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How our sense of economic reality is being distorted
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The following two sentences may seem a little surprising, coming from a journalist at a major media organization armed with cutting-edge analytics that show how every article, newsletter, and podcast is performing, but here they are.
First, I think it is reasonable to argue that the mass media era has not been unequivocally good for public understanding of the world. And second, the more information publishers and broadcasters have gained about how their audiences interact with their results, the more ambiguous the impact of those results has become.
The murky relationship between public-optimized publishing and public understanding has long been evident in the case of crime. The Persecution of William Randolph Hearst maximum that “if it bleeds, it leads” has led us to a perverse situation in which someone’s perception of crime is motivated more by reports than from their own experiences or those of people they know. It is now the norm for people to believe that crime is increasing when it is decreasing, and people’s satisfaction with life is based more on their perceptions of crime than in real crime.
But there is a growing body of evidence that the same worrying phenomenon may now be affecting public perception of the economy.
Data from the US Federal Reserve shows the same revealing pattern that we have become accustomed to when it comes to crime: people assess their own financial situation as being relatively healthy, and this changes very little from year to year, but their assessment of the economy national level has cratered, opening a huge abyss. It seems increasingly likely that news coverage will take some of the blame.
A study this year found that even when recessions have become much fewer and more frequent over the last century, news articles written about the economy have been increasingly pessimistic. Another found that the tone of economic news even more dissociated of the fundamentals of recent years, starting from 2018, which means that it cannot be just about the pandemic or the recent outbreak of inflation.
The latest evidence comes from Ryan Cummings, Giacomo Fraccaroli and Neale Mahoney, a trio of economists writing for the US economic publication Briefing Book, whose analysis of 1 million transcripts from six US broadcasters demonstrates a marked negativity bias when it comes to reporting gasoline prices. This is particularly important given the formative role these prices play in consumer sentiment most widely.
The research tells us several things. First, there is much more news coverage about prices when they are high than when they are low. If it exceeds, it leads, you could say. Secondly, the price at which this negative coverage starts has been steadily falling in real terms – making negative headlines increasingly likely, even for the same level of affordability. And, crucially, third, the shift into bad-news-on-prices mode happens much more abruptly on subscription-based cable news channels – where the incentives to keep the viewer glued to the screen are greater. stronger – than on television networks.
The strongest effect of all this is seen on right-wing Fox News, where record pump prices in June 2022 have led to nearly 80 percent of programs mentioning the cost of gasoline, compared to about 50 percent on CNN. and MSNBC, and less than 20 percent on network channels. In light of this, it’s not surprising that data from the University of Michigan’s consumer sentiment survey shows that Republicans are nearly twice as likely as Democrats to say they’ve recently heard unfavorable news about high prices.
All of this makes it unlikely that President Joe Biden will get much of the momentum expected from the US. continued economic expansion. Graphs showing Americans’ rising incomes and wealth, falling inequality, and remaining low unemployment simply can’t compete with easily debunked but very clickable claims that most families live paycheck to paycheck.
And unfortunately, none of that is likely to change. A recent article in nature found that the more negative a headline, the more people will click on it, and anyone who has spent any time on social media – now the main source of news for a growing share of people – will know that the same dynamics apply to them. From news organizations to TikTokers, everyone is now optimizing for engagement, and that means we hear more about the bad than the good.