Consumer Confidence and the Economic Media-- Economic Cycles Graphics from OECD/NYT

[Lily Hope Chumley]

The graphic shows contracting and expanding business cycles from the 1970s to the present; the first page shows what appears to be a two-year old's drawing, which then in later pages resolves into a picture of smaller and greater economic fluctuations over the last thirty years.
http://www.nytimes.com/interactive/2009/07/02/business/economy/2009...

The OECD's link offers more interactive but less pretty graphic which allows you to select for different countries, and offers four factors: ind. prod, composite indicators, business confidence, consumer confidence. http://stats.oecd.org/mei/bcc/default.html (I would suggest putting it at max speed, 20, and maximum tail length, 24)

What interests me is that, at least in the US, in the last two years consumer confidence seems to have been a predictive indicator, cutting a trail the other indicators followed, in a way that it previously was not (in the '90s-2002 for example consumer confidence followed behind the other indicators). This is probably a result of the foreclosures and home value losses and the media coverage surrounding them, followed by the bailouts. Last fall, people were talking about the possibility of heading into a second Great Depression, even before they began loosing their jobs.

I wonder if this is related to a change in elite business news, and concurrently a change in the prominence economic news has in popular sources. Business news has become more reflective, more sociocultural in orientation, and at the same time more popularizing--think of the Gillian Tett phenomenon, and FT's spring series, the "Crisis of Capitalism". American liberal intellectuals are paying attention to business news in a way that they were not, previously--look at "This American Life's" offshoot, "Planet Money" (thisamericanlife.org; http://www.npr.org/blogs/money/planet_money_podcast/) and "Marketplace" also began offering comical explanations of arcane financial instruments for everyday people on its website http://marketplace.publicradio.org/

I wonder if changes in our general relation to media, and media coverage of business is going to lead to a lasting change in the way that consumer confidence tracks or predicts other economic indicators. Could it be that the inherent reflexivity of economic cycles is going to go even deeper...?

[Keith Hart]

Hey Lily, I should take lessons from you on how to open up a discussion thread. You give readers lots of bonus links, plenty of questions, narrow and broad. If this doesn't spark a discussion, I don't know what will. I suppose one issue might be how closely OAC members are attuned to the business media. I'll take a back seat for now and await developments.

[Luka Rejec]

Wow ... that is one pretty graphic. Seriously ... amazingly intuitive, once I got the hang of it. On to the question:

I wonder, how is our relation to media changing, really? I read somewhere, and it strikes me as plausible, that the internet is not opening up our sources of information but rather closing them up. Instead of universal media, we are turning towards particular media, social networks, circles of friends and online communities. In short, we are setting ourselves for strong confirmation bias effects.

Could this perhaps explain the changes in economics? Economists, businessmen, financiers, forming a much more closed information network, where confirmation biases become far more pronounced, increasing volatility, radicalism and perhaps what you term reflexivity? When there's a bull market, all the sources a trader accesses tend to be bullish, when bearish, everything looks bearish. Perhaps the business community is losing sight of the broader picture because in the overdose of modern communication, everybody gets to pick and choose what they see and hear.

[Lily Hope Chumley]

well, should have edited it more closely..just made a couple of little changes to make the question clearer.

[Lily Hope Chumley]

Hi Luka,

That's an interesting point!

If you look at the last few years on the OECD page ( US data), business confidence ended up trailing consumer confidence. So, maybe that means that people in the business news bubble were the last to catch on to the news of the direction the economy is heading in, because they were in a closed media circle. But that would certainly be a surprising thing! You would think that people in business would be reading more detailed news and seeing possible downturns first, before consumers do...

We often think of economic problems as resulting from a "real"/material problem (such as the inability of many people to pay the mortgages they'd signed on for), and that "confidence" indicators react to these problems--like seeing a tree in the road, feeling anxious, and hitting the brakes. Unfortunately, hitting the brakes economically can cause trees to fall. In this case, it seems difficult to separate the forest from the trees, the "real" causes from the reflexive/mediated ones...I wonder if people in other countries have different perspectives on this?

[Daniel Seabra Lopes]

Well, the graphics look very interesting (at least the first ones). But perhaps everyone is waiting for some indicators to show that the economy has reached the bottom and will eventually start climbing, and this is just another way of filling this expectation (consumer confidence leading, after all?).
In theory, the assumption that economic cycles may last 10-12 years is discussable: there are different types of cycles, shorter and longer (the longest being the famous kondratiev cycle), each one apparently capable of describing economic fluctuations and giving out an impression of predictability. The same with consumer confidence indicators. What I find interesting here is that, through these graphics and quantitative indicators, economics is showing its (often ignored) sociological vein. These are indeed assumptions about society as a whole, about production and work, about the way business agents and consumers feel. At the same time, they look quite different from usual sociological and anthropological assumptions -- and, needless to say, they have much more impact, too (they are more "real" precisely because they are more reflected / mediated).
As an ethnographer, I would like to know how such indicators are produced: periodicity, data collection, measuring, modelling, copy / paste activity, and so on. I suspect that mediation starts right at the production level... Another question: since these business indicators are published regularly (monthly, sometimes weekly...) and reflection is mainly centred on the latest news, is there some room left for more encompassing discussions?

[Sarah Graff]

I think that the so-called real causes are difficult to separate from the purportedly not-so-real ones in our current economic order.

As for media covering business and the liberal intellectuals, I think that when something big and scary happens people want to try to understand it better so they feel safer. Think about that quintessential saying ‘knowledge is power’. It is easy to turn to the 24/7 internet for answers. Programs like This American Life (which won some awards recently for the Planet Money series) are helping those seeking information about this relationship between real and not-so-real elements of our economic order. Will that affect economic indicators and transform the way that predictions can be made? Only history will be our guide.

I agree that we should be aware that the way information (economic and other) is disseminated and consumed would have an impact because of the nature of our society today. Two articles that other OAC members might find interesting/thought provoking on this topic were published about a year apart in The Atlantic:

http://www.theatlantic.com/doc/200807/google

http://www.theatlantic.com/doc/200907/intelligence

They argue different viewpoints so it is worthwhile to look at both.

[Keith Hart]

Gillian Tett has a Cambridge PhD in social anthropology based on research in Tajikistan and is now capital markets editor for the Financial Times. Her book, Fools Gold, is on what happened after a team at J.P. Morgan invented credit derivatives. She abandoned a career as an academic anthropologist, used her Russian to become a human rights journalist at the time of the Soviet Union's collapse, was appointed head of the FT's Tokyo desk, wrote a book on Japan's banking crisis in the 90s and ended up at the FT's London HQ where she soon ran the prestigious Lex column (gossip for businessmen).

There she became acutely aware of how financial journalists reproduce and exaggerate the bias of finance specialists. First, they opted for the glamorous topics, like M & A, and neglected boring, but economically more signficant areas like credit derivatives. Second, if each area of finance has its own jargon, instead of informing the public what it means, the journalists tended to reproduce it, thereby strengthening the seclusion of insiders. She asked to be transferred to the murky world of CDSs and CDOs, where she found out about the J.P. Morgan story told in the book. By 2005 she knew that this particular source of the credit bubble was appallingly risky and started writing about it. She was attacked from the City as 'unpatriotic' (after all finance was leading Britain to a new renaissance, even though the FT had referred to the country once as "nothing more than a glorified hedge fund"). Her boss, the FT editor, was also critical of her attitude. The rest is history.

A Russian friend once told me that in his view the US media were more conformist than their Soviet counterparts under Brezhnev, without the same apparatus of political control, and I believe him. The complicity of American journalists in reproducing the party line of big money perhaps needs no further explanation. The London media are similar, but there are more pockets of independence there perhaps. I am very glad that this important topic has been opened up here in such a refreshing way. It relates to recent developments in an another thread of this discussion group, 'What is economic anthropology for'.

It is not well-known that Marcel Mauss, at the time he was working on his essai sur le don, was a prolific financial journalist, publishing a series of articles on the exchange rate crisis of 1922-24 which add up to a fifth of his mammoth Ecrits politiques (1997). Perhaps this factoid is relevant to the issue of how anthropologists might address issues of the sort that Lily has raised.

[Lily Hope Chumley]

The conformity of the American media to the basic theory and practice of capitalism--short memories, lots of gaudy spectacle, few tough questions---was brought home to me by a few years watching CCTV and other Chinese TV channels, which offer a lot of complex discussion of history, international news, policy, economics, etc...of course there is a slant and a bias, but the depth of the discussion goes beyond anything that is available in mainstream American media (except maybe public media, which is our best mass media). Chinese news--and Chinese television, and internet, and print culture-- is [at least on some topics] considerably more nuanced and open than you would think from reading the NYT, which often holds up chinese television as an example of everything totalitarian.

BTW, when is someone going to translate the rest of Mauss' work for us benighted non-french speakers?