Failure in the Information Age

In my previous post, I hinted at two topics which I didn’t have time to properly cover and so left hanging. Specifically, I pointed out the relative timelines of the presidential election and the housing market crisis without specifying how this was relevant, and I pointed out how small, monetarily, the crisis actually was without showing how this became the lead-in to “the greatest economic recession since the 1930s”.

The problem is one of real, rational information, and I’m going to deal with this topic before approaching the other two.

People can’t be expected to research information themselves beyond reading the newspaper or watching the news. It’s infeasible for us to wander across the country interviewing important people and questioning those who are qualified to comment. And even with the introduction of the internet, for most of us it’s not practical to spend several hours a day searching for information, let alone having the talent to recognize decent information from hokum.

So, we need journalists and reporters. But, journalism is reliant on three things to be of much practical use:

1) They must remain objective and bi-partisan.
2) They must investigate thoroughly and report everything without self-censorship.
3) They must have access to key sources and of course not be censored by external sources.

On the other hand there are the following issues which inhibit this:

1) Partisanship is hard to avoid, and once you have gained the slightest bit of it, you attract both readers and journalists who endorse that stance.
2) Partisanship sells news in the same way that a store which sells plain baseball caps must charge less than a store which sells New York Yankees branded baseball caps. People generally treat politics like sports and want to feel a part of the team.
3) Uncensored and realistic news is boring, tedious, depressing, and/or gruesome. Sensational and/or pleasant and amusing news sells.
4) Sources don’t want to give you information if they can’t trust that you’re on their side.
5) Policing journalistic standards is nigh impossible without government intervention, which is impossible since we do not want the government or any group imposing “reality” on journalists.

Now, somewhere between Watergate, Vietnam, and Edward Murrow fighting McCarthy there was a fairly strong standard of journalism established in the latter half of the 20th century lasting through, perhaps, the 80s. Through the 90s, and especially with the introduction of the internet and the great collapse of the paper news market and the rediscovery that shallow and entirely partisan journalism costs less and makes much much more money, we’ve got a problem.

Getting back to our original topics, let’s consider first the question of how the housing crisis became a trillion dollar deficit where the whole thing should only have cost $39 billion.

The best, simple example is given in a discussion between Ben Kingsley and Robert Redford in the film Sneakers:

Cosmo: Posit: People think a bank might be financially shaky.
Bishop: Consequence: People start to withdraw their money.
Cosmo: Result: Pretty soon it is financially shaky.
Bishop: Conclusion: You can make banks fail.
Cosmo: Bzzt. I’ve already done that. Maybe you’ve heard about a few? Think bigger.
Bishop: Stock market?
Cosmo: Yes.
Bishop: Currency market?
Cosmo: Yes.
Bishop: Commodities market?
Cosmo: Yes.
Bishop: Small countries?

The thing about the economy is that, by and large, the health of the economy is (nearly) entirely at the whim of what people think about the economy, regardless of what any macro-economist’s formulas might say. Oh certainly there is such a thing as bubbles or bankruptcy or other things which are quite solid and undeniable. But at heart, the economy is good when people buy stuff and people buy stuff when the economy is good, meaning that it’s people’s perception of the state of the economy that gets them to buy.

But as I’ve pointed out, people are reliant on the news for their perception of the economy.

If the news is sensationalist and hammering on the point that “millions” of Americans are going to be unemployed and homeless and that economists think that the government’s solutions to the problem are ill-advised, then everyone pulls all of their money from the market and causes banks to begin to topple. This means that instead of having to cover the mortgage expenses of a few million people, you had to prop up the sudden shrinkage of the entire world market.

If, on the other hand, newspapers had said (in August of 2007) that it was a fully containable problem, that people wouldn’t be homeless or unemployed for another 6 months–plenty of time to solve the crisis–and stated what sorts of solutions would actually work, then we would have had a much different future.

Of course either of these points to the need for a realistic solution to come out of the government. This leads to the other topic I had raised for discussion, the presidential election.

Two years before President Bush was the leave office, the campaign for the Presidency had already begun, and it wasn’t some small event happening in the background. It was widely reported upon and considered to be of utmost importance because President Bush was felt to be effectively gone from the office already. The American public, as I perceive it, felt like their country was being lead by no one and any actual problem which afflicted us could not be resolved until the new President came in. In the face of this a $300 billion bailout was fully ineffective.

But more importantly was that the bailout was the product of the nominees. The news presented it as being thanks to either Barack Obama or John McCain that it passed at all. But the news did not present the fact that it guaranteed enough money to purchase all the houses held under mortgage plus some. Everyone knew that things could not properly be resolved until the new President was elected, and everyone knew that $300 billion was simply a band-aid to tide us over until January 2009.

Why? Because that was the common perception, and the common perception is what dictates the economy. The July 2008 bailout was fully sufficient to achieve everything needed by any measure that was actually wrong with the US market.

But it was not to the advantage of the politicians who were running for office to make this known. It wasn’t to the advantage of the news to make this known. Though in both of these cases, moreso the problem is a complete lack of understanding of the actual issue at hand. Neither side really took the 10 minutes it would take to figure out what was wrong, how bad it was, nor how it could be fixed. I generally distrust the idea that people will really screw over a whole bunch of other people as some sort of conspiracy, but I do think that people will gladly stay ignorant of pertinent information where that information could only ever hurt their position.

It was the duty of our representatives to acquaint themselves with the realities of the issues at hand and make reasonable responses to it. But it was also the duty of the media to make sure that they were actually doing so. And it was the duty of both of these groups to make sure that the electorate understood the issue well enough that we wouldn’t pull all of our money from the market.

In the Information Age, a botch-up like this should have been nigh impossible. That it wasn’t is where I feel that the need for this blog comes into play. Reality and rationality have to be re-introduced. There is no way to know when the mass media will return to a reliable state of being, but one could hope that at least one or two voices can become the new generation of Edward Murrows and be, again, trustworthy.

I am frightened by the imbalance, the constant striving to reach the largest possible audience for everything; by the absence of a sustained study of the state of the nation. – Edward R. Murrow