A New York Times article on four nights of riots in Barcelona was headlined, “In Spanish riots, anguish of those recovery forgot.” The unemployment rate in Spain was 25.3 percent in March, the most recent month for which data are available. It is down by less than 1.0 percentage point from its year ago level. At this pace of recovery, the unemployment rate will first fall below 10 percent somewhere around 2030.
A New York Times article on four nights of riots in Barcelona was headlined, “In Spanish riots, anguish of those recovery forgot.” The unemployment rate in Spain was 25.3 percent in March, the most recent month for which data are available. It is down by less than 1.0 percentage point from its year ago level. At this pace of recovery, the unemployment rate will first fall below 10 percent somewhere around 2030.
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Tyler Cowen had an interesting column discussing a book by Alice Goffman that described the life of people trying to evade the law. Cowen points out that fugitive status undermines family relations and can make normal work impossible.
The discussion is interesting and the book sounds well worth reading, but as an economist nerd type it is difficult not to ask a seemingly obvious question; do these people answer government surveys? Of course fugitives almost certainly do not answer the door for the people conducting the Current Population Survey (CPS) and other government surveys.
This matters because it could mean that the data from the CPS (the main survey for determining employment and unemployment rates) are biased, especially for those demographic groups who are disproportionately likely to be in trouble with the law. This likely appears to be the case with young African American men. While the overall coverage rate for the CPS is around 88 percent, for young African American men it is around two-thirds.
The current methodology effectively assumes that the people who don’t get covered by the survey are as likely to be employed as the people who do. Based on comparisons between the 2000 long-form Census and the overlapping months of the CPS, my colleague John Schmitt found that the CPS may overstate employment rates for young African American men by as much as 8 percentage points.
By its nature is hard to get a clear fix on the size of this problem, but it does seem reasonable that not only actual fugitives, but people on probation or parole or in other ways involved with the criminal justice system might be less likely to talk with someone asking questions from the government. If we think these people are less likely to be employed, then our data may be overstating employment and understating unemployment. It would be good if the Bureau of Labor Statistics took some interest in this issue.
Tyler Cowen had an interesting column discussing a book by Alice Goffman that described the life of people trying to evade the law. Cowen points out that fugitive status undermines family relations and can make normal work impossible.
The discussion is interesting and the book sounds well worth reading, but as an economist nerd type it is difficult not to ask a seemingly obvious question; do these people answer government surveys? Of course fugitives almost certainly do not answer the door for the people conducting the Current Population Survey (CPS) and other government surveys.
This matters because it could mean that the data from the CPS (the main survey for determining employment and unemployment rates) are biased, especially for those demographic groups who are disproportionately likely to be in trouble with the law. This likely appears to be the case with young African American men. While the overall coverage rate for the CPS is around 88 percent, for young African American men it is around two-thirds.
The current methodology effectively assumes that the people who don’t get covered by the survey are as likely to be employed as the people who do. Based on comparisons between the 2000 long-form Census and the overlapping months of the CPS, my colleague John Schmitt found that the CPS may overstate employment rates for young African American men by as much as 8 percentage points.
By its nature is hard to get a clear fix on the size of this problem, but it does seem reasonable that not only actual fugitives, but people on probation or parole or in other ways involved with the criminal justice system might be less likely to talk with someone asking questions from the government. If we think these people are less likely to be employed, then our data may be overstating employment and understating unemployment. It would be good if the Bureau of Labor Statistics took some interest in this issue.
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It’s not polite to use the “L” word here in Washington, but it’s hard not to be more than a bit disgusted with the frequency with which trade pacts are sold as great engines of job creation and economic growth, when they clearly are not. The latest offender in this area is Bruce Ackerman, a Yale Law professor.
In a Washington Post column Ackerman called on President Obama to push for the Transatlantic Trade and Investment Pact (TTIP), which he described as, “opening the path for job-creating opportunities for workers on both continents.” Really, what evidence does Professor Ackerman have for this assertion?
The most widely cited projections for the growth impact of the TTIP are from the Centre for Economic Policy Research in London (no connection to my CEPR) which shows the pact leading to an increase in GDP of 0.4 percent in the U.S. when its effects are fully felt in 2027, and 0.5 percent in the European Union. The analysis explicitly says that it will not lead to more jobs since the models are full employment models. It may lead to somewhat higher wages, but it is not a way to employ the unemployed. Furthermore, the discussion notes that in the transition, some workers may end up unemployed as the economies adjust to the new rules.
Implying that a deal that raises GDP by 0.4 or 0.5 percent 13 years out means “job-creating opportunities for workers on both continents” is just dishonest. The increment to annual growth is on the order of 0.03 percentage points. Good luck finding that in the data.
In addition, there are reasons to believe the growth effect could go in the opposite direction. The model used by the London CEPR does not assume any negative growth impact from higher prices for drugs or other goods that might be more costly due to stronger patent and copyright protections coming out of the deal.
These will likely be a drag on growth. Economists tend to like patents and copyrights (probably because their friends and family members benefit from them), but that doesn’t change the fact that they lead to market distortions and have major economic costs. If the price of a drug rises by 1000 percent because we imposed stronger or longer patent protection it has the same effect in the market as if we imposed a 1000 percent tariff on the drug.
Markets are stupid, they don’t realize that the price increase was caused by a policy that economists support in contrast to a trade policy they oppose. They respond the same way in both cases. While we don’t know how much increased patent and related protections will raise prices as a result of these deals, but there is no doubt that the direction is up. And that will slow growth in a way that is not accounted for in the CEPR analysis. (Yes, higher prices give more incentive for innovation. If you find evidence that this ends up as a net positive for the economy, you get a Nobel Prize and huge bucks from the pharmaceutical industry.)
Reducing trade barriers can lead to increased economic growth and gains for consumers and workers, however the barriers between the U.S. and Europe are already very low in almost all cases. This means that the potential for further gains are limited. This deal is primarily about imposing a set of regulations on both continents, some of which may be improvements, but many of which will be designed to serve the business interests who are in on the negotiations. They hope to accomplish through a “trade” deal what may not be possible through the normal democratic process. And they won’t hesitate to sell this backdoor sleaze as a “job creator.”
It’s not polite to use the “L” word here in Washington, but it’s hard not to be more than a bit disgusted with the frequency with which trade pacts are sold as great engines of job creation and economic growth, when they clearly are not. The latest offender in this area is Bruce Ackerman, a Yale Law professor.
In a Washington Post column Ackerman called on President Obama to push for the Transatlantic Trade and Investment Pact (TTIP), which he described as, “opening the path for job-creating opportunities for workers on both continents.” Really, what evidence does Professor Ackerman have for this assertion?
The most widely cited projections for the growth impact of the TTIP are from the Centre for Economic Policy Research in London (no connection to my CEPR) which shows the pact leading to an increase in GDP of 0.4 percent in the U.S. when its effects are fully felt in 2027, and 0.5 percent in the European Union. The analysis explicitly says that it will not lead to more jobs since the models are full employment models. It may lead to somewhat higher wages, but it is not a way to employ the unemployed. Furthermore, the discussion notes that in the transition, some workers may end up unemployed as the economies adjust to the new rules.
Implying that a deal that raises GDP by 0.4 or 0.5 percent 13 years out means “job-creating opportunities for workers on both continents” is just dishonest. The increment to annual growth is on the order of 0.03 percentage points. Good luck finding that in the data.
In addition, there are reasons to believe the growth effect could go in the opposite direction. The model used by the London CEPR does not assume any negative growth impact from higher prices for drugs or other goods that might be more costly due to stronger patent and copyright protections coming out of the deal.
These will likely be a drag on growth. Economists tend to like patents and copyrights (probably because their friends and family members benefit from them), but that doesn’t change the fact that they lead to market distortions and have major economic costs. If the price of a drug rises by 1000 percent because we imposed stronger or longer patent protection it has the same effect in the market as if we imposed a 1000 percent tariff on the drug.
Markets are stupid, they don’t realize that the price increase was caused by a policy that economists support in contrast to a trade policy they oppose. They respond the same way in both cases. While we don’t know how much increased patent and related protections will raise prices as a result of these deals, but there is no doubt that the direction is up. And that will slow growth in a way that is not accounted for in the CEPR analysis. (Yes, higher prices give more incentive for innovation. If you find evidence that this ends up as a net positive for the economy, you get a Nobel Prize and huge bucks from the pharmaceutical industry.)
Reducing trade barriers can lead to increased economic growth and gains for consumers and workers, however the barriers between the U.S. and Europe are already very low in almost all cases. This means that the potential for further gains are limited. This deal is primarily about imposing a set of regulations on both continents, some of which may be improvements, but many of which will be designed to serve the business interests who are in on the negotiations. They hope to accomplish through a “trade” deal what may not be possible through the normal democratic process. And they won’t hesitate to sell this backdoor sleaze as a “job creator.”
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The Silicon Valley folks and their allies in think tanks and academia are constantly touting the need to have more immigrants to work as engineers in their companies. This is in spite off the fact that the wages of the workers in the sector do not demonstrate evidence of a serious shortage (i.e. they are not rising rapidly).
Given the frequency with which more immigration comes up in the context of the tech sector, is striking that the issue is not mentioned once in a major NYT article on doctor shortages in the Veterans Affairs hospitals. Doctors in the United States make on average more than twice what their counterparts in other wealthy countries earn, which means that many would likely be willing to work in the United States for a period of time, given the opportunity. (The piece puts the median pay of primary care physicians in the private sector at $221,000 in 2012.) It is also easy to design a mechanism to compensate developing countries for any doctors who come to United States so that they can train 2 or 3 doctors for each one that comes to the United States.
Anyhow, given the evidence of a shortage of doctors in the United States, and the huge gap in pay between the U.S. and other countries, this would seem an obvious case for benefits from increased immigration. It is remarkable that this is not front and center on the national agenda.
The Silicon Valley folks and their allies in think tanks and academia are constantly touting the need to have more immigrants to work as engineers in their companies. This is in spite off the fact that the wages of the workers in the sector do not demonstrate evidence of a serious shortage (i.e. they are not rising rapidly).
Given the frequency with which more immigration comes up in the context of the tech sector, is striking that the issue is not mentioned once in a major NYT article on doctor shortages in the Veterans Affairs hospitals. Doctors in the United States make on average more than twice what their counterparts in other wealthy countries earn, which means that many would likely be willing to work in the United States for a period of time, given the opportunity. (The piece puts the median pay of primary care physicians in the private sector at $221,000 in 2012.) It is also easy to design a mechanism to compensate developing countries for any doctors who come to United States so that they can train 2 or 3 doctors for each one that comes to the United States.
Anyhow, given the evidence of a shortage of doctors in the United States, and the huge gap in pay between the U.S. and other countries, this would seem an obvious case for benefits from increased immigration. It is remarkable that this is not front and center on the national agenda.
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The Washington Post had an interesting piece discussing the issues associated with the cost of Sovaldi, a new drug designed to treat Hepatitis C. As the headline tells readers, Gilead Science, the manufacturer of the drug, is selling a year’s dosage for $84,000. The piece notes that many new drugs are now being developed which will likely carry similar price tags.
At one point the piece raises the possibility of price controls, which it implies would be a government intervention into the market. Actually, the $84,000 price is the result of a government intervention into the market. It is due to the fact that the government grants companies a complete patent monopoly, threatening to arrest those who try to compete in selling the same drug.
While patent monopolies are one way to provide an incentive for research and development, they are an extremely inefficient mechanism. Not only do they lead to a situation in which drugs that would otherwise be cheap (absent patent protection, Sovaldi would almost certainly cost less than $1,000) become very expensive, they provide enormous incentives for drug companies to misrepresent the safety and effectiveness of their product. And they do this all the time, just as economic theory would predict.
In addition, patent monopolies provide incentives for duplicative research as other companies attempt to innovate around a patent in order to get a share of patent rents. The article reports that this seems to be happening in the case of Hepatitis C where other companies are bringing similar drugs to the market.
In short, the problem of high-priced drugs is the direct result of government policy. That point should be front and center in any piece that discusses the topic.
The Washington Post had an interesting piece discussing the issues associated with the cost of Sovaldi, a new drug designed to treat Hepatitis C. As the headline tells readers, Gilead Science, the manufacturer of the drug, is selling a year’s dosage for $84,000. The piece notes that many new drugs are now being developed which will likely carry similar price tags.
At one point the piece raises the possibility of price controls, which it implies would be a government intervention into the market. Actually, the $84,000 price is the result of a government intervention into the market. It is due to the fact that the government grants companies a complete patent monopoly, threatening to arrest those who try to compete in selling the same drug.
While patent monopolies are one way to provide an incentive for research and development, they are an extremely inefficient mechanism. Not only do they lead to a situation in which drugs that would otherwise be cheap (absent patent protection, Sovaldi would almost certainly cost less than $1,000) become very expensive, they provide enormous incentives for drug companies to misrepresent the safety and effectiveness of their product. And they do this all the time, just as economic theory would predict.
In addition, patent monopolies provide incentives for duplicative research as other companies attempt to innovate around a patent in order to get a share of patent rents. The article reports that this seems to be happening in the case of Hepatitis C where other companies are bringing similar drugs to the market.
In short, the problem of high-priced drugs is the direct result of government policy. That point should be front and center in any piece that discusses the topic.
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A New York Times article on the success of Podemos, a new anti-austerity political party in Spain, referred to the “hints of recovery” in Spain. In the last year, the unemployment rate in Spain has fallen by 1.0 percentage point to its current level of 25.3 percent. At this pace of recovery, the unemployment rate in Spain should fall below 10.0 percent just before 2030.
A New York Times article on the success of Podemos, a new anti-austerity political party in Spain, referred to the “hints of recovery” in Spain. In the last year, the unemployment rate in Spain has fallen by 1.0 percentage point to its current level of 25.3 percent. At this pace of recovery, the unemployment rate in Spain should fall below 10.0 percent just before 2030.
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An NYT article on the battle between Amazon and Hachette, a major publisher, told readers that:
“Thanks to Wall Street’s unwavering support, Amazon could afford to sell books for what it paid for them — something no physical bookseller could do.”
While the willingness of investors to pay large amounts of money for the stock of a company that makes little or no profit has been important to Amazon’s success, it is also worth noting that through most of its existence it has been exempt from the requirement that it collect sales tax, unlike its traditional competitors. This has allowed it to undercut them in the market giving the company an enormous competitive advantage courtesy of the taxpayers. The savings from not having to collect sales taxes dwarf Amazon’s cumulative profits since it came into existence.
Addendum:
Having read through the comments here, I will make a couple of quick points.
1) Don’t waste anyone’s time or kill any electrons talking about customers being obligated to pay the tax. This is a blog about the real world. No one sends their sales tax to the government for the things they bought on Amazon. What matters is the law as it’s enforced, and that means that Amazon’s brick and mortar competitors (which includes many Internet sellers) had to collect state sales tax all along. Amazon has just recently started collecting taxes in some states.
2) Not having to collect sales tax is a huge subsidy to Amazon. (Yes, it is a subsidy. States and cities collect revenue — if Bezos gets out of paying it, then everyone else pays more. It is the same thing as if the governments sent Jeff Bezos a big fat welfare check every year.) And it mattered a huge amount to Amazon’s growth and survival. If it thought it could have raised prices by 4-8 percent (the amount of state sales tax) without hitting its market share, it would have done so. The fact that the company has generally operated with near zero profits indicates that collecting sales tax would have been a very big hit.
Note: Typos corrected.
An NYT article on the battle between Amazon and Hachette, a major publisher, told readers that:
“Thanks to Wall Street’s unwavering support, Amazon could afford to sell books for what it paid for them — something no physical bookseller could do.”
While the willingness of investors to pay large amounts of money for the stock of a company that makes little or no profit has been important to Amazon’s success, it is also worth noting that through most of its existence it has been exempt from the requirement that it collect sales tax, unlike its traditional competitors. This has allowed it to undercut them in the market giving the company an enormous competitive advantage courtesy of the taxpayers. The savings from not having to collect sales taxes dwarf Amazon’s cumulative profits since it came into existence.
Addendum:
Having read through the comments here, I will make a couple of quick points.
1) Don’t waste anyone’s time or kill any electrons talking about customers being obligated to pay the tax. This is a blog about the real world. No one sends their sales tax to the government for the things they bought on Amazon. What matters is the law as it’s enforced, and that means that Amazon’s brick and mortar competitors (which includes many Internet sellers) had to collect state sales tax all along. Amazon has just recently started collecting taxes in some states.
2) Not having to collect sales tax is a huge subsidy to Amazon. (Yes, it is a subsidy. States and cities collect revenue — if Bezos gets out of paying it, then everyone else pays more. It is the same thing as if the governments sent Jeff Bezos a big fat welfare check every year.) And it mattered a huge amount to Amazon’s growth and survival. If it thought it could have raised prices by 4-8 percent (the amount of state sales tax) without hitting its market share, it would have done so. The fact that the company has generally operated with near zero profits indicates that collecting sales tax would have been a very big hit.
Note: Typos corrected.
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Andrew Sentance, a former member of Bank of England’s Monetary Policy Committee, wrote in the Financial Times that we should stop worrying about deflation. He actually is at least partly right.
Sentance distinguishes between what he calls “chronic” deflation, “benign” deflation, and “price adjustment.” He says that we need only worry about the former, a process whereby price declines become self-perpetuating, much as an inflationary spiral can become self-perpetuating. He writes that in this situation people may put off purchases and the real value of debt increases, both of which reduce demand and therefore put further downward pressure on prices.
Sentance argues that we have little basis for fearing this sort of deflation. He is right. We have not seen this sort of deflationary cycle in any wealthy country since the Great Depression. Even in Japan the periods of deflation were relatively brief, with the rate of price decline almost always less in absolute terms than -1.0 percent.
However it does not follow from this fact that a low rate of inflation is not a problem. The low rates of inflation across Europe mean that real interest rates are much higher than would be desired in a weak economy. Given the high unemployment rate across the euro-zone, a standard Taylor rule would imply a negative real interest rate on the overnight rate of at least -3.0 percent. However with an inflation rate of just 0.7 percent, the European Central Bank can only get the rate down to -0.7 percent with standard monetary policy.
The debt burdens on homeowners and governments are also much greater than would be the case if inflation was eroding the real value of debt at the rate of 2.0 percent a year, or even better at a 3.0 percent or 4.0 percent annual rate. Since most of the outstanding debt was contracted when the inflation rate was higher and expected to remain higher, the lower than expected rates of inflation that countries are now experiencing amounts to a windfall transfer from debtors to creditors.
More rapid inflation would also facilitate the price adjustment process that is necessary to restore balance within the euro zone precisely because we are unlikely to see the sort of deflationary spiral that Sentance dismisses. The new zero inflation rate in Germany and other core countries means that the peripheral countries can only adjust very slowly with modest rates of deflation. If the core countries had inflation rates of 4.0-5.0 percent, the adjustment could be much quicker.
And Europe is paying an enormous price for this slow adjustment. According to the I.M.F. every country in the euro zone is operating well below its potential GDP with the exception of Malta. In Greece the output gap is almost 10 percent, but the I.M.F. calculates that even core countries like Austria and the Netherlands have output gaps. In these cases, the estimated gaps are 0.9 and 4.7 percent, respectively.
Furthermore, these gaps are measured against sharply lowered estimates of potential GDP. If the I.M.F.’s pre-crisis projections are used as the basis for calculating potential GDP then almost every country in the euro zone would be looking at an output gap of more than 10 percent of GDP. (By comparison, we are supposed to believe that the Transatlantic Trade and Investment Pact, which is projected to raise GDP by 0.5 percent by 2027, is a big deal.)
This suggests that all is seriously not well in the euro zone and that a higher rate of inflation could be an important part of the cure.
Andrew Sentance, a former member of Bank of England’s Monetary Policy Committee, wrote in the Financial Times that we should stop worrying about deflation. He actually is at least partly right.
Sentance distinguishes between what he calls “chronic” deflation, “benign” deflation, and “price adjustment.” He says that we need only worry about the former, a process whereby price declines become self-perpetuating, much as an inflationary spiral can become self-perpetuating. He writes that in this situation people may put off purchases and the real value of debt increases, both of which reduce demand and therefore put further downward pressure on prices.
Sentance argues that we have little basis for fearing this sort of deflation. He is right. We have not seen this sort of deflationary cycle in any wealthy country since the Great Depression. Even in Japan the periods of deflation were relatively brief, with the rate of price decline almost always less in absolute terms than -1.0 percent.
However it does not follow from this fact that a low rate of inflation is not a problem. The low rates of inflation across Europe mean that real interest rates are much higher than would be desired in a weak economy. Given the high unemployment rate across the euro-zone, a standard Taylor rule would imply a negative real interest rate on the overnight rate of at least -3.0 percent. However with an inflation rate of just 0.7 percent, the European Central Bank can only get the rate down to -0.7 percent with standard monetary policy.
The debt burdens on homeowners and governments are also much greater than would be the case if inflation was eroding the real value of debt at the rate of 2.0 percent a year, or even better at a 3.0 percent or 4.0 percent annual rate. Since most of the outstanding debt was contracted when the inflation rate was higher and expected to remain higher, the lower than expected rates of inflation that countries are now experiencing amounts to a windfall transfer from debtors to creditors.
More rapid inflation would also facilitate the price adjustment process that is necessary to restore balance within the euro zone precisely because we are unlikely to see the sort of deflationary spiral that Sentance dismisses. The new zero inflation rate in Germany and other core countries means that the peripheral countries can only adjust very slowly with modest rates of deflation. If the core countries had inflation rates of 4.0-5.0 percent, the adjustment could be much quicker.
And Europe is paying an enormous price for this slow adjustment. According to the I.M.F. every country in the euro zone is operating well below its potential GDP with the exception of Malta. In Greece the output gap is almost 10 percent, but the I.M.F. calculates that even core countries like Austria and the Netherlands have output gaps. In these cases, the estimated gaps are 0.9 and 4.7 percent, respectively.
Furthermore, these gaps are measured against sharply lowered estimates of potential GDP. If the I.M.F.’s pre-crisis projections are used as the basis for calculating potential GDP then almost every country in the euro zone would be looking at an output gap of more than 10 percent of GDP. (By comparison, we are supposed to believe that the Transatlantic Trade and Investment Pact, which is projected to raise GDP by 0.5 percent by 2027, is a big deal.)
This suggests that all is seriously not well in the euro zone and that a higher rate of inflation could be an important part of the cure.
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Newspapers should be in the business of informing their readers, but not the New York Times. Last fall I had raised the issue of putting large numbers in some context so that readers would be able to understand their significance. I was primarily thinking of budget numbers. Almost no readers have any idea what the billions or trillion mean, but they would immediately be able to understand a number expressed as a percent of the budget. The latter takes no additional research, it takes one second of a reporter’s time to use a spreadsheet or calculator.
Margaret Sullivan, the paper’s public editor agreed with me. So did David Leonhardt who was the Washington Bureau chief at the time and is now the editor of Upshot section. Leonhardt said that to most readers reporting a number in the hundreds of billion was the same thing as just writing “really big number.” It seemed that this agreement would lead to a change in the paper’s practices. However that was not to be the case.
The paper still routinely presents budget and other numbers without any context, even though everyone involved in the process knows these numbers are meaningless to the overwhelming majority of people who see them. Of course the numbers are also meaningless to the editors and copy editors at the NYT who review copy.
We got more evidence of this fact in a correction to an article on the cost of demolishing abandoned buildings in the city of Detroit. The correction told readers:
“Because of an editing error, an earlier version of the headline on the home page gave an incorrect figure for the estimated cost of ending blight in Detroit. It is $850 million, not $850 billion.”
Yes, million, billion, who can tell the difference? If this number had been expressed relative to the size of the city’s economy the error might have been clearer to the NYT’s editors and likely would have not found its way into print.
The city of Detroit has a gross city product of roughly $35 billion, assuming that the share of the city’s economy in the metro area economy is proportional to its population. This means the cost of addressing blight, as indicated in this article, would be roughly 2.3 percent of the city’s annual output. By contrast, if the article had used the billion number it would have reported that the cost of blight was 2300 percent of the city’s economy. Presumably an editor would have been able to realize that the latter was an implausible figure and caught the mistake before it found its way into print.
It is difficult to see any legitimate reason for not expressing numbers in a context where they are understandable to NYT readers. The failure to do so also means the numbers are less understandable to NYT editors, which means that the paper will allow more embarrassing typos into print.
Newspapers should be in the business of informing their readers, but not the New York Times. Last fall I had raised the issue of putting large numbers in some context so that readers would be able to understand their significance. I was primarily thinking of budget numbers. Almost no readers have any idea what the billions or trillion mean, but they would immediately be able to understand a number expressed as a percent of the budget. The latter takes no additional research, it takes one second of a reporter’s time to use a spreadsheet or calculator.
Margaret Sullivan, the paper’s public editor agreed with me. So did David Leonhardt who was the Washington Bureau chief at the time and is now the editor of Upshot section. Leonhardt said that to most readers reporting a number in the hundreds of billion was the same thing as just writing “really big number.” It seemed that this agreement would lead to a change in the paper’s practices. However that was not to be the case.
The paper still routinely presents budget and other numbers without any context, even though everyone involved in the process knows these numbers are meaningless to the overwhelming majority of people who see them. Of course the numbers are also meaningless to the editors and copy editors at the NYT who review copy.
We got more evidence of this fact in a correction to an article on the cost of demolishing abandoned buildings in the city of Detroit. The correction told readers:
“Because of an editing error, an earlier version of the headline on the home page gave an incorrect figure for the estimated cost of ending blight in Detroit. It is $850 million, not $850 billion.”
Yes, million, billion, who can tell the difference? If this number had been expressed relative to the size of the city’s economy the error might have been clearer to the NYT’s editors and likely would have not found its way into print.
The city of Detroit has a gross city product of roughly $35 billion, assuming that the share of the city’s economy in the metro area economy is proportional to its population. This means the cost of addressing blight, as indicated in this article, would be roughly 2.3 percent of the city’s annual output. By contrast, if the article had used the billion number it would have reported that the cost of blight was 2300 percent of the city’s economy. Presumably an editor would have been able to realize that the latter was an implausible figure and caught the mistake before it found its way into print.
It is difficult to see any legitimate reason for not expressing numbers in a context where they are understandable to NYT readers. The failure to do so also means the numbers are less understandable to NYT editors, which means that the paper will allow more embarrassing typos into print.
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