Felix Salmon of Reuters just wrote about the difficulty that most journalists have in reading economics papers :
we generally have no ability or inclination to try to understand the details of the formulae and regression analyses, so we confine ourselves to reading the stuff in English, and work on the general assumption that the mathematics is reasonably solid.
As a long-time journalist with a Phd in Economics–game theory to be precise, so I’ve got my mathematical chops–I’ll let you into a secret. The real joker in the deck is not the mathematics, but the data. Or more precisely, the lack of good economic and financial data in many areas.
You can analyze the economy all you want, but if you don’t have good data about leverage in the financial system (Lehman, anyone?), then all your models and forecasts are based on flawed inputs. Meanwhile, the Fed’s Flow of Funds release doesn’t even mention derivatives. Huh?
Or to shift to another area, what do we know about the extent of offshoring? One of the most important trends in the global economy, and the data simply isn’t there (maybe it’s been offshored!). Pick your favorite company and ask…how many of their employees work overseas? Any answer?
Or here’s another one. Think about your local area (city, county, state). How much of the employment is from small local firms, and how much is from establishments of larger companies? Wouldn’t that be something useful to know?
I could go on and on (as the readers of my articles and blog posts know). The lack of good data on innovation and globalization is horrifying, given the economic importance of these topics to today’s world.
But as the saying goes, ‘problem’ is just another word for ‘opportunity’. When the official data falls short, the reporting by economic journalists becomes essential. We should poke our noses into all the interesting questions that people care about, but that the available data and theory can’t answer. And if in the end we’ve helped people understand a bit better, we’ve done our job.