Economics, politics, media
A couple of months ago we organized a seminar in DCU, as a joint initiative of the Business School and the School of Communications, in which we brought together economists, financial analysts and journalists. One of the themes that almost spontaneously popped up in the debate and quickely grabbed eveybody’s attention was why the media did not see the financial storm of 2007-09 coming, never mind shout danger!, nor they seemed to play much of a watchdog role in relation to corporate and banking practices and the governance of both companies and the economy. One article touches on these points in today Irish Times. Here is the link:
http://www.irishtimes.com/newspaper/opinion/2010/0306/1224265703246.html
Perhaps without realizing it, the Irish Times run the day before an interview with George Soros that can shed some light on this question. The wealthy speculator read, in his youth, as a phylosopher and perhaps that helped him develop the view that economics, and especially financial economics, is reflexive in nature. That is, economic outcomes are as much the by-product of the system search for equilibrium in the presence of resource constraints as they are the almost self-fulfillng realizations of what successful business and political leaders, including economists, think will and should happen. No, it’s not a tautology, if that’s what you’re thinking, it just takes seriously the roles of elites in shaping and coordinating expectations, which have a known crucial role in driving economic dynamics. Even neo-classical economists readily acknowledge this. It’s just that, in DSGE models popular among these economists, expectations quickly converge to a unique steady state. This is not impossible, but implies either the absence of frictions, so that the coordination of expectations does not need agencies (i.e., politics, business and opinion leaders, academia, the press, etc that is the ‘elites’ and their media), or a sort of perfectly competitive equilibrium among agencies that coodinate expectations, which in turns implies absence of barriers to acquire agency status.
