How the Media Effects the Economy

The Economist Free Exchange blog and James Surowiecki weigh in on the media’s effect on people’s perception of the economic crisis. Surowiecki makes an interesting point, explaining that he thinks the media’s use of “impending” to describe the recession “implies that the markets haven’t yet fully come to terms with reality. And that, in turn, is likely to make investors even more skittish than they already are.” The Economist replies with a quote from their archives (1990s) supporting the idea the media can move markets, but finally concludes, “I can also imagine a world in which the media has become increasingly benign, and where the incredible volume of information available has had a net calming effect on the economy. I would probably lean toward this possibility, in fact. But as someone who sits in front of a computer all day reading blogs, I imagine I’m not representative.”

I’ve been trying to wrap my head around this question for awhile and can see both sides. We certainly live in an age where the economic crisis can seem all the more serious because media is literally everywhere we turn and it’s all covering the same stuff. On the other hand, for me (and the Economist it seems), the access to information has allowed me a much greater understanding than I could have had if this had happened 15 years ago. The number and diversity of voices available on the web is staggering and I’ve been able to learn quite a bit about economics. In the end, though, I think it’s the Economist who sums it up best with “I’m not representative.”

October 25, 2008