Just a quick follow-up on the Mauldin piece on ‘morality economics’ that I wrote earlier. To recap, ‘morality economics’ is the misguided notion that the solution to private excess in the boom period preceding the ’08 crisis is governmental austerity, which causes growth to slow and unemployment to remain elevated during the business cycle downturn.
Now, this wouldn’t be a huge issue except for the fact that the majority of policymakers have bought into this bogus mindset. This is in spite of the fact that the evidence to support these arguments was scant four years ago, and has completely collapsed today. So, what explains the curious persistence of this mindset among policymakers and the DC pundit class?
While this might not be the whole story, I think this interview with the co-founders of Politico goes a long way toward explaining the problem.
Jim VandeHei: The critique of Politico—“Oh my gosh, Politico is so insidery!”—my response is always, “What part of Politico don’t you understand?” This has always been a publication focused on this city. So we write about everything: the good, the bad, the personalities, the politics, the policies. Unless you understand, holistically, all those ingredients, you don’t understand the town.
[Interviewer] IC: So what is it for you? Do you want good government? To keep politicians honest? What?
JVH: Helping people understand Washington. Not how they want it to be, not what you think is important, but how it operates. We also really want to save for-profit, nonpartisan journalism. We want to prove there is a business model that works.
JH: We have an obligation to be interesting. We don’t think of ourselves as the electric company or the water company: Well, we have a responsibility …” That was a mindset in a previous generation of journalists. That mindset might have even been legitimate. There really were only a handful of establishments reporting on this stuff and making judgments on its relative importance. People were looking to editors to say, “Tell me what I should think about.” We are in an era where everyone is his or her own editor and will decide what they care about. If we are boring, … there is no market for that. Nor is there a public calling to be boring.
I have two main criticisms of the segment above, and they both tie back into the austerity debate. First, as Nate Silver points out, the main issue with Politico isn’t that it is ‘insidery’ but that it takes conventional wisdom at face value without offering any sort of critical analysis. The second (and related) point is that this seems to be by design–Politico’s business model is to not be boring, and apparently correcting factual errors and/or common misperceptions is incredibly boring. [As a side note, perhaps that’s why I only have about 3 regular readers haha].
I seriously disagree that Politico has no obligation to be anything but interesting. Politico is read by everyone that operates in DC–if it does nothing but spread DC gossip and circulate conventional wisdom, then Politico is simply contributing to and exacerbating a closed feedback loop whereby factually incorrect conventional wisdom becomes de facto gospel as everyone who is anyone in DC sees it enough that they start to believe it. (This has been documented in the past: here, here, and here). The problem with this information feedback model is that outside voices are marginalized/shut out, and its not exactly clear how any one particular opinion translates into conventional wisdom (though, with all of the money that has poured into deficit reduction advocacy, I don’t think it’s too much of a puzzle…). Thus, with regard to deficit reduction, we’ve measured economic policy for the last 4 years against a deficit reduction benchmark because Simpson/Bowles/Ryan/Obama told us that we would have a fiscal crisis if we didn’t reign in our spending and reduce our deficit. Unfortunately, not a single one of those people is an economist, and outside voices that have been correct about the expected path of inflation, growth, and unemployment over the past 5 years (Delong, Krugman, Kimball, etc) have been completely ignored or shut out of the public debate with disastrous consequences for our economy.
So, to Politico, I would say this: in most places, conventional wisdom doesn’t matter in the slightest and publications that utilize Politico’s business model probably don’t do much harm. Washington DC is different, because conventional wisdom there determines the outcomes of policies that affect (literally) billions of people. You might not be the solution to our current economic policy woes, but you are certainly part of the problem.