Cognitive Dissonance On the Economy

The American economy has been humming along at pretty much the same pace as it did in the Clinton years for some time now and is the envy of the world, yet the American public is still complaining about it. There is a profound cognitive dissonance problem here.

Back Talk has the figures. He notes that today's economic pessimism is "borderline ridiculous" and wonders why the public's perceptions should be so much at odds with economic reality. His best guess is that the press reports economic news impressionistically rather than objectively and fails to provide context for its stories. During Clinton's years press stories were upbeat and the public was optimistic. Under Bush stories are downbeat and hedged with all sorts of speculative worries and the public gets a negative impression despite the fact that our economy is performing extremely well.

Read the whole thing here.

Tigerhawk argues that the reason for public dissatisfaction is stagnating real wages rather than media manipulation. [here] Glenn Reynolds replies that the shift in public attitudes coincides with the change in administrations rather than with shifts in real income, suggesting that political rather than economic factors are driving the perceptions. [here]

RELATED:

Harvard Professor Greg Mankiw, in recent posts, shows just how false the media picture of the economy is and illustrates one of the techniques used to create that false impression.

First, the Big Lie!

Economist Ann Huff Stevens punctures another media myth:

For some years it has been that reported that employees in the United States experienced widespread, substantial declines in job security or stability over the past several decades. Various newspaper articles have suggested that big structural changes in labor markets mean that job security is a "myth," that lifetime employment with a single employer is far less likely than it was, say, thirty years ago. Workers themselves worry that their prospects for keeping a job for a long period have shrunk, that they may need several jobs during their careers. "There is, however, a striking lack of solid empirical evidence to support these claims," writes economist Ann Huff Stevens.

Read the whole thing here,

In one respect the myth is true. Workers are worried about their prospects for long-term employment, but that is not because of instability in the labor markets but is almost entirely due to media misrepresentation of the true state of affairs.

Mankiw then illustrates one of the techniques underlying the Big Lie!

The NYT highlighted on the front page above the fold the following statement:

wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947.

Scary stuff, worthy of being featured on the front page where the news networks were sure to pick it up. But only two days later the Times reported:

Perhaps the biggest surprise in today’s report was a surge in wage-and-salary income during the first half of this year. Between the fourth quarter of last year and the second quarter of 2006, it grew at an annual rate of about 7 percent, after adjusting for inflation, up from an earlier estimate of 4 percent, according to MFR, a consulting firm in New York.

As a result, wages and salaries no longer make up their smallest share of the gross domestic product since World War II.

As Professor Mankiw notes this is a priceless "Emily Litella" moment for he Times, but note where the good news was reported. It was buried on page C1, in the business section whereas the earlier doom and gloom assessment was featured on page 1.

Read it here.

AND THEN THERE'S THIS:

Don Boudreaux at Cafe Hayek notes another technique of the Times' "Big Lie!" -- omitting relevant contextual information.

This editorial in today’s New York Times -- entitled "Downward Mobility" -- does its best to extract depressing news from the latest report issued by the U.S. Census Bureau.

Basically it shows that real median household income has grown at less than one percent per year over the the past four decades. Sounds like stagnation if presented without any contextual information, but consider this.

[T]he economy today offers so very many more options than did the economy in 1967 – or even the economy of that halcyon year, 1973. Today I can buy cell-phone service; today I can buy cable television with hundreds of channels, including ones that specialize in sports, cooking, history, and science; today even the cheapest automobiles are safer and more reliable than were the finest cars for sale in 1967; today I can buy telephone answering machines (with caller-ID), microwave ovens, CDs, personal computers, Internet service, and MP3 players. Today I can watch movies in my own home – in color – whenever I want without having to wait for one of the three or four available television stations to telecast a movie for viewing on a black-and-white television.

Today I can use GPS.

Today’s houses are bigger, on average, than a few decades ago, and better equipped -- and more affordable.

Today’s coffee is indescribably superior to the coffee Americans regularly drank just a few years ago; the variety and quality of teas is much higher; a huge selection of books is available at the neighborhood Barnes & Noble or Borders – or through on-line retailers such as Amazon.com. The variety of foods available in supermarkets and at restaurants is much greater and, hence, more interesting. And much of this food is low-fat. (One-percent and two-percent milk were not available to the typical American back in the day.)

The average number of items offered for sale by today's typical supermarket is 45,000 (up from what I believe was about 5,000 in the late 1960s).

Today I can buy an inexpensive quartz wristwatch that keeps time with remarkable accuracy.

Today, because of sites such as eBay, I have access to a thicker market for selling my junk.

Today I can buy – or get in a cereal box – a powerful electronic calculator. Today I can take digital photographs and digital videos and send them by e-mail, instantaneously, to family and friends around the world.

Today I can pay even for small purchases with a credit card – or if I prefer to pay with cash, I can get that cash from an ATM.

Today I can have packages delivered overnight.

Today, anesthesia is much better. (Those of us who had teeth filled in the 1970s and again much more recently can attest to the enormous improvement.) Many medicines available today were unavailable back then. Today I can wear not only soft contact lenses, but disposable ones that are cleaner and more convenient than standard lenses. And if I choose, I can have my vision restored to 20/20 through Lasik surgery.

Today -- with Wal-Mart's help! -- I can check my cholesterol by myself, inexpensively and without fasting.

Today life-expectancy is longer.

Americans today spend fewer hours per day on the job, on average, then they did just a few decades ago. In 1960 the average length of the American work week was 38.6 hours; in 1973 it was 36.9 hours; in 1996 (the latest year for which I have data), this figure was down to 34.4 hours. (Note that from 1870 to 1996 the trend in the length of the work week has been steadily downward; no reason to think that this trend has reversed itself in the last ten years.) And because the average number of days worked per year has also fallen, the average American worker in 1996 spent nearly 200 fewer hours annually on the job than did his counterpart in 1973. (These data are from W. Michael Cox and Richard Alm, Myths of Rich & Poor (1999), Table 3.1, page 55.)

Today, diapers are disposable.

Today I can google.

Read the whole thing here.

By decontextualizing the economic figures the Times is implying that the American middle class has failed to share in the nation's prosperity, but nothing could be farther from the case. Once again the NYT presents its readers with all the news it sees fit to print.