Poor Karl Ritter and Matt Moore of the Associated Press must have a lot of time to kill, a dearth of ideas, and a studied disinterest in accuracy as they await the awarding of the Nobel Prize for Economics in Stockholm, Sweden on Monday. A list of past winners is here.
Besides lamenting that no woman has ever won the Economics Prize (so?), the AP pair felt the need to relate the financial bailout passed by Congress and signed by the President a week ago, and the current steep stock market decline that followed it (or, as yours truly and Investors Business Daily would argue, occurred because of it), to who might win the award.
Along the way, they, as AP reporters are wont to do, erred, and quite seriously.
Here's how their report, weirdly entitled "Amid the meltdown, economics Nobel no easy pick," began (bold is mine):
If history is any guide, this year's Nobel economics prize will award the developers of economic theories that have had the time to take root, grow and prove resilient.
The past also indicates that Monday's winner will probably be an American male who will have done the bulk of his work several decades ago, not someone who has analyzed issues related to the financial meltdown that is now throwing capitalism into turmoil worldwide. Also, no woman has ever won the economics prize from the Nobel Foundation since it was first handed out in 1969.
But unless one really believes that professional economists just sign any old thing that crosses their desk, Ritter and Moore are incorrect that all nominees suffer from a dearth of knowledge of issues relating to what the pair describe as the "meltdown." At least two nominees under serious consideration looked at the matters involved closely enough to be among the over 160 economists who signed a letter to the Speaker of the House of Representatives and the President pro tempore of the Senate on or shortly after September 24, 2008. The 160 signers also included at least three current Nobel laureates.
One of the nominees for this year's prize who signed the letter, Lars Peter Hansen of the University of Chicago, was named by the AP pair. The other, Harvard's Oliver Hart, is mentioned at an October 10 New York Times Freakonomics Blog entry by Steven D. Levitt.
Both gentlemen are among those who signed onto the following letter:
As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.
I first learned of the letter from this article at Bloomberg News. If the actual contents of the letter were posted at any news site, I couldn't find it.
Considering its gravity and its source, a Google News search on "economists letter bailout" (not in quotes) between September 24-30 surfaced pretty light mention of the letter. The only front-page story about it appeared on Page A01 of the Washington Post on Friday, September 26. Other mentions were clearly less prominent. The ones I found were at a Reason blog post, a New York Times "Talking Business" column by Joe Nocera, the Harvard Crimison, a Chicago TV station and a semi-coherent LA Times column by Joel Stein. I doubt there were many other citations of the letter, and could locate no reports about it by AP.
The report by Ritter and Moore shows that that weak original news coverage begets weaker and erroneous subsequent news coverage -- enough in this case to blow away the reporters' core premise that no one "who has analyzed issues related to the financial meltdown" is up for Monday's Nobel. They're flat-out wrong.
Cross-posted at BizzyBlog.com.
