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Understanding the Cost of Free Lunch

An informal media survey suggests that the media's know-how of basic economics can be hit-and-miss, and industry insiders disagree over its relevance and consequence.

December 1, 2000


Ron Wirtz Editor, fedgazette
Understanding the Cost of Free Lunch

Few news events are as compelling as social unrest. Coverage of the World Trade Organization (WTO) protests in Seattle late last year was thick among newspapers, television, radio and online news outlets, replete with demonstrators, riot-control officers, world leaders and an apologetic mayor.

But the problem, according to some, was a glaring error of commission. Rather than investigate the root issue of the protests—the pros and cons of international free trade—the media focused its attention largely on the unrest taking place outside the negotiations. One obvious reason for doing so was the spectacle's drama and entertainment.

But a larger question is the degree to which the general media can handle the more mundane, but arguably more important, stories that involve basic economics. While many consider basic economics to be relevant only for the business page, the fundamental nature of economics is about the framing of choices concerning public and private goods and services. As such, it would seem that economics has relevance to many stories in a given news day.

But whether the media is equipped to handle those stories is another question. In the case of the WTO protests, for example, "few publications could describe what was really at stake" with the negotiations, said Peter Hillan, former executive business editor of the San Jose Mercury News.

The Federal Reserve Bank of Minneapolis has been involved with the issue of economic literacy for the better part of two decades, most often at the K-12 level. Given the reach, impact and educational nature of the news media, the Minneapolis Fed queried more than 150 journalists, former journalists and journalism school faculty via e-mail and phone for their personal opinions regarding the economics know-how of news organizations. About 40 responded to the informal, open-ended survey. While no iron-clad conclusions can be made, a number of interesting themes emerged.

Asked whether most reporters had a grasp of basic economics, most respondents gave a qualified "no": Know-how of economics was generally good at elite news organizations and among the business and financial press. Below that upper crust, most believed that economic literacy waned—sometimes badly—as you moved down the media ladder in terms of market size, and was generally suspect throughout broadcast news. Despite such criticism, there was no clear answer regarding what, if anything, should be done. In fact, a fair handful of respondents believed that poor understanding of economics in the media—even if present—was not a terribly significant problem.

Don't know what we don't know

Not much is known about the media's understanding and ability to apply basic economics—concepts like cost-benefit, trade-offs, marginal utility, opportunity costs—or the effect of this literacy level on the broader public.

A 1994 survey of journalists (oversampled with business reporters) by Becker, Walstad and Watts found their economics knowledge was similar to social studies teachers. The study, which also looked at literacy levels of economics teachers at the high school and university level, made little judgment as to whether journalists' knowledge of economics was adequate, aside from broadly concluding that "the transmission of economic thinking is less than ideal" at many levels.

In 1987, the Ford Foundation and the Foundation for American Communications (FACS) found that "informed coverage of economic matters that now dominate civic and political affairs remains measurably and markedly unfilled" by the media. Their report identified a slew of sources for this problem, including an uneducated public, poor reporter training, an adversarial relationship between business and the press, and "an inherent inaccessibility" of economics—all of which added up to a general lack of incentives for the media to do a better job in this area. No other similar studies could be found on the subject.

In this vein, the recent inquiry by the Minneapolis Fed was done simply to gauge opinions on the matter within the industry itself. Most respondents, though not all, believed that the understanding of basic economics was good to excellent at news organizations that specialize in financial and other business news, like The Wall Street Journal, Barron's or CNBC.

Many also believed economics know-how was good on business desks of the general news media. "We have reporters with tremendous [economics] expertise" on the business desk, said Ray Marcano, regional editor of the Dayton Daily News, and president of the Society of Professional Journalists (SPJ).

But most respondents also said that knowledge of basic economics below the elite media organizations and business desks—the wide swath of remaining reporters—tailed off considerably.

"It is my experience that most mainstream reporters have little, if any, basic understanding of economic principles, terms of art or even the fundamental underpinnings that would undoubtedly inject clarity into their reporting," said Jim Gray, executive director of SPJ and a former TV news anchor and editor for Market News Service. As a result, "an overwhelming number of reporters do not have a clue about the underlying causes of the economic stories they are reporting."

"I think that most reporters have a very limited grasp of economic principles. It just wasn't in their training, nor do many have the right kind of aptitude," said Don Kimelman, a former editor of The Philadelphia Inquirer with 25 years of journalism experience, and now with Pew Charitable Trusts. "The exception, however, comes with business reporters, most of whom have the right aptitude and many of whom have had special training."

Economic literacy at the Los Angeles Times business desk "is fairly high," according to Kathy Kristof, a syndicated business columnist there. But she added, "There are many people on metro desks who either don't understand, or don't deal with, the economic implications of many political statements and events, which lends a certain naivete to the reporting."

Andrew Cassel, a business columnist for The Philadelphia Inquirer, said, "There's a general antipathy to economic thinking in most newsrooms, mainly because of a widespread bias that favors 'putting a face' on stories. The problem with economics is that it tends to find relevant truths not in how people feel about things, but in how they act. We tend to prefer the former in our reporting, for obvious literary reasons."

Cassel said economics know-how in the media was a matter of degree. "Large-market newspapers are perhaps better than small ones, but that's not universal, as papers in New York and Philadelphia have run series that raise serious questions about their staffers' economic literacy." Many respondents were quick to absolve reporters for any shortcomings in this area. Poor grounding in economics, Gray said, was "not necessarily [reporters'] fault, as reporters—especially in electronic media in medium and small markets—do not have specialty beats. Most stations and smaller publishers cannot afford specialists."

"Smaller news shops simply can't afford that luxury [of an economics specialist], so when economics becomes a story, you see a general assignment reporter trying to handle it," said Charles Davis, a journalism faculty member at the University of Missouri-Columbia, and formerly a reporter for 10 years.

"Working in small markets is like being a flat rock thrown in a perfect horizontal just over the water's surface—you have neither the time nor the depth to stop and analyze what's going on," said Frederick Blevens, print journalism coordinator at Southwest Texas State University and formerly a reporter and editor at several major metro newspapers. "In large markets, such concepts are better presented because there's time and focus to meet higher reader expectations."

TV newscasts were variously described as a "wasteland," "a disaster" and "a joke, but not a funny one." But those in the business said few TV or radio news staffs have the expertise or air time necessary to weave economic fundamentals into news reports.

"Often there's not enough time and space for such material, especially to explain it to the news audience, which may not understand it much either," said Gordon Govier, news director for WNWC Radio in Madison, Wis. "Outside of police and government reporting, and the odd health beat, most broadcast reporters don't specialize. ... There just isn't enough time when staff is limited."

"I'm not sure local newscasts are designed to deliver a lot of in-depth stuff," said Jim Parker, executive producer of FOX News Philadelphia, WTFX-TV. Television news is designed for immediacy, and if it was a person's only news source, he added, "you're missing out."

Is economics "special"? Should it be?

Respondents differed over whether economics is a specialized beat or a fundamental content area for all reporters.

Gary Hill, a news director with KSTP-TV in Minneapolis and past president of the Minnesota SPJ chapter, questioned whether economics was "more broadly applicable" than other content areas. "Perhaps," said Hill, "but something like knowledge of medicine is [also] very important to today's reporter. It reaches into areas like food, exercise, insurance, politics, policy, pathogens, epidemics, etc. It is very difficult to say what applies more often."

Economic literacy is "the same as scientific literacy or math literacy or medical literacy or agricultural literacy in terms of the sophistication level of a reporter," according to Jack Willis, a reporter at a small Gannett daily for two decades and currently the editorial adviser to the student newspaper at the University of Oklahoma.

Veteran reporters "may not be sophisticated in those subjects either, unless their assignments or beats have required them to become knowledgeable or they have an appropriate background or exposure to the subject," Willis said. "Does a Wall Street Journal reporter know how to read a Fortune 500 financial statement? You bet. Does she know the differences in a heifer and a steer ... or a Black Angus and a Hereford and a Simmental? Perhaps not, unless she was raised on a farm."

But others argued that basic economics cuts across virtually all news beats, and having a grasp of this subject was part of a reporter's tool kit. "The greater importance that business and economic news plays in our day-to-day lives dictates that understanding the fundamentals has become more important," said Gray, the head of SPJ.

"All journalists should have a good working knowledge of economic principles, regardless of the beat they cover-just as they all should understand their local area's tax structure and the fundamentals of government and business budgeting," said Barry Paschal, a journalist of 17 years, and currently the opinions editor at the Columbia County (Georgia) News-Tribune.

"Economic events have a compelling impact on nearly every aspect of our lives," said Kristof of the Los Angeles Times. "When you neglect or misunderstand that impact when reporting, you mislead your readers. ... As a society we can't afford lowest-common-denominator reporting."

"Many journalists in print, broadcast, cable and online simply lack the curiosity to understand the value of bringing economic thinking to their assignments," said Bill Barnhart, a financial columnist of the Chicago Tribune. "Time pressures make matters worse."

Jim Upshaw, a broadcast journalism professor at the University of Oregon, said, "I believe there's an economic strata to every beat, and therefore a potential economic element to almost every news story." But many reporters suffer from "econ-intimidation," which shows up in poor story selection, said Upshaw, who worked previously as a TV reporter with NBC and major-market stations for 22 years.

Understanding economics does not necessarily mean that reporters should "all be able to define marginal utility or opportunity cost. What reporters ought to have is basic reasoning skills and an introduction to a few fundamental economic concepts," said Jane Shaw, a former associate economics editor for Business Week, and currently a senior associate with the Political Economy Research Center, an environmental-political think tank.

"I am probably an economic imperialist," Shaw said. "I would say that any public policy has ramifications that can be better understood with an arsenal of basic economic tools" like the role of incentives, the nature of unintended consequences and the ability to anticipate supply and demand.

For example, Shaw said, a reporter seeing a decline in timber production "should expect to see some impact such as increases in the price of lumber. They may even be able to explain why we see more steel beams and trusses in buildings under construction today. Or if hydroelectric dams are breached to protect salmon ... reducing the amount of power that will be produced, reporters should anticipate some impact on energy prices.

"In my opinion, these very straightforward ways of thinking about policies are often ignored," Shaw said. "All too often, the reporter is locked into a 'one side' vs. the 'other side' method of reporting. Frequently the assumption is that one side is good and one is bad." Hillan of the Mercury News agreed. "When you look at the media there is a huge problem, in my mind, of reporters' understanding of basic fundamentals to ask the right question," Hillan said. "What [reporters] lack is an authoritative view on subjects that are very complex. ... Many of them are ill-equipped [but] pushed into new areas every week." Compounding the problem is a news orientation where "presentation overrides good facts or a shortage of facts," he said.

The lack of subject expertise—in economics as well as other subjects—can put the reporter at the mercy of the source, several respondents said. "Generally, reporters accept what they are told by economic experts," according to Bruce Rodgers, a staff writer, columnist and former editor of PitchWeekly, an alternative newspaper in Kansas City. Given the volume of political rhetoric today, "unless a reporter has specific training in economic matters, he is forced to do a he-she type of story where the public has to determine the truth" of sources' opinions "rather than the truthfulness of the data," Rodgers said.

Mere mention of basic economics, "and a lot of [reporters] would look at you and say, 'Huh?'" said Parker FOX News. As a result, cub reporters either avoid an economic angle for a particular story, or simply "regurgitate verbatim" what a source said. "The public doesn't gain anything from that."

Some argued that economic literacy is even worse among politicians, a matter unknowingly complicated by reporters. "We have too many people running for public office who promise to add services without increasing taxes, or promise to cut taxes without cutting services," said Dan Foley, a journalism professor at the University of Tennessee. "Too many citizens are looking for a free lunch, and elected officials are only too willing to promise one." Without the proper training, he said, journalists "are accurately reporting the nonsense that the politicians speak and that we the public want to hear."

Gray of SPJ agreed. "With candidates for office throwing around claims and counterclaims centering on economic successes and failures," media play a central role in helping the public "sort the wheat from the chaff."

Cassel of the Inquirer said, "There are places—the city of Philadelphia is a notable example—where really bad economics dominates political thinking. The result is a city that has been in decline for half a century, with little change forecast because the underlying problems-high taxes, high costs, restrictive markets-are still unaddressed."

Economics creep in the news hole

Thanks to the increasing popularity of business news, respondents said economics is slowly creeping into other news beats and prominent spots in the news hole. Barnhart of the Chicago Tribune said that business and financial reporting has become more important in the news business and an important new employment opportunity for reporters. As a result, it "has made reporters more conscious of the need to understand economic principles and to be conversant in the lingo of economics and business."

Several sources said that globalization has changed the job description for many foreign correspondents. Once a beat dedicated solely to politics, "the big stories in foreign news are business," particularly in countries like India, China and east Asia, said Sreenath Sreenivasan, a journalism professor at Columbia (N.Y.) University.

Reporters of state and federal fiscal policy have always had to deal with economics, but economics is increasingly relevant to other beats as well, said Kimelman of Pew Charitable Trusts. "There are no shortage of local disputes-from tax incentives to attract new businesses to stadium construction-where reporters would be well served to have a better grasp of economic principles," he said. "I think this is an important matter. There has been a lag between the rise in importance of economic issues and the training that journalists receive."

But the audience is the real driver regarding the amount of economics in the news today, many pointed out. Sophisticated readers will seek out highly literate news reporting on economic and other issues, the argument went, and that sophistication plays itself out down the media's literacy ladder. In many cases, news outlets can only push so far into economics before the reader or viewer turns the page, grabs for the remote or clicks over to a fantasy football Web site. It's important for reporters to ask themselves "whether the public is necessarily interested in that [economics] angle," said Parker of FOX. "When times are good, [economics coverage] doesn't matter as much. ... Most think, 'cost-schmost-benefit. Who cares? What does it mean to me?'"

[Even the 1987 Ford/FACS study noted this audience dilemma: "To put it bluntly, the public may want the media to talk about economic matters ... but the demand for accurate analysis of such affairs is likely to be dominated by the demands for entertaining or personally useful angles on such affairs."]

"You want to respect the reader, but don't talk down to them," said Byron Calame, a deputy managing editor of The Wall Street Journal and president of the Society of American Business Editors and Writers. Sometimes reporters and editors rationalize that a reader or viewer would not be interested in the economics of a particular news story, which Calame said makes the economics angle "a little less compelling to worry about."

That mentality can become a crutch, according to Joshua Mills, formerly a New York Times editor now directing the master's program in business journalism at Baruch College-City University of New York. "In a perfect world, journalists would take the lead" on pressing economic issues like taxation, Mills said, "but all too often they sense the public's lack of interest and allow that to shape coverage."

But Marcano of the Dayton Daily News said reporters have to be careful to talk in a language the reader understands, removing jargon and attempting to simplify complex ideas or issues in a limited amount of space. As a result, Marcano said, readers with specialized background often believe reporting is incomplete or misleading. "When you write for a broad audience, you can't write as you would for a [professional or technical] journal," Marcano said, himself a former medical journalist.

One reason there aren't a lot of economists in the newsroom is "because the message might be lost on a less sophisticated audience," said William Pesek, a staff writer at Barron's. "A writer who's not an economist by trade needs to write a story at a level he or she understands. More likely, that will hit closer to home for readers than a professional data person."

Pesek used his college calculus teacher as an example. "He was brilliant and could calculate the square root of 5,456 in his head. But when it came to teaching his students, he was useless. He knew his stuff, but had no idea how to impart that knowledge to others."

"Ultimately," said Cassel of the Inquirer, "people get the newspapers and other media that they want. If more people reacted to really bad economics in the media-with letters, PR, lobbying editors, etc.—it would likely get better."

The increasing popularity of the stock market and interest in the general economy—whether local, regional or national—also appears to be creating a bit of hybrid reader, and it's not clear whether or not media is the leader or follower of the economic literacy curve.

"Nowadays, construction workers are reading The Wall Street Journal and calling me, asking questions about monetary policy and the Phillips curve," Pesek said. "That's a remarkable change. If economic literacy is lacking among journalists, the American public will feel the pain."

A-B-C, not 1-2-3

Even if there were universal agreement on the extent of the problem (which there wasn't), respondents differed on what, if anything, could be done to improve media understanding and use of basic economics in news reporting.

For example, journalist training received much attention, with respondents variously arguing that J-school curricula was keenly geared to properly training young journalists on one hand, and oblivious to core analytical skills and individual subject areas (economics among them) on the other hand.

A number pointed out that economics was simply not a subject to which journalists are instinctively drawn, mostly because of its relation to math and statistics. Journalists tend to be "word people, not number people," said Kimelman of Pew. Columbia's Sreenivasan said journalists "wear it as a badge of honor that they don't know numbers."

"Reporting action on a mass or ongoing level requires statistics, which most newspaper people would rather avoid," Cassel said. Foley said many of his Tennessee University students tell him, "If I could do math, I wouldn't be in journalism school."

Others pointed out that the economics profession offers a journalist little help with the translation from conceptual framework to real-world relevance. "I may be biased, but I think the problem lies with the economics profession," said Joseph Rebello, senior economics writer for Dow Jones News Wires. "I have a bachelor's degree in economics, so I know that economics is the art of finding a complicated way of expressing a simple concept. Economic understanding would be greatly enhanced if economic policymakers simply learned to use plain English when making public statements."

Upshaw, from the University of Oregon, said that the "current trend toward lowbrow news-you-can-use actually could enlarge the news role of economic factors if patient, plain-talking economists visited newsrooms more often."

Constant deadlines and small newsholes also influence how much economics is included in an average story. For most media outlets, "there's a rush to keep pumping things out," said Parker of FOX. Others agreed, saying reporters face increasing pressure to crank out more copy faster, a condition exacerbated by the "always on" of the Internet.

"Once in the office, there's a lot of 'feed the beast' mentality," said Hillan of the Mercury News. "That comes as a cost" of eating away the time a reporter might otherwise use to cultivate new sources or do background reading—learning that should lead to more thorough reporting at all levels, he said.

In fact, most respondents seemed to think that any economics knowledge gap is best closed by hands-on reporting. "A lot [of reporters] understand [economics] instinctively, with a bit of experience and mentoring and learning," said Calame, from WSJ.

Jim Parker, a business reporter with the The Post and Courier of Charleston, S.C., has 20 years of experience, "yet nearly all I learned about business was on the job." One of the first banking stories Parker ever did, "I thought loans were liabilities—'you're giving out money, right?'—and deposits were assets—'people are giving the bank money, right?'" he said.

Several others pointed out that they might not be able to define certain economic terms, but have used or applied them as a matter of instinct. "I'm sure I did without being fully conscious of it," said Edward Kean, chief financial correspondent with BridgeNews.

In that vein, a number of respondents questioned whether economic illiteracy in the media was a real problem. Calame said he was not "hugely worried" about economic literacy among individual reporters, pointing out that reporters increasingly work in teams, "sharing the expertise that resides in [different] people." "Economic literacy is a good thing," said Calame, but he cautioned "not to make it the end-all, be-all. ... It is not necessary for a large number of business reporters to have those tools highly polished." It was more important that reporters have resources on and off staff that can fill knowledge gaps and can "get up to speed in an hour" to write a news article, Calame said.

"The level of understanding among journalists about economic matters isn't quite so dire that a literacy drive is warranted," said Rebello of Dow Jones. "It's always helpful to have as much prior knowledge as possible for any subject you're researching. But it isn't essential. A good reporter will nearly always be able to learn the essentials quickly. ... As a reporter, you have the luxury of calling almost anyone and demanding an instant tutorial on the subject of your choice."

Blevens of Southwest Texas State, added, "I don't know the consequences of such deficiencies, but the last time our democracy was threatened, two low-level cop reporters started pulling the string that eventually hung a president. Somehow, consequential stories get out and the job gets done, whether the public fully understands or not."

"I openly grant the idea that reporters are economically illiterate," said Jim Parker of FOX. The real problem lies with reporters who "are afraid to use those three words: I don't know. ... It's more important that you can say, 'I don't understand,' and 'where do I go to get the answer.'

"I don't think the answer is in teaching reporters all this stuff," Parker said. "The difference at the end of the day is that a good reporter will acknowledge the shortcomings and properly fill the gap."

Ron Wirtz
Editor, fedgazette

Ron Wirtz is a Minneapolis Fed regional outreach director. Ron tracks current business conditions, with a focus on employment and wages, construction, real estate, consumer spending, and tourism. In this role, he networks with businesses in the Bank’s six-state region and gives frequent speeches on economic conditions. Follow him on Twitter @RonWirtz.