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Thursday, July 29, 2010

Book Review: Dollars and Nonsense: Correcting the News Media’s Top Economic Myths, edited by Stephen Moore and Richard Noyes

Dollars and Nonsense: Correcting the News Media’s Top Economic Myths

edited by Stephen Moore and Richard Noyes

Media Research Center • 2001 • 107 pages
• $16.95 paperback

Reviewed by Robert Batemarco

Facts never speak for themselves. They need to be interpreted. But suppose the interpreters don’t speak the same language that the facts are in. You would then get the situation decried in Dollars and Nonsense, namely, news media that regularly construe good economic news as bad and bad economic news as good.

The authors of the ten essays contained in this concise volume, a project of the Media Research Center, each unearth an all-toocommon example of economic misinterpretation and try to set the record straight, using both economic logic and facts ignored by the initial perpetrator.

Alas, much of the unenviable task of economists is to fight constant rear-guard actions against myths that have persisted for decades, if not centuries. Case in point is the opening article, in which Nobel Prize-winner Milton Friedman shows that the stimulative power accorded to government spending by much of the financial press (accepted uncritically by many since the 1930s, courtesy of Mr. Keynes) is a mirage.

Several articles dealing with macroeconomic topics include Lawrence Kudlow’s disentangling of inflation and economic growth, Arthur Laffer and Stephen Moore’s defense of tax cutting, William Gale’s primer on saving, William Niskanen’s comparison of American and European labor markets, David Hale’s expose of the scattershot record of economic forecasters, and Brian Wesbury’s unmasking of the irrelevance of that mischievous statistic, the trade deficit.

Although most news accounts of economic events seem to deal with macroeconomics, the editors of Dollars and Nonsense have not shortchanged microeconomics, where numerous economic myths are also to be found. The book includes three strong essays debunking microeconomic myths: Robert Crandall’s demonstration of how consumers benefit from deregulation, Nicholas Eberstadt’s refutation of Malthusian doomsaying, and Michael Cox’s denial that middle-class living standards are deteriorating.

The chapters are short and well written, in a journalistic style befitting their subject, with strategically placed charts or tables to back up their arguments. In addition, each chapter contains a compilation of examples of the journalistic misrepresentations of economic issues they take to task.

Perhaps the most valuable part of the book is editor Stephen Moore’s introduction. It explains that errors in economic reporting are not random, as they might be were their sole source mere economic ignorance. Rather, they follow a consistent pattern— finding problems for which there is a government “solution” — that results from combining a statist worldview with the pursuit of self-interest guided by the maxim that bad news sells papers. Moore ends his introduction on a positive note, listing “seven simple rules about understanding the new economy.” They are short and to the point and would do more to elevate the level of economic understanding than 1,000 new Ph.D.’s.

As far as it goes, this book is a muchneeded corrective to the warped interpretations of economic issues disseminated by most major media organs. In two ways, however, I contend that it does not go far enough. The first is that it makes too many concessions to the conventional “wisdom.” For instance, after convincing us that the European “social market” generates persistent high unemployment, Niskanen draws no stronger conclusion than that “it is not the best model for the United States” — as if the double-digit unemployment it generates were good for other countries.

The second way in which this book does not go far enough is in some of the media myths it fails to include. One of the most widely accepted myths in need of correction is that misguided Keynesian notion that savings is a drag on the economy, with its corollary that consumption is what stimulates growth. Indeed, the author of chapter 9, William Gale, mentions that belief, but lets it pass without critical comment, as he devotes his entire contribution to the measurement of saving.

Written at a popular level and placing a premium on brevity, Dollars and Nonsense does not always make some of the finer distinctions one might expect from a more indepth treatment. Perhaps that would be asking too much. The Media Research Center’s mission is a worthy one. Far more often than not, this book succeeds in that mission.

  • Tsvetelin Tsonevski the Director of Student Programs at The Independent Institute. He is formerly the director of academic affairs at FEE. He holds an LL.M. degree in Law and Economics from George Mason School of Law.