Cato’s Jagadeesh Gokhale with an example of the current state of economic journalism:
[NPR reporter Adam] Davidson: “Ladies and gentlemen, I have an amazing investment opportunity for you. Give me $100, just a hundred, and in one year I promise it will be worth 93 bucks. We call it the deflation special.”
My reaction: No, sir! Under deflation, $100 today would increase in value to $107 (assuming your implicit rate of deflation). Help! Stop the car! …Wait, I’m the one driving…what just happened?
Davidson: “All right, seriously, nobody is giving anybody a hundred bucks just so they can lose seven.”
My reaction: No, no, please, please take my money! I’d give you a million dollars if I had that amount. I really would!
It gets worse from there. Davidson completely misunderstands the effects of deflation — and thousands of listeners take him at his word. No wonder public understanding of economics is so poor.
People spend little time learning about economics in the first place because of rational ignorance. Compounding the problem is that in the little time they do spend learning — usually from economically untrained journalists — they get incorrect information from people who know not of what they speak.
I previously wrote about the troubled relationship between economics and journalism here and here.
Inertia Wins! 