The quality of economic journalism (updated x2)

I'm a little late on this issue but I see from reading TVHE that Steve Pierson over at the Labour Party blog, The Standard, is criticising National's stimulus package, and the quality of economic journalism. I was somewhat surprised that Pierson was criticising other people's economic understand, but be that as it may, I want to add a couple of short comments to what Matt Nolan has already said.

Matt writes

I’ll go through the two harshest criticisms below:

1) “In the greatest economic crisis in a lifetime, we remain the only country in the world whose government has done nothing to try to stimulate the economy”

I’m not so sure about this. Just recently there was a post on Dani Rodrik’s blog that, when talking about the G20, stated:

There have been a relatively small number of stimulus packages thus far and they don’t amount to much

We hear alot about stimulus packages around the world - and I’m not sure that NZ’s tax cuts and infrastructure spending are that small in comparison …

My point here is that Pierson looks like he is all fired up over having a stimulus package without asking, Do we need one and if so, what form should it take? These are two questions over which there is much debate, many economists argue that a package is not needed or will do more harm than good and many of those who support a package, disagree over what should be in it. The issue is that the usefulness of a stimulus package is far from agreed upon by economists and it should not be taken for granted. So to say

“... we remain the only country in the world whose government has done nothing to try to stimulate the economy”

even if true, could turnout to be a good thing.

Matt Nolan continues

2) “Many (economic journalists) are so economically illiterate that they think running an economy is like running a household budget”

I’m not sure this is really economically illiterate - expect for the bit about “running the economy”. The government doesn’t so much run the economy - it is a sector in the economy, a sector that is focused on redistributing and setting up a broad framework to improve outcomes in the market economy.

I agree with Matt, but would say the government is a 'too large' a sector of the economy. But the household analogy is a good one, in particular because it focuses our attention on the budget constraint. The government does have a budget constraint, just like a household, a point overlooked at our pearl.

It should be noted that the term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)".

Update: Not PC comments here.

Update 2: Matt Nolan has some additional comments here.