Research chat: The Economist’s Greg Ip with the inside story on business reporting
Greg Ip is the U.S. economics editor for The Economist and a keen observer of the intersection of business and policy. An award-winning journalist, he was a longtime writer for The Wall Street Journal, where he served as chief economics correspondent in Washington, D.C.. He is author of the The Little Book of Economics: How the Economy Works in the Real World, a useful primer for young journalists — and anyone wanting to improve his or her economic literacy.
As part of our “research chat” series, Journalist’s Resource recently caught up with Ip to ask him for insights on economics reporting:
Journalist’s Resource: What are some good outlets to follow for young business journalists who want to educate themselves?
Greg Ip: All of the big business publications – ourselves, the Wall Street Journal, the Financial Times, the New York Times – have economics blogs and post news all day long on the economy. They include very trustworthy, impartial analysis of the latest data, usually in language that is pretty easy to understand for a very large audience. I’ll say that my favorite is “Real Time Economics” at the Wall Street Journal – I created it, so I’m biased. At the New York Times, “Economix” is very good; at the FT, “Alphaville” is a little bit more market-oriented, but also very good. And at The Economist, “Free Exchange” is very strong. One of the resources I keep around is The Economist itself. The second- and third-to-last pages contain tables of economic forecasts, and I honestly have not come across anything that so neatly brings together all the key numbers you need to know about where the global economy is going.
If you are someone like me who likes to do the math and see the original numbers, then you can go to the original producers of the main data and sign up for releases of the data, or just visit them on any given day when the releases come out. These producers are the Bureau of Labor Statistics; the Census Bureau; the Bureau of Economic Analysis; and the Federal Reserve. All four of them have websites of varying user-friendliness, and the news releases aren’t terribly easy to read. But they get better over time.
JR: Which of the government websites is the most accessible?
Greg Ip: I think the Federal Reserve website is the best, followed by the Bureau of Economic Analysis, followed by the Bureau of Labor Statistics, and then followed in last place by the Census Bureau.
JR: What are some of the other resources that you use?
Greg Ip: Once you get more curious and dexterous with these sites – so that you’ll want to do analysis yourself by downloading data – one website that everyone uses is FRED, an acronym for the Federal Reserve Economic Database. It’s managed by the Federal Reserve Bank of St. Louis. This is a terrific website because it’s free, and second of all because they are always adding new series. The interface takes a little bit of getting used to. It has charting tools; it has spreadsheet tools. When I started out in this business, you had to subscribe to very expensive databases that were kind of clunky. Now you have much better stuff and it costs you nothing. If you want to get even more in-depth, you will have to shell out for something like Moody’s Analytics. For those of you who are just starting out, where money is a bit of an issue, I can’t think of a better place to start than FRED.
I’m a big fan of the forecasts of the IMF (International Monetary Fund) and the OECD (Organization for Economic Co-operation and Development), because I think they are pretty impartial. There was a famous line by John Kenneth Galbraith who said the only function of economic forecasts was to make astrology look respectable. So you have to understand that when you’re reading economic forecasts, it’s sort of like an educated guess. It can be tough to understand how the pieces come together and what to expect. Groups like the IMF and the OECD are good precisely because they are the conventional wisdom; they are not taking strong views one way or another. That doesn’t mean that they are right. In fact, I’m sure that they will be wrong – I just don’t know which way they’ll be wrong. But they are free.
JR: What are some pitfalls that young economics reporters should watch out for?
Greg Ip: Let’s cover a few things that are especially important for journalists.
Number one is the failure to consult the original source. It is amazing how many times you can read something, for example, in a news report or blog post and think you know what they’re saying, and then you just quote it – maybe changing a word or two. And then you realize you’ve completely misinterpreted it. As often as possible, you need to go to the original material. For example, if someone is talking about the unemployment numbers, don’t just quote from somebody’s news article. Go to the Bureau of Labor Statistics itself. You’d be surprised at how often, looking at the raw data itself, the numbers are saying something different than you thought. And you often find something that you didn’t realize before in the numbers.
Also, be careful when you’re quoting a policymaker – for example, when the President addresses the country or gives an interview or makes off-the-cuff remarks at an event. Sometimes only one sentence or two will make it into the news. But when you consult the entire context of what was said it’s often a lot more interesting, and the context makes what was said very valuable. By the way, that’s true in all journalism, not just economic journalism
JR: What about specific errors to be mindful of?
Greg Ip: People often confuse levels and rates of change. For example, people will often say, “Inflation rose last month by 1.7 percent.” What they meant was prices rose 1.7 percent. Inflation is itself a measure of a rise or fall. So inflation is 1.7 percent. That issue to a lot of people isn’t intuitive. You see similar misunderstandings when people talk about the debt and the deficit, or the difference between a stock and a flow. So you can have a debt one year and a surplus at the same time. How is that possible? It’s because you started with a debt of $100, then had an annual surplus of $2, so you end the year with a debt of $98. If you started with a debt of $100 and you ran a deficit of $2, you’d end up with a debt of $102. You need to understand these differences.
You need to think like an economist. Any time anyone says something is bad, the immediate question you should ask is: Relative to what? It’s very important, for example, in assessing the President’s economic program. So someone says, “The economy is bad.” Well, relative to what? Relative to what it would have been? Relative to another country? These are important questions to ask because they help you think through the implications of what you’re saying. Just to give another example: The President says, “Oil and gas production are at record highs.” Well, relative to what? Relative to what they would have been if you weren’t President? Then you realize it is mostly driven by private exploration and development on private land. If you look at production on federal land, it’s down. But then President Obama could himself say, “Relative to what?” Because as it turns out, some of the deposits on federal land are very old and are being tapped out. Also, because of the Macondo oil spill in 2010, there was a drilling moratorium. So, whenever someone asserts something – especially a partisan – the question is “Relative to what?” That is why when people say, “The debt is at a record level!”, you should ask that question. Economists know that you do not just look at the debt and say, “Well, it was $100 last year and it’s at $102 this year. It’s at a record level –that’s terrible!” That’s up 2 percent. If GDP grew 3 percent over the same period, then debt relative to GDP went down. And that is the metric we should be looking at.
Another question journalists should ask is: “What is happening at the margin?” People will say that the housing market is in really bad shape – look at all those foreclosures, look at all those vacancies. But if at the margin each new month of data tells us the number of foreclosures has gone down and the number of homes for sale has decreased, you say, “Yes, things are bad, but at the margin things are getting better.” This is very important if you cover the financial markets, because they care intensely about what is happening at the margin. It is always the case that the stock market turns around while the economy is still in recession. Why is that? Because investors are interested in what is happening at the margin. Does the latest information we have indicate that things will be better a year from now or worse?
JR: You speak with a lot of academic economists. How do you approach experts and interact with them in an effective way? Do you read their papers? How do you prepare?
Greg Ip: There are probably two ways I approach academic experts. Number one: There’s a stable of people I’ve known for years who I always say, “This is a person I want to turn to when I have a question about such and such.” In international trade, for example, I might turn to Doug Irwin at Dartmouth, because no one knows international trade better than Doug. I trust the guy, and he’s not biased. And he’s the first person a lot of other reporters would call about the same thing. If I have a question about economic history, I’ll call Peter Rousseau at Vanderbilt or Michael Bordo at Rutgers. If I have a question about taxes, one of the first people I’ll often call is Alan Auerbach at Berkeley. He’s a highly credible academic, and I’m pretty sure I’ll get a good answer from him.
Number two: when I get into more specialized areas, I’ll often come across a piece of research which is new and I’ll not know the authors. So the first thing I’ll do is read the paper. Then I’ll go to that academic’s website. Almost all academics now have home pages, where they will not only have copies of their research, they’ll also have commentaries and popular writings which are easier for non-specialists to read and get the basic understanding.
JR: Do you have particular interviewing approaches with them?
Greg Ip: Not really. The first thing I usually do is email them about the questions I have. If I don’t have a lot of experience in the area, I’ll ask, “Can you point me to some other things so I can get a better grounding before we can begin the interview?” I find that academics are incredibly helpful and patient; they like to talk about their work, because they’re excited by it and publicity is usually good. It wasn’t always that way. When I first started doing this, getting academics to talk was often quite difficult.
One thing that I have learned about academics is that – even when they are not partisan or biased in the direction the research goes – I think it’s the nature of the discipline that academia rewards people who develop very strong views on often narrow subjects. So if you developed the view from your research that banking crises always come from moral hazard, you will tend to interpret all events through that prism. When you’re talking with someone like that, you need to keep this in mind. And when they wander out of their field, they may be less knowledgeable. Somebody once joked that the worst thing you can do to an economist is give him a Nobel Prize, because it gives him license to opine on almost anything.
JR: What about government officials? How do you approach those interviews? Do you do a lot of “on-background” interviews?
Greg Ip: Yes, I do tons of them. With the Federal Reserve, for example, it’s always been that way. It’s frustrating, but that’s just the way they work. In Washington, if you insist all interviews be on the record, you’d get fewer of them and they’d be less candid. I think when you talk with policymakers, it depends on what you want. If you’re trying to make news, it might not be terribly valuable to be off the record, unless they drop something valuable that you can source a different way. Or are you just trying to learn more about the subject? In that case, background may be just fine. At The Economist, where we don’t use a lot of quotes, background is often just fine. We take the best ideas we hear and make them our own!
JR: You’ve interviewed many, many top officials. How do you approach these interviews?
Greg Ip: You’ve got to know the subject really, really well, so that you don’t waste the policy maker’s time, you can spot what’s genuinely new or interesting, and you can see through spin. I’ll give you an anecdote: John Snow, Treasury Secretary under President George W. Bush, wanted to push back against the idea that wages and income had not done very well under the President. He invited some journalists, including me, to present some data to show how much average incomes had grown under Bush. And some of us objected to this and said, “We know averages are skewed by the wealthy.” When I reported on this the next day, I reported what he said, but I also highlighted in the piece that if you looked at median household income, you get a completely different story. So it was important that I had that background, that knowledge, so that I did not parrot his interpretation.
My experience is that policymakers would rather be interviewed by people who know the subject very well. They like intelligent questions. They might not be happy when the journalist challenges what they say, but as long as it’s done respectfully, I find that the policy maker also responds with respect, not resentment.
JR: Can you walk us through a recent piece you did for The Economist and give us some insight into how it was put together?
Greg Ip: Let’s take “America’s Economy: Points of Light” [July 2012]. The way this started is that my editors and I were wondering if – amidst all the gloom and the weak recovery in the U.S. economy – there were signs that the structure of the economy post-crisis was evolving in ways that were positive or negative. One of the first things I did was to look at the data itself: What’s happening with exports, with business investment and consumption? One of the things that stood out was that exports were doing fairly well compared to other recovery periods; and consumption and housing were doing quite poorly, and this was not surprising. I wanted to make a point that the U.S. economy was becoming more dependent on exports, especially the types of exports that big-brained American professionals specialize in. I’ve always thought of architecture and engineering as fields involved in this sort of thing. I had planned a trip to China anyway, so I sent an email to a trade group – the American Council of Engineering Companies – and I asked if they had any companies that are doing a lot of stuff in China now. So they sent along several firms. I called up a firm called Thornton Tomasetti – a big structural engineering firm – and the representative said, “Yes, we’re working on this thing called the Shanghai Tower.” I said, “I’ll be in Shanghai. Can I come visit it?” And he said, “Yes.” So when I visited I got the color I needed for this story.
But I need more than that. From a previous story I remembered that Ethan Allen was opening up all these stores in China, so I arranged to visit one of their stores in Shanghai. And I remembered from my previous research how big this natural gas and fracking boom had become in the U.S. Coincidentally, another colleague of mine had written for that same issue a special report about natural gas. I was very enchanted by the natural gas story, because it involved the sort of ingenuity, risk-taking and wise government support that is unique to the American situation and economy. I also remembered reading a passage in the Economic Report of the President about how cheap natural gas was having these powerful downstream effects. So, for example, the plastics industry uses natural gas as a feed stock. Some of these big plastic refiners had moved offshore because gas had gotten so expensive four or five years ago. It turns out that the industry had started to return because of the natural gas boom. This was something, again, I read about in the Economic Report of the President. With a bit of work, I called some companies. I was looking for one that had closed down a couple of years ago and reopened. And sure enough, there was one just outside of New Orleans. So I made a trip down there to get some more color.
Those were three or four portraits that I wanted to bring together in a broader story. The point of this was to take a story that could have been just dry numbers and to illustrate it with some actual pictures — to tell a bigger story. It was a bit of a difficult story to tell, because it was ultimately an optimistic story told against a gloomy set of data. This was when the economy was going into another one of its mid-year swoons. I was trying to communicate a rather nuanced message that, even though the cyclical story was rather gloomy, the secular story was an encouraging one. I also interviewed the deputy secretary of commerce, so I managed to get a policy angle in there.
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