Steve Sachs Duke


Thursday, September 30, 2004


News Inflation: The A.P. ran a story a few days ago reporting that oil prices had pushed past $50 a barrel:

RIYADH, Saudi Arabia (AP) -- Saudi Arabia, the world's largest oil exporter, will raise its production capacity by nearly 5 percent to 11 million barrels a day in an attempt to rein in prices that topped $50 a barrel for the first time, the oil ministry said Tuesday. . . .

Word of the decision came as crude oil topped $50 per barrel on Tuesday, pushing past the psychological milestone for the first time.

Traders bid oil over $50 a barrel in Asian trading after the November crude contract settled at a 21-year high of $49.64 on Monday on the New York Mercantile Exchange in a reaction to the slow recovery of U.S. oil production that was damaged by Hurricane Ivan and unrest and terrorism fears in key producers Saudi Arabia, Iraq and Nigeria.

To their credit, in the very last paragraph, they also note that the $50-a-barrel figure (and the talk of a "21-year high") is historically meaningless:

Still, adjusting for inflation, today's prices are still more than $30 a barrel below the level reached in 1981 after the Iranian revolution. Economists also point out that the country is more energy efficient than it was two decades ago -- due to conservation measures taken after prices skyrocketed and because the industrial sector has shrunk dramatically.

This sort of thing has bothered me for a long time. I'm not sure why reporters and editors--who should know better--continue to write breathless articles on large nominal figures (the most expensive hurricane in history, etc.), even when the real figures are completely unexceptional. Or, for that matter, why they repeat claims that the deficit is "the largest in history," when what really matters is deficit as a share of GDP. In many ways, this "news" is only news to people who've never heard about inflation.

I'm sure it makes for good copy, and probably sells more papers than "Deficit Large, But Not Unprecedented." Maybe the news value is in the fact that other people pay attention to nominal values--the "psychological milestone." (But isn't that psychology itself a creature of the media?) And it's also a perennial source of scare headlines, since as inflation continues, virtually any monetary quantity will eventually become "the largest in history." But aren't there some editors out there sufficiently committed to accuracy to keep these non-stories from running?




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