economics – Sheila Kennedy

The Attention Economy

There is a very common complaint–usually voiced by an older person with “know-it-all” pretensions–about “kids these days.” Although that complaint has echoed through history (ever since Socrates, actually), today it tends to focus on the ubiquity of screens…the inescapable elements of our digital world.

It is certainly true that we now occupy an unprecedented environment, and there’s really no telling how or whether it is warping the young of the species. (If I had to guess, young people were different post-Gutenberg than they’d been pre-Gutenberg–and I would wager that some folks weren’t all that happy with that change, either.) The way we socialize the young into constantly changing cultures is inevitably evolving, and determining whether the changes are healthy or damaging is pretty speculative.

We just don’t know.

That said, a recent essay in the most recent Hedgehog Review, addressing that issue, was alternately annoying and thought-provoking. It was titled “The Great Malformation: A personal skirmish in the battle for attention.” After reminding readers of the often-quoted African proverb that “it takes a village to raise a child,” the author indulged in the all-to-common verbal handwringing:

The villagers are too often found behind closed doors, watching television or surfing the Internet. When they do appear in public, they are increasingly prone to do so with portable electronic devices in hand, phoning or surfing or tweeting their way through virtual realms, leaving the village streets full of moving bodies but emptied of human presence. This same retreat from shared physical spaces is observable even—or, rather, especially—in the inner sanctum of the home, where brothers and sisters, husbands and wives, parents and children, are increasingly found alongside each other yet absent to each other, cocooned in mesmerizing solipsism, ghosting even themselves and their own lives. The human race is on its way to becoming seven or eight billion perfect societies of one, each bound in what Stephen Colbert once called “solitarity” with other human beings, somewhere or another—who knows where—who themselves are busy absenting themselves from their families and homes. Where are the children being raised in such a world heading? What are they being urged to care about, cultivated to do and to be? What conception of the human good, if any, is implicit in, supported by, or coincident with this sort of upbringing?

I nearly stopped reading. Agitation about something we all know, without reference to data that illuminates what’s occurring, is just another version of “get off my lawn.” But the essay then took a different direction, arguing that today’s screen fixations come from an intertwining of culture and economics. The article is lengthy, and much less superficial than the cited paragraph suggests.

A few observations that struck me:

The market economy torn free from the rest of cultural life some half-dozen generations ago has now turned upon its parent and consumed her. The work of the polity that Aristotle regarded as most crucial—the acculturation of successive generations—increasingly occurs as the unplanned aggregate effect of corporate profit-seeking, in a direction that few regard as genuinely good for the next generation. This novel experiment in socialization raises anew the concern that we might prove unable to keep our republic (as Benjamin Franklin put it), or even our humanity….

As industrial capitalism matures, it gradually colonizes large swaths of the culture, whose evolution is then subject to being steered by the same decentralized and unplanned processes that serve up the other benefits and burdens of capitalism…We are accustomed to this arrangement and not generally awake to its perversity. When we enter the sphere of getting and spending, our activity is shaped by the pursuit of profits, and unlikely to cleave to any compelling conception of the human good. Presumably we do this in order to gain the resources we need to pursue genuine goods in the remainder of our lives. When the market swallows this remainder and seeks to reshape it to maximize profits, it becomes an impediment, not a contribution, to human flourishing.

This cultural revolution could not have come so far so fast without tapping into a very personal resource, located in the inner realm of conscious experience: human attention. There is growing recognition that attention has become an exceedingly valuable and hotly contested commodity.

From radio and television, to advertising, to video games…it’s hard to argue that today’s culture hasn’t devolved into a competition for eyeballs and clicks. And it is worth asking ourselves what the long-term consequences of that devolution portend.

A brief blog post cannot do justice to the essay’s lengthy analysis. It’s well worth reading the entire article.

I don’t agree with everything in it, but it’s a provocative read.

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Testing Economic Theory

A couple of weeks ago, after speaking to a group at North United Methodist Church, I was approached by a couple who handed me a book and accompanying materials on Modern Monetary Theory. I explained that economics is definitely not one of my strong suits–far, far from it– but they insisted that the book, a New York Times bestseller titled The Deficit Myth, written by economist Stephanie Kelton–was clear and accessible.

So I took the book, and I read it. All the way through. And I found it very persuasive.

Modern Monetary Theory (MMT) begins with an undeniable fact: government budgets in countries with sovereign control over their currencies are very different from household budgets. Not all countries have “sovereign control”–in the EU, for example, countries that have adopted the Euro cannot issue currency. They are “users” not issuers, and thus are constrained in much the same way as our household budgets are.

The United States, however, is not. Our government is not revenue-constrained in the same way as our households or our businesses. That doesn’t mean there are no constraints; it just means the constraints are different. As the book persuasively argued, budget hawks and public officials wringing their hands over the size of the budget deficit are still operating under economic paradigms that were appropriate when we were on the gold standard (and/or Bretton Woods), but the country today operates within a very different fiscal reality, one that requires that we change our previous assumptions.

MMT doesn’t dispense with fiscal responsibility; it redefines what responsible behavior looks like.

MMT advocates argue that the government can use its currency-issuing power to guarantee full employment, as it can fund necessary public sector jobs during economic downturns without worrying about running out of money. Governments can use fiscal policy more effectively to stimulate demand and support economic growth. MMT emphasizes the importance of managing real resources (labor, materials, technology) rather than focusing on budgetary ones.

The real constraint on government spending, according to MMT, is inflation.

If government creates too much money, it can fuel a speculative bubble; if it creates too little, it promotes stagnation. Taxation thus becomes an important tool–both for controlling aggregate spending and for altering the distribution of wealth and income–i.e., addressing and reducing the gap between the rich and the rest. (As the author notes, it’s important to determine when taxes should be raised or lowered, and especially which ones and on whom.)

I obviously cannot reduce the book’s lengthy and lucid explanations to a blog post. I strongly encourage you to read the book, or other explanations of MMT. I will note, however, that there are a growing number of economists, many cited in the text, who have adopted MMT because it is based upon an accurate description of the way our current economy functions.

Something that wasn’t in the text, but occurred to me as I was reading, was that both FDR’s New Deal and Joe Biden’s “Bidenomics” appear to have adopted some of the major tenets of MMT, by using government spending to boost wages and employment. I know that many people attribute FDR’s economic successes to wartime anomalies, but the data on Biden’s flourishing economy cannot be so easily dismissed.

As Heather Cox Richardson recently reported:

Data from the Bureau of Economic Analysis released today showed inflation continuing to come down. In November the Personal Consumption Expenditures (PCE) price index was 2.6% over the previous November, down from 2.9% in October. The Federal Reserve aims for 2%. Falling gas prices meant that overall, prices actually dropped in November for the first time since April 2020.

In a statement, President Joe Biden reminded Americans that “[a] year ago, most forecasters predicted it would require a spike in joblessness and a slowdown to get inflation down. I never believed that. I never gave up on the hard work, grit, and resilience of millions of Americans.” In addition to the falling inflation rate, he noted that “the unemployment rate has stayed below 4 percent for 22 months in a row, and wages, wealth, and the share of working-age Americans with jobs are higher now than they were before the pandemic began.” …

The administration is highlighting economic numbers not just because they are good—and they are: real gross domestic product (GDP) grew by an astonishing annual rate of 4.9% in the third quarter of 2023; under Trump it was 2.5% before the pandemic knocked the bottom out of everything—but also because they illustrate the administration’s return to an economic theory under which the U.S. government operated from 1933 to 1981.

Unfortunately, we have too many lawmakers and pundits who cling to outmoded paradigms even more fiercely in the face of empirical evidence to the contrary.

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The Data And The Public

Axios has an annual Thanksgiving feature in which the publication looks at (verifiable) economic evidence for which we should be grateful. Given the mountains of misinformation and outright propaganda about the economy being promulgated for political purposes, it’s worth taking a look at what the numbers actually show.

First of all, the article says we should be grateful is that lots of Americans are working. Predictions that workers wouldn’t return to the labor force after the pandemic were simply wrong.

Workers have joined the job market in droves. The rebound in supply, lifted in part by an immigration surge, has helped the labor market come into better balance amid continued low unemployment.

The share of workers aged 25-54 who were employed was 80.6% in October — down slightly from a multi-decade high reached over the summer but higher than was seen in any month between June 2001 and January 2020.

For women aged between 25 and 54, the share who are in the labor force is near its highest level ever. So much for pandemic-era fears of a prolonged “she-cession.

Not only are people working, real wages are rising.

No matter your preferred wage growth measure, the data tells a similar story. While pay isn’t rising quite as fast as 2022’s breakneck pace, inflation has cooled much faster.

Not only that, wages finally began to outpace inflation this year; average hourly earnings for rank-and-file employees are up 4.4% over last year, and inflation is down to 3.2%. That should help keep consumer spending —a bedrock of the U.S. economy– healthy.

There are other grounds for gratitude:

The banking crisis that wasn’t. Eight months ago, the collapse of Silicon Valley Bank and two other large regional banks looked like the start of a banking crisis that risked choking off lending economy-wide. It hasn’t happened.

There have been no further major bank failures, and credit availability has generally remained stable.The government’s decision to use emergency authorities to make even the largest depositors in SVB whole instilled confidence in the banking system and prevented both mass outflow of deposits and large-scale contraction of bank lending.

If you are an enthusiast of the Fed’s H.8 report (Assets and Liabilities of Commercial Banks in the United States, as it is known) — and who isn’t — you will see that banks’ aggregate real estate loans, consumer loans and most other forms of lending are higher now than a year ago.

Commercial and industrial loans are down only very slightly, to $2.775 trillion in October from $2.777 trillion a year earlier.

And gas prices are coming down.

We need more media reports based upon economic reality, because there is a persistent difference between that reality and the public’s perception of the economy, which is much more sour than it should be in some areas, and far too sanguine in areas that ought to be seen as deeply troubling.

Take opinions about inflation. Polls show that Americans believe inflation to be much higher than the statistics show. There is scant media attention to the fact that the U.S. brought the rate of inflation down more rapidly than Europe (we won’t even discuss Argentina…)The annual inflation rate in the EC was 4.3% in September 2023, which was down from 5.2% in August. A year earlier, the rate had been 9.9%.

What is truly ironic is that Americans hold these negative beliefs about what has been genuinely positive performance at the same time that most are blissfully ignorant of far more worrisome aspects of the economy.

According to a 2015 article in Scientific American,

The average American believes that the richest fifth own 59% of the wealth and that the bottom 40% own 9%. The reality is strikingly different. The top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%.

That gap has not narrowed.

I have spent the last 30 years warning about the consequences of the low levels of civic literacy in this country. My focus has been on the nation’s constitutional framework–the Constitution, the Bill of Rights, and the philosophical premises that undergird those documents. I now realize–thanks to the persistent disconnect between economic reality and public opinion about the economy– that the country has major problems with economic literacy as well.

Our economy has problems. They just aren’t the ones a majority of our citizens recognize or understand. We aren’t going to be able to address those problems unless a majority of our citizens can accurately identify them. Basic economic literacy is just as necessary as constitutional literacy if the voting public is going to install public officials who understand those basics.

I’m beginning to understand why we have so few citizens who cast truly informed votes.

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Beyond Cherry-Picking

A recent essay from The New Republic addressed a question that constantly bedevils me: why do people firmly believe things that are demonstrably false?

I’m not talking about questions that are simply unprovable, like “is there a God?” I’m talking about aspects of our common experience about which there is ample data from credible sources. The linked article, for example, looks into the widespread belief that America’s economy is struggling, when all of the data confirms the opposite.

In the article, Timothy Noah dubs the journalism tracking such unsupportable beliefs as the “Folklore Beat,” and provides examples:

Covid vaccines are unnecessary. Foreign aid constitutes two-thirds of the federal budget. Donald Trump won the election. Schoolteachers are trying to turn your children gay or trans. Little green men visited Area 51, and the military doesn’t want you to know.

Noah is impatient with the media’s tendency to report respectfully on the people espousing those beliefs.

I’ll grant that when misconceptions acquire a large following (though seldom a majority one), that’s news. But is it really necessary to hand a megaphone to every street-corner blowhard in America? News organizations don’t do this because they believe what the blowhards say. They do it because they’re sensitive—too sensitive, if you ask me—to any accusation that they’re out of touch with John Q. Public. And while it’s certainly necessary to document ways in which macroeconomic data fails to capture the complexities of everyday life, particularly with respect to economic inequality, how many times do I have to hear some uninformed fool expound on how President Joe Biden is mishandling the economy? He can’t prove it; he’s not trying to prove it; he just feels that way, and we mustn’t disrespect feelings.

When it comes to the economy, polling continues to show much of the public unhappy with Biden’s performance–although, as Noah notes, “the Wall Street titans on whom Biden wishes to raise taxes maintain a higher opinion of Biden’s economic stewardship than the public at large.”

Perhaps that’s because the rich watch economic matters more closely.

Speaking of the rich, Morgan Stanley recently quadrupled its prior estimate of GDP growth for the first six months of this year, and doubled its GDP growth prediction for October–December 2023, signaling that its economists no longer anticipate a recession. But only a paltry 20 percent of respondents to a CNBC survey released the same week agreed that the economy was excellent or good. Other polls have returned similar results.

The New Republic essay enumerated the truly excellent economic facts of life–employment and paychecks up, inflation down, manufacturing returning to the U.S., etc.–and then considered reasons for the public’s evident dismissal of excellent economic news.

As with so many aspects of American life today, the answer turns out to be partisanship.

In 2016, Gallup polled voters on the economy one week before the election and one week after. During the week preceding the election, with President Obama in the White House and Hillary Clinton widely expected to win, only 16 percent of Republicans thought the economy was improving, compared to 61 percent of Democrats. One week after the election, fully 49 percent of Republicans suddenly thought the economy was improving, compared to only 46 percent of Democrats. Note how much greater this post-election swing was for Republicans: 33 percentage points, compared to 15 for Democrats….

How does voter opinion differ according to party identification on Biden’s handling of jobs and unemployment? So much so as to render the 47–48 percent figure meaningless. Among Democrats, 84 percent approve, in rough approximation to objective reality. Among Republicans, only 15 percent do.

Inflation? Only 5 percent of Republicans approve of how Biden handled that, as against 71 percent of Democrats. If the judgments of both remain less favorable than on jobs and unemployment, that’s because inflation, though greatly diminished, remains above the Fed’s target level of 2 percent (though if you ask me, 3 percent inflation is pretty low).

The inescapable conclusion is that when you ask somebody whether the economy is doing well, you won’t get an answer about the economy. You may not even get an answer about that individual’s personal experience (which may or may not reflect broader economic trends as compared to one, two, or 10 years ago). Most of the time, you’d be better off just asking, “Are you a Democrat or a Republican?” Because these days, that determines how people—especially Republicans—feel about pretty much everything. If the man on the street sounds like a blowhard, hyper-partisanship explains why. The rest is just noise.

Partisan polarization has overwhelmed reason. Tribalism now dictates interpretations of reality. And of course, thanks to the Internet and social media, it’s easy to find “evidence” to support your preferred version of even the most unlikely “facts.”

Welcome to Never-Never Land.

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Policy, Politics And Reality

Paul Krugman condenses our current democratic dysfunction into one pithy paragraph.

In principle, voters should judge politicians by their actions; they should support politicians who pursue policies that help them, oppose politicians whose policies would hurt them. To do this, however, voters should have a reasonably good idea of what policy is doing.

Krugman is focused on economic policy, but his evaluation of what voters know–very little–is equally true of other policy domains. As he says, In a sensible world–i.e., one that worked as envisioned– voters would have both “a reasonably accurate picture of what’s happening” and a basic understanding of what aspects of our lives are actually under politicians’ control.

As he points out, in the world we inhabit, neither of these things is true. (This observation echoes a popular meme making the Facebook rounds, to the effect that it’s easy to believe in conspiracies when you have no idea how things really work.)

Krugman uses the current gloom over the economy as an example.

Start with the state of the economy. You might be tempted to assume that in a world in which getting and spending occupies a large part of everyone’s life, people would have a pretty good sense of how the economy is doing, even if they aren’t familiar with national income accounting. In reality, however, economic perceptions are largely shaped by media coverage — and, increasingly, by partisanship.

Indeed, the role of partisan skew has gotten so large recently that the Michigan Survey of Consumers, probably the most influential gauge of economic perceptions, highlighted it in its most recent data release; you might say that the Michigan Survey has warned us not to trust the Michigan Survey.

He has appended a chart illustrating the wide differences in consumer sentiment among self-identified Democrats and Republicans since 2019. The chart shows–among other things- that today’s Republicans have a more negative assessment of economic conditions than they did in March 2009, when the country was in the depths of the financial crisis, a time when unemployment was at 8.7 percent and the economy was losing 800,000 jobs a month.

Other data confirms Krugman’s point that people’s views on the economy reflect what partisan media and their own political preferences are telling them; they show “a huge divergence between what people say about the state of the economy, which is quite negative on average, and what they say about their own personal finances.”

Then there’s the grousing about Biden and the increase in gas prices, despite the fact that the rise is global and Presidents have virtually no control over them.

So we’re living in a nation with many voters who seem to have both a distorted view of the state of the economy and false beliefs about what aspects of the economy politicians can affect. How is democracy supposed to function well under these conditions?…

The fact remains that public perceptions have become extremely disconnected from reality — economics is just one example. It’s a real conundrum. And if you’re waiting for me to propose solutions, well, not today.

That disconnect from reality is an absolutely foreseeable consequence of our national inability to know who and what we can trust.

The constant drumbeat about “fake news,” the willingness of far too many elected officials to lie through their teeth–not to mention their unwillingness to call a lie a lie–aided and abetted by media outlets engaged in propaganda rather than news, are all bad enough.But they would be far less effective if the population at large was minimally knowledgable–if people knew the basic facts about America’s legal framework, the rudiments of economic theory and the difference between science and religion.

When people who are ignorant of those basics are constantly told that the “legacy” news media is peddling falsehoods, that “others” are to be feared and their voices discounted, that the United States was founded as a “Christian Nation,” that scientific “theories” are nothing more than wild-ass guesses, and much more–they are far more susceptible to conspiracy theories and disinformation. Some of those theories are so far out–space lasers, pedophiles in charge of the federal government and similar lunacies–that most relatively sane people will reject them, but others–the President is in charge of prices at the gas pump, or the economy is not as robust as it looks–are far more likely to take hold.

When we no longer have Walter Cronkite (or reasonable clones) to trust, all bets are off.

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