a blog

by Josh Nicholas

Journalism has a presentation problem

One of the biggest issues with modern journalism is that framing is overvalued and understanding is undervalued. This is true not just in practice, but also in the way it is taught.

Look at any journalism course in Australia and you’ll find that subject knowledge is discounted in favour of presentation skills. Internships and practical media projects are favoured over electives in other academic disciplines - statistics, economics, medicine etc.

This came to mind as I read the last of Nate Silver’s essays on the 2016 election.

In recent elections, the media has often overestimated the precision of polling, cherry-picked data and portrayed elections as sure things when that conclusion very much wasn’t supported by polls or other empirical evidence.

By teaching journalists that their job is packaging the ideas and actions of others, the medium inevitably becomes constrained. What is good presentation exactly? Among other things it’s putting things as simply as possible.

On the one hand this is a good thing - it makes the news widely accessible. On other other, simplification can itself be misleading. Condensing dozens of pages of a working paper, or decades of iterative academic theory, by necessity requires the subtraction of nuance. This is what Nate Silver identifies in his latest piece.

Experts provided myriad caveats to their forecasts in the 2016 election. But constrained by their job as packagers, journalists provided only certainty. By banishing the details as boring or irrelevant, trying to get a clear angle, we were systematically misled.

”While many things about the 2016 election were surprising, the fact that Trump narrowly won1 when polls had him narrowly trailing was an utterly routine and unremarkable occurrence. The outcome was well within the “cone of uncertainty,” so to speak.”

But a narrowing of the role is only part of the problem. One of my friends is currently studying journalism and recently completed a course on data journalism. While this taught her a great deal on telling stories with data, she has little idea of what data to use or when, There were no economics, demographic, health etc. components of her course to provide her with the context surrounding the data.

This narrowing of expertise by definition curtails what stories are told. A bunch of technical skills are being dumped on the market with little subject knowledge to act as guidance to what exactly is a story. It also means these journalists are at the mercy of the very experts they end up packaging.

Now, of course, this whole argument is a great generalisation and misses many wonderful journalists. Especially older journalists who have spent time in the field and built up subject knowledge. But having spent much of the past decade around young and upcoming journalists, Silver’s analysis reads incredibly true. And it’s very worrying.

The economy is everything

With Australia currently engaged in an abysmal debate over same sex marriage, it‘s refreshing to be reminded that morality often has a utilitarian history.

For example, this recent paper suggests that norms around illegitimate children are based in economics.

Based on data from the Austro-Hungarian Empire and modern Austria,
we show that regions that focused on animal husbandry (as compared to crop farming) had significantly higher illegitimacy ratios in the past, and female descendants of these societies are still more likely to approve illegitimacy and give birth outside of marriage today.

The key point is actually buried a fair bit down in the paper. The reason there is this split in social norms between crop and animal farming communities is apparently due to differing labor structures.

18th and 19th century workers on crop farms were on short term contracts, often working as day labourers.

In crop farming, the work load and the resulting demand for additional
labor, is determined by the rhythm of the seasons... additional manpower is needed in the harvest season.

Workers on animal farms, meanwhile, had long term contracts. This was less precarious, but they also tended to live on the farms and so had little opportunity to create their own households. Their illegitimate children were tolerated by the communities.

In contrast, in animal husbandry the workload is distributed relatively evenly throughout the year... Animal husbandry requires a sound knowledge of the peculiarities of each animal (analogous to firm-specific human capital), while harvesting is less specific.

The diminishing returns of research

"Innovation" has become a political/economic panacea over the past few years. But an interesting paper suggests that research also obeys the laws of diminishing returns. Research productivity in the United States has declined spectacularly in the last few decades.

A good example is Moore's Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s.

The paper is mainly aimed at updating endogenous growth models, which assume that research exhibits constant returns. But the examples given - declining research productivity in technology, medicine and the economy as a whole, have huge implications for those thinking we can just chuck a bunch of researchers onto the problem of stagnating growth.

We find that research productivity for the aggregate U.S. economy has declined by a factor of 41 since the 1930s, an average decrease of more than 5% per year

Averaging across all our samples, research productivity falls at a rate of about 9% per year, cumulating to a 2.5-fold decline every decade. At this rate, research productivity declines by a factor of about 15 over three decades of changes; put differently, it requires 15 times more researchers today than it did 30 years ago to produce the same...

We don't just need to chuck more brains at this problem. We need to use our brains to deploy those brains.

The long history of financial technology

One of the best things about history as a subject is its power to put us in our place. Progress - especially of the technological kind - is very rarely as radical as we think.

When I think about all the hype surrounding the blockchain, I start to think of all the other technologies that have been used as immutable ledgers.

The tally - a wooden stick used to keep track of financial transactions - is a perfect example.

The sum involved in a transaction was represented by notches in a stick of wood, which was then split to furnish both payee and payor with tangible and tamper-proof evidence of the event. Although often inscribed with symbols to identify the measuring unit or to give other information about the transaction, the basic data in the form of different width notches, was understood by both the literate and the illiterate. This feature invites speculation that the use of the tally may have predated written communication.

The exact grain of the wood in each tally is different, meaning they are all but impossible to forge. The tally essentially achieved with nature something the blockchain does through an encrypted public ledger.

According to Willard Stone, the tally may go back as far as the ancient Greeks. Maybe even to 484BC.

Herodotus tells of a Greek from Miletus, because of the insecure conditions in Ionia, giving half his fortune to Glaucus, a Spartan known for his honesty, together with tallies... Many years had gone by when the sons of the man by whom the money was left came to Sparta, and had an interview with Glaucus, whereat they produced the tallies, and asked to have the money returned to them.

From there the tally pops up all over the world and throughout history. Marco Polo described their use as IOUs in China. French monasteries used them to keep track of deposits. The British exchequer used tallies both to keep track of taxes paid, as well as what was lost during currency debasement.

When the Bank of England was foundedin 1694, one of its first acts was to make a loan of ~€1,200,000 to the Government. Acknowledgement of the debt was in the form of tallies, the longest of which exceeds eight feet in length (these are still in existence and unredeemed).

This isn't to say that the blockchain isn't a spectacular achievement. It very much is. But we should recognise that a lot of today's financial technologies aren't solving unsolved problems. They are just more efficient ways of doing what we already do.

We may be seeing an unprecedented technological boom. But most of our problems aren't new and we've been using technology to solve them since year dot.

An island of stone money?

The Island of Yap plays host to one of economics' most interesting stories. It's said that the inhabitants of Yap used gigantic round pieces of limestone as a form of currency.

I've encountered this story in a few popular books and even a podcast, but the academic literature seems pretty thin. I've just started my research, but I can only find a few papers and books with more than a passing allusion to the stones.

And many of the few references are to one book from 1910, called, funnily enough, the Island of Stone Money. I'm not going to dwell too much on the book itself as it's so full of orientalism the author thought nothing of beginning:

"Like all other primitive people (it hurts one's feelings to call them savages or even uncivilized, - one is too broad and the other too narrow) they are shy at first, either through mistrust or awe..."

But the book is a good starting point to investigate the stones. It's got an entire chapter on money and currency. And it's all there - fei stones, sea shells, coconuts. Anything you'd want to trade on an island paradise.

"...as far as mere existence is concerned in Uap, there is no use for money. But nature's ready- made clothes, though useful, are not ornamental, and the soul of man, especially of woman, from the Equator to the Poles, demands personal adornment."

Of course, there are a few criteria for something to be considered money. It has to be a medium of exchange, a store of value and a unit account. And looking through this story, the stones do appear to tick all the boxes.

They are used for exchange. Although, mainly for high value transactions, as they are cumbersome and rare. These same two points also make them a rather convenient store of value - they were created hundreds of miles away, on another island, in another time, and are far too big to be stolen. And the book clearly denotes several goods in terms of the fei.

The book even makes a halfhearted stab at connecting the stones with the labour theory of value.

"Here then the simple-hearted natives of Yap, who never heard of Adam Smith nor of Ricardo, or even if they should hear of them would care no more for them than for an English song from the phonograph, have solved the ultimate problem of Political Economy, and found that labour is the true medium of exchange and the true standard of value."

But there's one great story that exemplifies the problem with taking this book at face value.

"...my faithful old friend, Fatumak, assured me that there was in a village nearby a family whose wealth was unquestioned, - acknowledged by everyone, and yet no one, not even the family itself, had ever laid eye or hand on this wealth; it consisted of an enormous fei, whereof the size is known only tradition; for the past two or three generations it has been, and at that very time it was lying at the bottom of the sea!... The purchasing power of that stone remains... as valid as if it were leaning visibly against the side of the owner's house..."

The entire thing is anecdote. We need something more.