Welcome back.
Last week, I wrote a piece in response to Professor Peter Siminski’s criticisms of the media’s economics coverage.
But I only answered half of his points because I ran out of time, so I’ll answer the rest today.
The first section of this piece will be about academic economists, then we’ll talk about experts and sensationalism in economics reporting.
Let’s get into it.
Academic economists please stand up
Professor Siminski wondered why economists frequently quoted in the media come disproportionately from banks, management consultancies, and think tanks.
He said more space should be made in the media for academic and public-sector economists, and those economists, in turn, should strive to contribute more to national debates.
I agree.
Academic economists have structural forces working against them, because they’re not part of that eco-system of economic analysis I talked about last week, which is all built around regular data releases from the Australian Bureau of Statistics.
That eco-system has a feedback loop. The more time journalists spend talking to economists in that system, the more likely it is they’ll call them again, even for topics that have little to do with ABS datasets.
But this isn’t a new problem.
In 1996, then-Reserve Bank governor Bernie Fraser also pointed out that financial market economists had more ready access to journalists.
“The most notable feature of the survey of 32 economists conducted ahead of the recent interest rate cut was not that practically no-one picked the reduction, but that virtually everyone polled was from the financial sector,” he noted wryly.
So, if you’re an academic economist, how do you break that decades-old cycle and get on a journalist’s radar to start your own feedback loop?
It can help to contact one yourself. It’s like anything; people may not know you exist until you contact them.
If your university department has a proactive media unit, that can really help you too. In the past, university media teams have drawn my attention to new papers they knew I’d be interested in and put me in contact with the researchers.
Journalists should pull their weight here too.
The problem is, journalists often don’t have time to trawl through university website directories to find a “new” expert.
But this is where the Women in Economics Network comes in.
It should be applauded for the work it’s done to solve this problem for journalists in recent years.
Around six years ago, the WEN created a very simple searchable database of women economists, and it’s been a gift from a journalist’s perspective.
It allows journalists to find the right kind of economist quickly.
The Economic Society of Australia soon followed with its own database of economists, which is also fantastic.
If journalists aren’t aware of those websites they need to be. And if you’re an economist who isn’t listed on one of them, it would be worth joining.
The question about public sector economists is a bit different because their ability to speak to the media can be curtailed by their employers.
It’s a genuine shame, because some obviously have things worth saying. But workarounds can be found.
What does expertise really mean?
Now, let’s consider the trickier question of expertise and sensationalism in economics reporting.
Professor Siminski said the choices journalists make about which economists to quote should be guided by informed attempts to identify “genuine expertise,” as well as by diversity considerations.
“The opposite approach, sensationalism, is irresponsible and detrimental to the public good. And it contributes to distrust in economists,” he said.
On one level, that seems pretty simple.
Who’s an expert on ABS data? People who work at the ABS. Call them, and they’ll put you in contact with someone to answer your question.
But in other situations, your attempt to find an expert isn’t so simple.
Who’s an expert on monetary policy? You might think it would be safe to say an RBA governor.
But how many times have you seen a governor talk about inflation and interest rates, only to see them get dunked on by economists afterwards?
So if a governor’s views are contestable, what does that say about monetary policy?
It says there are economists out there who believe they know more than a central bank governor. So, speak to them. Read their research. See where it leads. What do other people say about their work? They may be a genuine expert and respected globally. Or maybe they’re just a blowhard.
But then, what does it actually mean to be an ‘expert’ on monetary policy? Is expertise all-encompassing?
Maybe you’re an expert on how the transmission mechanism of monetary policy works, and you have a good idea of how high interest rates ought to go to achieve your aim of bringing inflation down.
But does that make you an expert on the political role played by modern “independent” central banks? Does it make you an expert on the impact some of their methods may be having on democracies?
Not necessarily.
I have some expertise in journalism (what it is, how it’s practised, how stories make their way into the media), but does that make me an expert on the impact the mass media has on society?
Of course not.
And I don’t have the right to tell people to stop complaining about the media and the damage it does. Their complaints are frequently legitimate.
But questions like these can push you in the direction of critics of monetary policy. And how do you judge who’s an expert among the critics? And what do you do if the other experts dismiss what these critics say?
These are serious questions.
Economics journalists ought to let people know about new economic movements that emerge to deal with modern problems.
What is doughnut economics? What is the degrowth movement all about? What’s happened with the latest basic income pilot program?
Is it sensationalist to say, “Look over here, this is really interesting, could any of these ideas or ‘alternative’ economists solve a problem?”
I know some economists really hate articles that pose questions like that, unless they can be quoted at the bottom of the piece, as the final arbiter and judge, to say: “Well yes it’s interesting enough, but of course that would never work.”
But that can get us into the thorny realm of “gate-keeping”.
Let’s not go there today.
A recommendation to strip the power from the Act
I’ll show you an example of how the question of expertise can become cloudy sometimes.
The Reserve Bank of Australia was recently subject to an external review by three panellists, all of whom are well-respected for their expertise in some economic circles.
After their review, the three panellists recommended that the piece of legislation that created the RBA, the Reserve Bank Act 1959, should be amended to strip a particular power from it.
What was the power they want to strip from the Act?
The power it gives the government (via the Treasurer) to overrule decisions of the Reserve Bank Board.
That special “overrule” power has never been used by an Australian treasurer. But it could potentially be used in an exceptional circumstance, as a democratic fail-safe.
Why should we get rid of it?
To me, it looked like the panellists may have stretched their expertise a tad there, in making that recommendation.
Are they experts on Australian democracy? On the way voters feel about the power they have (or don’t have) over our major economic institutions and frameworks?
Here’s the justification they provided for that recommendation:
“While no Australian government has used these override powers, there is the possibility that established conventions cease to be observed.
“The current legislation creates the risk that the government wields, or threatens to wield, power in a way that undermines the independent operation of monetary policy.”
Read that second paragraph again.
The overrule power was written into the Act precisely to allow governments to “threaten” to use it.
In fact, the policymakers who put it into the original post-war legislation expected that the threat of its use would provide an incentive for the government and central bank, behind the scenes, to resolve any policy differences by constructive debate rather than resorting to legislative provisions.
And now these panellists are saying that overrule power, which is designed to allow a treasurer to threaten to use it, should be removed because a treasurer might threaten to use it?
Interesting.
So, after I saw that recommendation, I contacted the office of Paul Keating, former prime minister and treasurer, to see what he thought of it.
I figured if anyone was going to have thoughts on this topic it would be him.
When Mr Keating was still a teenager, he started to visit Jack Lang twice a week, the former premier of New South Wales, and kept it up for a decade.
Jack Lang was NSW premier from 1925 to 1927, and again from 1930 to 1932 during the Great Depression.
As Mr Keating saw it, he could learn an immense amount about Australia’s political history, how its democracy functioned, and how power worked in this country, by listening to Mr Lang’s stories.
And as he told the journalist Kerry O’Brien in 2011, Mr Lang’s oral histories were extremely valuable.
“He was at Henry Parkes’ rallies,” Keating said.
Henry Parkes was a key figure in the push to federate Australia’s colonies in 1901, making him one of the founding fathers of our federation.
“You name them, Edmund Barton or Fisher, or later of course Hughes, or Bruce, or any of these people, Lang knew them all personally, so you got a pen-sketch of what they were like, you know, how they behaved, and what their little foibles were, and all this sort of stuff,” he said.
“You get this connection, you see. Here I am, this is 2011, but you get this connection through Lang back through the early Labor Party back to Henry Parkes, and you can actually take the drift of Australian public life back that far, and there’s somewhat of a connection running through it.”
Would you say Mr Keating is an expert on Australian politics and why its economic institutions need checks and balances on their power?
Is he an expert on how much power should be taken away from voters and given to unelected bureaucrats?
Sure, in a sense.
And he definitely criticised the recommendation to abolish the overrule power.
He told me Australians had to retain control over their major economic institutions, and the overrule power had never prevented the RBA from increasingly asserting its independence from government over time anyway.
He warned the Albanese government not to wave it through.
But then, a month later on X, formerly know as Twitter, I had a small interaction with one of the RBA panellists, Renée Fry-McKibbin.
Ms Fry-McKibbin told me that the recommendation to remove the overrule power from the Act wasn’t just about the RBA and its actions. It was about protecting the RBA from the government too.
“What if we have a disingenuous Treasurer? Maybe one secretly signs up to the position without anyone else knowing a’la Treasurer Morrison. We don’t know the future, but checks and balances to protect both sides are needed,” she tweeted.
I’ve been thinking about that for months.
Consider how the overrule power actually works (here’s the section of the Act).
If the government and one of the RBA’s boards (the Reserve Bank Board, or the Payments System Board) have a serious disagreement about a policy decision taken by one of the Boards, the treasurer and relevant board are required to try to reach an agreement.
If they can’t, the treasurer can submit his or her policy recommendation to the governor-general, and the governor-general, acting with the advice of the Federal Executive Council, may, by order, determine the policy to be adopted by the relevant RBA board.
The treasurer will then tell the board of the policy decision.
Then, the treasurer also has to present copies of the order determining the new policy, and a statement from the government explaining why the difference of opinion arose, to both houses of parliament within 15 sitting days after the treasurer has told the RBA Board what to do.
So, how would former prime minister Scott Morrison have done that?
He would have had to get himself secretly sworn in as treasurer by the Governor-General (which he did do during the pandemic).
But then, he’d need to tell the relevant RBA board that he’d secretly had himself sworn in as treasurer, and as treasurer he was now obligated to try to reach an agreement with them about a policy dispute.
Then, after failing to reach agreement with them, he’d have to go to the governor-general and all the rest of it.
And he’d have to tell both houses of parliament (and his colleagues) that he’d secretly had himself sworn in as treasurer and he’d triggered the special overrule power to get the RBA Board to do what he wants.
That seems like a fanciful scenario.
Is that really the reason we need to strip the overrule power from the RBA Act?
Something seems off here.
And that’s just one example of the ways in which the boundaries of expertise can be hard to pin down.
This is the end
But let’s wrap things up.
Thankyou for sticking with me.
How do we summarise these points about experts and sensationalism in economics journalism?
Maybe this way.
Here are three quotes from economists who have been quite influential in policymaking circles in recent decades:
Larry Summers, former US Treasury Secretary, June 2022: “We need five years of unemployment above 5 per cent to contain inflation — in other words, we need two years of 7.5 per cent unemployment, or five years of 6 per cent unemployment, or one year of 10 per cent unemployment.”
Alan Greenspan, former US Federal Reserve chairman, October 2008: “I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms … I discovered a flaw in the model that I perceived is the critical functioning structure that defines how the world works.”
Milton Friedman, talking about what ex-Communist states have to do become market economies, April 2004: “When I was first asked that question about fifteen years ago, I had a very simple, straightforward answer. Three words —privatise, privatise, privatise. In the light of the past years, we know that that’s much too simple an answer.”
Do those statements contribute to distrust in economists?
Is there any overreach of expertise emanating from them?
I see a complicated story of policymaking, politics, ego, power, economic theory, disagreements between economic departments, ideology, media management, and corruption, unfolding over decades as markets grew and swelled and burst and rolled back, and globalisation washed across the world in waves.
And in amongst it, there have been economics journalists trying to identify “genuine expertise” to make sense of it all.
Who are the experts to guide us through the problems of climate change and the collapse of ecosystems? Will our current inflation-targeting framework be the best vehicle to do so?
RBA governor Philip Lowe recently said there could be better ways to manage inflation.
But is he qualified to speak on that particular topic?