest less after a debt shock than it did before—the opposite of Delong’s argument.
2. Impose a Narrative
There is, at least according to the media, a giant tug-of-war in economics between pro- and anti-austerity camps. This may be true in European politics, but almost everyone in economics (DeLong and company excepted) falls comfortably between the caricatured extremes. A Manichean war of ideas makes for better stories, though, so most reporters and headline-writers nudged the IMF paper into one corner, instead of leaving it in the moderate middle.
David Wessel wrote that the IMF paper “slapped down the austerity crowd.” Unfortunately for clean narratives, the paper equally slapped down the anti-austerity crowd. For countries where the debt-to-income ratio is still rising, such as France, Italy, Japan, Spain, the United Kingdom, and the United States, the IMF model recommends further budget cuts.
3. Fudge the Hard Stuff
Reporters struggled to keep economic concepts straight. In this discussion, the distinction between deficit, debt level, and debt ratio are crucial. But reporters often confounded the concepts, leaving non-expert readers with false impressions.
The Economist wrote: “PUBLIC debt in rich countries exploded between 2007 and 2012, rising from an average of 53% of GDP to nearly 80%. Some people think this is a problem, and say that governments need to do their best to cut it.” Does the IMF report recommend cutting “it” or not? Both! It recommends cutting the debt ratio (“organically”) but not cutting the debt level.
Szu Ping Chan muffed it more explicitly for The Telegraph: “IMF economists cited research by Moody’s Analytics that suggested countries such as the UK, US and Canada could afford to live ‘forever’ with relatively high debt shares compared with their pre-crisis averages.” The research suggests they could live with high debt levels forever; it suggests the opposite about high debt shares. (Chan is also confused about the provenance of the research).
This is not simple, but it’s important. I often shock non-economists when I tell them that the U.S. debt from World War II was never paid off—it’s still there, but has been shrunk to insignificance by decades of steady growth.
4. Don’t Phone a Friend
None of the articles here offered a second source with an independent view of the IMF paper, committing one of the common journalistic failures that Bohannon noted. Journalists generally don’t know the academic literature to which new papers accrete, and we researchers often take a higher-than-justified view of our own contributions. Without a counterpoint, news stories are press releases.
Talley, for example, credulously cites IMF authors Jonathan Ostry and Atish Ghosh’s blog post (not the working paper, as Talley indicated) claiming that theirs is a “radical solution for high debt.” It’s radical only in the sense that the forward pass in American football is radical: Ostry and Ghosh’s solution has been the most common approach to high debt since World War II.
An interested reporter with good sources could have used the IMF paper as a way to improve readers’ understanding of deficits and debt dynamics. Regrettably, what readers got instead was another installment of Manichean austerity politics.