Posted tagged ‘NPR’

Friday Stuff: xkcd to the rescue

September 17, 2010

As I contemplate the contemplation of last year and next, with papers due by sundown tomorrow, no extensions, this old xkcd ‘toon struck me just right:

Happy Friday, all, and to those thus embarked, an easy fast.

A Tale of Two Financial Stories, or Why it Helps to Pay Attention to the Man Behind The Curtain — Paul Krugman and NPR edition

April 26, 2010

Two stories caught ear and eye this morning.

First, in terms of my attention, this one from NPR, heard while driving in to work.  Then, this one from K-thug, pulled up via my usual quick check of Daily Kos’s pundit round-up.*

Very short form:  the NPR story, of a type that I generally regard with a bit of suspicion, was an anchor-interviewer with a reporter doing a prospective analysis of the big financial rumble to come between, Goldman Sachs and Sen. Carl Levin’s subcommittee.  The story hinged on the release of emails by both sides intended to condemn or exculpate the poster child for a financial system gone way off the tracks.

It was everything you’ve come to loathe in political horse race stories, now translated into the big-money arena:  who’s ahead, who will win, what each is saying of the other.

There was no real attempt to make sense of the underlying argument, and in fact the reporter conflated two different issues: whether Goldman defrauded investors by failing to reveal flaws it knew and or consciously engineered into financial instruments it was selling; and/or whther Goldman in some sense conspired to bring the economy down by shorting mortgage backed securities in the run-up to the collapse of 2008.

The difference matters, to put it mildly.

Meanwhile, Krugman makes the obvious point: short sales may be ugly but they are not in themselves evil.**  FWIW  I’m not bothered by shorts at all (except on English men of a certain age, but that’s a different story, and probably relates to the trauma of being forced to wear and observe type-specimens of such schmattas as a very knobby kneed and self-conscious third grader in Hong Kong back when blogging was done with chisel and slate).

Rather, as Krugman argues, the real story revealed in straying emails is not that of Goldman doing what Goldman is set up to do — make as much money as it can, by any means up to the limit of the law (they devoutly hope, while budgeting for that hope’s denial) — but of rating agencies doing exactly what they are set up to prevent.  Krugman writes:

The Senate subcommittee has focused its investigations on the two biggest credit rating agencies, Moody’s and Standard & Poor’s; what it has found confirms our worst suspicions. In one e-mail message, an S.& P. employee explains that a meeting is necessary to “discuss adjusting criteria” for assessing housing-backed securities “because of the ongoing threat of losing deals.” Another message complains of having to use resources “to massage the sub-prime and alt-A numbers to preserve market share.” Clearly, the rating agencies skewed their assessments to please their clients.

These skewed assessments, in turn, helped the financial system take on far more risk than it could safely handle. Paul McCulley of Pimco, the bond investor (who coined the term “shadow banks” for the unregulated institutions at the heart of the crisis), recently described it this way: “explosive growth of shadow banking was about the invisible hand having a party, a non-regulated drinking party, with rating agencies handing out fake IDs.”

Goldman is a pit bull, trained up as an attack dog.  You expect it to bite, especially, as now, when that hound’s master has for so long failed to constrain its pet.

The response is obvious, and is now, imperfectly, working its way through the Senate.

The ratings agencies are supposed to be neutral umpires, but the payment structure under which they work has turned them, as Krugman notes, into witting confederates of the very folks whose offerings they were supposed to assess.  The term “accelerant” is often used to describe the chemical compounds arsonists to transform a match-drop ignition into a holocaust.  It works pretty well to describe what happened to our financial house when the ratings folks used their magical “AAA” rating to transform sh*t into (fools’) gold.

All of this is to say read the whole Krugman piece, for one, and to ask the DeLong question of NPR:  why oh why can’t we have a better press corps.

What’s really troubling to me is that NPR is in fact one of the good ones, by and large.  They have smart people working for them; they still employ real reporters; they pay attention.

But economics reporting is very hard — I’ve said elsewhere that I think it is harder than what most people think of as “real” science writing — and the way NPR swung and missed this morning is a very useful example of what happens when a news organization doesn’t quite get the story or the beat.

The piece I reference isn’t altogether  terrible, in the sense that it sets out to deceive or is talking about something wholly trivial in the face of a larger disaster (see Michelle Obama, sleeveless dresses of, for an example of what I mean here).  I don’t know the internal editorial sequence of events that NPR stories go through in this or in any case, but if I were to guess, I’d say that at least part of the problem behind this kind of story on that network is that the assigning or managing editors for the show are not sufficiently knowledgeable to tell the difference between the tabloid excitement of Goldman in the headlines and the substantive significance of something much duller, like whether or not Moody’s and Standard and Poor assessed risk accurately.

Just writing those last three words made my eyelids dip, just a little — which is the problem.  You have to see the story behind the facts if you want to be a useful journalist.  To be sure, a big part of the job of any specialized journalist, a science writer, an econ scribe, whatever, is to educate your editors into a broad understanding of what really matters on your beat, so I don’t want to absolve the on-air folks entirely.

Also, to be fair, we all like the tabloid stuff to help the morning coffee go down; it’s part of the trade too.  But my beef is that NPR had two stories on the financial crisis in today’s Morning Edition program — the other was on the way Senate filibuster rules are impeding reform — and both missed the story with more significance to the question of how bad and how soon the next crisis will be. And that’s not good enough.

*Within which I also found today, to my far-from-solitary surprise, a pointer to Mark Helprin making sense.

**For a good explanation of one of the garden variety uses of short selling for ordinary investers, or more precisely, the writing of put options, see Burton Malkiel’s passage on the use of options in his occasionally controversial classic, A Random Walk Down Wall Street.

Image:  Jean-Marc Nattier, “Marie Zéphirine de France”  c.1753

What’s Wrong With This Broadcast: NPR Edition

March 15, 2008

I’m listening to my local NPR station’s broadcast of Scott Simon’s Saturday Morning Edition as I write this, and the host introduced a discussion of the upcoming fifth anniversary of the war in Iraq by talking about casualties: the 3,975 American servicemen and women killed to date, and, as the host put it, Iraqi casualties estimated from some 40,000 to over 100,000.

Apparently Scott simply forgot about two separate studies published in the fifteen months, each of which concluded that excess Iraqi deaths since the American invasion topped half a million. The Johns Hopkins, Lancet group published their result first: they see about 650,000 deaths as the most likely number as of the end of 2006. As discussed in this post below, a later WHO led study led to the number Simon quoted, an estimate of 151,000 Iraqis dead by violence since the start of the war as of late 2007. Though that number is often cited as a definitive refutation of the Hopkins work, the WHO survey identified 151,000 deaths by violence among 400,000 excess deaths total. As a Hopkins researcher pointed out while methodological differences led him to trust the higher number more, the two estimates were in broad agreement.

Simon also ignored another major study suggesting even higher totals: a British independent surveying company’s estimate of over one million deaths. (To paraphrase a famous West End comedy, perhaps NPR’s motto has become “No Data, Please. We’re American.”)

In other words: Simon simply spoke falsely when he introduced histwo guests, Senators James Webb and John Kyl to discuss the current state of the war. The misstatement, to put the kindest gloss on it, framed the subsequent interviews.

That error (see — kind) materiallly affected what came next. By drastically understating the upper bounds to the cost of the war to the Iraqis, he allowed Senator Kyl’s claims of the likelihood of a political and strategic success of the occupation to stand essentially unchallenged. Those claims have to be understood against the background the sectarian devastation that has taken place already. The real question, one that Simon never thought or had the gumption to ask is not “is the surge working?” but “is the reduction of violence of the last several months meaningful?” — given the lack of the political change the surge was supposed to nurture.

All of which is to echo, once again, Brad DeLong’s cri de coeur.  Like he said:  Why, oh why can’t we have a better press corps?

Image: Francisco Goya, Los Desatres de la Guerra, plate 79, captioned “Murio la Verdad” — “The Truth has Died,” c. 1820. Source: Wikimedia Commons.

I don’t know nuthin’ ’bout economics, but…: NPR/Henri Poincaré/Mortgage follies edition

February 25, 2008

Innumeracy is a problem I have and will come back to a lot here. But as I listen to more and more popular presentations of technical subjects, I still get astonished by the intersection of two structural problems in the media.

That is: many reporters — not so high a proportion of self-described science writers, though still plenty there — have trouble with even the most elementary uses of quantitative approaches to their stories because they just don’t think in numbers at all. That’s the negative way of framing the problem; journalists have a lack that inhibits their capacity to do good work in an ever-more technically imbued world.

Then there’s the affirmative problem. Reporters establish stories by anecdote, by individual bits of data, single episodes. They’re called stories for a reason: the goal is to perform one of the most powerful acts of communication humans have figured out, to convey information that compels belief because its hearer can place themselves right into the narrative.

That’s why, to edge closer to the real subject of this post, so much of the reporting on the mortgage crisis (fiasco) centers on some family that’s about to lose a house, and spend little time, on the meaning of the big numbers, like the implications of a repricing of US housing on a large scale.  The point is that not only do many journalists not know a set of ideas that could help them figure out such things;  what they do know leads them away from the kind of approach to their work that more mathematical sophistication would provoke.

But there’s a wonderful passage that bears on this from the great French mathematician Henri Poincaré in a collection of essays that greatly influenced the young Albert Einstein:

We can not know all facts, and it is necessary to chose those which are worthy of being known.

Choose? Worthy? Surely Poincaré is not going prematurely po-mo on us here?

Not really. The notion embedded in his deliberately provocative turn of phrase is that facts need form, some apparatus that can incorporate a given datum into a richer story — one with a meaning larger than that of a single incident. That apparatus is quantitative.

(BTW — I use the word “quantitative” rather than mathematical, because for a great deal of human experience, the math needed to make sense of what’s going on is not that complicated.  It’s often a matter of counting, sorting, and extracting relationships within the formal limits of what you learn by the end of high school.  I have posted on a couple of such examples from great scientists — Freeman Dyson, for one, and J.B.S. Haldane for another.  There are lots more — perhaps readers could be persuaded to post examples of what they think are elegant, simple insights a bit of math can give us ?)

All of this  into mind while I listened to NPR this morning.

This is the story that got me going — a short (1 minute, 10 seconds) reporter-voiced account of what seemed to the Morning Edition team to be something strange: Even though the Fed is cutting interest rates, mortgage rates went up sharply last week. That ain’t how its supposed to be, according to the reporter, Adam Davidson, because when the Fed lowers its rates, other rates are supposed to drop.

The reason Davidson gave for what he saw as weird is not all wrong: he said that lenders are newly afraid of inflation, and hence want to charge a higher price for money that is going to be paid back over time.

But look at the unexamined assumption: that the Fed can control rates in general. That’s not true.

What’s missing here? An understanding of the real importance of time.

The Fed mostly exerts its influence on interest rates through the shortest of short-term instruments, the overnight federal funds rate — which is just the price banks pay for extremely brief loans required to keep their minimum reserves up to snuff.

But real people borrow money for houses on long time scales, most famously through 30 year mortgages. The enormous difference between the types and uncertainties of risk between those two scales of time serve at least partially to decouple the two rates — see the data to be retrieved here for a survey view of this.

So it is true that fear of inflation could keep push term rates up, whether or not the Fed was playing around with short term rates. But so could lots of other things.

Perhaps that the value of US real estate is unclear in a falling market, and thus lenders demand a risk premium before they lend against such difficult-to-value assets. Perhaps the overall credit worthiness rating of American real estate borrowers has dropped in the aggregate.  Perhaps lenders fear that the secondary market for mortgages is going to get a bit less liquid.  Lots of factors play into long term interest rates that have nothing to do with the reasons the Fed makes its interest rate decisions.

In other words: and the NPR story was either meaningless or misleading. And it failed because the reporter glossed over or did not fully understand what the mortgage rate summarizes as a single number — all the complex calculations of risk and profit that underpin the decision of whether or not to make a loan.

What I would have loved to hear instead of a “this fact is strange” report would be that story: how do interest rates express quantitatively our ideas about the future.  It’s still a good, fully human story:  Those numbers tells us a tale about what we think we know about what’s coming down the pike — and how much in dollars and cents we fear changes in our perception of what we don’t know.

Image: Rembrandt van Rijn, “The Money Changer,” 1627. Source: Wikimedia Commons.