The Economist’s Greg Ip on economics reporting

As Canterbury is starting up its journalism program again this interview with The Economists's Greg Ip could be of use to would be economics journalists. Ip is the U.S. economics editor for The Economist and a keen observer of the intersection of business and policy. An award-winning journalist, he was a longtime writer for The Wall Street Journal, where he served as chief economics correspondent in Washington, D.C.. He is author of the The Little Book of Economics: How the Economy Works in the Real World, a useful primer for young journalists — and anyone wanting to improve his or her economic literacy. And to be fair most journalist need to improve their economic literacy!

Part of the interview reads:

JR: What are some pitfalls that young economics reporters should watch out for?

Greg Ip: Let’s cover a few things that are especially important for journalists.

Number one is the failure to consult the original source. It is amazing how many times you can read something, for example, in a news report or blog post and think you know what they’re saying, and then you just quote it – maybe changing a word or two. And then you realize you’ve completely misinterpreted it. As often as possible, you need to go to the original material. For example, if someone is talking about the unemployment numbers, don’t just quote from somebody’s news article. Go to the Bureau of Labor Statistics itself. You’d be surprised at how often, looking at the raw data itself, the numbers are saying something different than you thought. And you often find something that you didn’t realize before in the numbers.

Also, be careful when you’re quoting a policymaker – for example, when the President addresses the country or gives an interview or makes off-the-cuff remarks at an event. Sometimes only one sentence or two will make it into the news. But when you consult the entire context of what was said it’s often a lot more interesting, and the context makes what was said very valuable. By the way, that’s true in all journalism, not just economic journalism

JR: What about specific errors to be mindful of?

Greg Ip: People often confuse levels and rates of change. For example, people will often say, “Inflation rose last month by 1.7 percent.” What they meant was prices rose 1.7 percent. Inflation is itself a measure of a rise or fall. So inflation is 1.7 percent. That issue to a lot of people isn’t intuitive. You see similar misunderstandings when people talk about the debt and the deficit, or the difference between a stock and a flow. So you can have a debt one year and a surplus at the same time. How is that possible? It’s because you started with a debt of $100, then had an annual surplus of $2, so you end the year with a debt of $98. If you started with a debt of $100 and you ran a deficit of $2, you’d end up with a debt of $102. You need to understand these differences.

You need to think like an economist. Any time anyone says something is bad, the immediate question you should ask is: Relative to what? It’s very important, for example, in assessing the President’s economic program. So someone says, “The economy is bad.” Well, relative to what? Relative to what it would have been? Relative to another country? These are important questions to ask because they help you think through the implications of what you’re saying. Just to give another example: The President says, “Oil and gas production are at record highs.” Well, relative to what? Relative to what they would have been if you weren’t President? Then you realize it is mostly driven by private exploration and development on private land. If you look at production on federal land, it’s down. But then President Obama could himself say, “Relative to what?” Because as it turns out, some of the deposits on federal land are very old and are being tapped out. Also, because of the Macondo oil spill in 2010, there was a drilling moratorium. So, whenever someone asserts something – especially a partisan – the question is “Relative to what?” That is why when people say, “The debt is at a record level!”, you should ask that question. Economists know that you do not just look at the debt and say, “Well, it was $100 last year and it’s at $102 this year. It’s at a record level –that’s terrible!” That’s up 2 percent. If GDP grew 3 percent over the same period, then debt relative to GDP went down. And that is the metric we should be looking at.

Another question journalists should ask is: “What is happening at the margin?” People will say that the housing market is in really bad shape – look at all those foreclosures, look at all those vacancies. But if at the margin each new month of data tells us the number of foreclosures has gone down and the number of homes for sale has decreased, you say, “Yes, things are bad, but at the margin things are getting better.” This is very important if you cover the financial markets, because they care intensely about what is happening at the margin. It is always the case that the stock market turns around while the economy is still in recession. Why is that? Because investors are interested in what is happening at the margin. Does the latest information we have indicate that things will be better a year from now or worse?

This question I think is interesting. I wonder how many journalists in New Zealand have a list of contracts they can approach on a particular issue and how many have ever read an actually academic paper to see whats it's about?

JR: You speak with a lot of academic economists. How do you approach experts and interact with them in an effective way? Do you read their papers? How do you prepare?

Greg Ip: There are probably two ways I approach academic experts. Number one: There’s a stable of people I’ve known for years who I always say, “This is a person I want to turn to when I have a question about such and such.” In international trade, for example, I might turn to Doug Irwin at Dartmouth, because no one knows international trade better than Doug. I trust the guy, and he’s not biased. And he’s the first person a lot of other reporters would call about the same thing. If I have a question about economic history, I’ll call Peter Rousseau at Vanderbilt or Michael Bordo at Rutgers. If I have a question about taxes, one of the first people I’ll often call is Alan Auerbach at Berkeley. He’s a highly credible academic, and I’m pretty sure I’ll get a good answer from him.

Number two: when I get into more specialized areas, I’ll often come across a piece of research which is new and I’ll not know the authors. So the first thing I’ll do is read the paper. Then I’ll go to that academic’s website. Almost all academics now have home pages, where they will not only have copies of their research, they’ll also have commentaries and popular writings which are easier for non-specialists to read and get the basic understanding.