Wising Up Journalists To Econ 101
Wising Up Journalists To Econ 101
By Bill Steigerwald
Journalists are notoriously clueless about economics.
It's now gotten so obvious that the University of California-Berkeley's journalism school has started a special course to teach its future E.J. Dionnes how to accurately and fairly cover the economy.
The co-professors -- former Clinton administration economist Brad DeLong and former New York Times Washington correspondent Susan Rasky -- will use the official Left Coast/Berkeley syllabus, of course, but it's a good start.
Not to engage in unkind stereotyping, but based on 30 years of watching and working in the news & commentary sector, I think there's a good reason journalists are so economically challenged.
Most of them are lefty-liberal-union-Democrat-statist types who don't like, trust or understand business, capitalism or free markets. A perfect example is syndicated columnist Neal Peirce, who this week writes about how the minimum wage will be an important issue in some state political races this fall.
Peirce, arguably journalism's foremost expert on the politics and economic development of American cities, doesn't hide whose side he's on in the minimum wage debate -- the Amalgamated Office Workers Union.
That's fine. It's an opinion column. But Peirce's politics don't excuse him from playing fast, loose and fallacious with the economics of government-mandated minimum wage hikes.
According to Peirce, only greedy 'business lobbies' 'claim' that minimum wage hikes distort the free market for labor or hurt small businesses. He also says 'there's zero evidence to prove' business's argument 'that increased minimum wages will be job-killers for low-income workers' -- which would shock any economics professor who hasn't sold his supply-and-demand curve to a left-wing think tank.
Because he focuses so narrowly on his team's side of the economic and moral equation, Peirce sees no costs or victims from forcing businesses to give raises to the 2.7 percent of America's hourly wage earners who make $5.15 or less.
But if Peirce talked to the owner of his nearest McDonald's, he'd hear differently.
To cover his higher wage costs, the owner will try to raise Big Mac prices, which would hurt all consumers. He'd also likely cut back total man-hours, which means laying off a counter kid or two and/or not hiring a new employee or three. Remaining employees would have to work harder.
Whether he knows it, by looking at only part of the minimum wage picture, Peirce commits an economic fallacy Frenchman Frederic Bastiat described in the 1840s as 'what is seen and what is not seen.'
Yes, we see the workers get higher wages -- and Peirce and unions cheer. But to play fair and be economically accurate, we must also take into account, or "see," those workers who are never hired. We must also look at how the money employers are forced by law to pay for higher wages might have been spent otherwise. For a new milkshake-making machine, for instance.
This fallacy -- part of the larger failure to consider long-term and wider economic consequences of messing with the laws of supply and demand -- is often found in news stories about things like minimum wage laws and government-subsidized development projects.
It's not hard to avoid. Henry Hazlitt warned about it clearly in 'Economics in One Lesson,' a 1948 classic all future journalists and their professors should read. If those profs at Berkeley ever put it on their syllabus, it'll perform miracles.
Bill Steigerwald is a columnist at the Pittsburgh Tribune-Review. E-mail Bill at email@example.com. © 2006 Pittsburgh Tribune-Review, All Rights Reserved.
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