Thursday, 17 April 2014

Abusing economic analysis: UK Treasury edition

For US readers, this is about the misuse of dynamic scoring in analysing tax changes

Ask most people if they think a particular tax - like fuel duty - should be reduced, and they will say yes. If you ask people do you think income taxes should be raised to pay for a cut in fuel duty, you will get a rather different response. So just asking people if they would like one particular tax to be cut without saying how it will be paid for is pretty meaningless. Unless of course your aim is to provide ‘evidence’ that taxes are too high, and you are not too worried about the nature of that evidence.

There is a slightly more sophisticated version of this trick, and the UK Treasury have just played it. Each individual tax potentially distorts the pattern of economic activity. If that pattern without any taxes is near some ideal, then we can call taxes ‘distortionary’. If we taxed apples and used this money to subsidise the production of pears, people would eat too many pears and not enough apples. However there is one tax that is not distortionary, because it does not influence incentives and therefore this pattern of economic activity. It is a poll tax - a tax levied on each individual independent of their income, wealth or what they spend their money on. Economists call this a lump sum tax. So cutting any distortionary tax, and paying for this by raising a poll tax, is bound to produce beneficial results in terms of reducing distortions.

There is only one problem with paying for a particular tax cut by raising a lump sum tax - in the UK we do not have a poll tax. We did very briefly - it was not very popular, because people care about fairness as well as the distortionary impact of taxes. For this reason, you should not expect to find a government department like the Treasury modelling the benefits of cutting fuel duty by assuming it was paid for by raising a poll tax. Unfortunately, that is exactly what has been done in a Treasury/HMRC report released this week

George Osborne is not planning to reintroduce a poll tax - veneration of a past Conservative Prime Minister would not go that far. I think the argument the Treasury would use to justify what they have done is simplicity. If you pay for a cut in fuel duty by, say, raising income taxes, you have to model the impact of two taxes on economic behaviour rather than just one. I don’t think that is a very good excuse, but even if we think it has some validity it has a direct implication: an individual study of this kind is meaningless on its own. It can only be used in conjunction with other studies that look at the impact of raising other taxes. Will Treasury officials therefore stop their masters using the numbers from this exercise to justify cuts in fuel duty? No prizes for guessing the answer. (They might if they could but they don’t have that degree of influence.)

So what could have been the beginning of an intelligent discussion of the costs and benefits of particular taxes (as in the Mirrlees review, for example) has been turned into a simple propaganda exercise.

Unfortunately it gets worse. Fuel duty is particularly ‘distortionary’ because its rate is high (see Chart 2.1 of the Treasury paper). There might be a good reason for that. The tax could be high because it is trying to offset damage that is not prevented by the market: road congestion, pollution and of course climate change. In terms of the language of economics it is (at least in part) a Pigouvian tax designed to offset externalities. In that case the tax is not distortionary at all: a world without fuel tax would not be ideal, and imposing a fuel tax gets us nearer that ideal. As Chart 3.1 from the paper indicates, these beneficial impacts of fuel duty are not modelled by the Treasury’s CGE model. (This is why, as John McDermott notes, this kind of partial dynamic modelling tends to be attractive to right wing outfits. Is it significant that the paper does not actually include the words ‘climate change’, and just uses the vaguer term environmental damage?)

So what the Treasury have done is modelled all the benefits of cutting the tax, but ignored all the costs. If this was but one stage in a process that would subsequently look at the cost of these externalities, and would realistically model how these tax cuts were paid for, fine. As a stand alone exercise, I’m afraid the Treasury study is worthless.

As Chris Giles notes in an excellent report, this is really part of a political exercise to build the case for tax cuts. It has two unfortunate side effects. First, it just encourages the suspicion among many that anything coming out of the UK Treasury at the moment is worthless propaganda. Second, it encourages those on the left who think that mainstream economics is inherently biased. But if you saw an opinion poll that asked people if they thought a particular tax was too high, without also asking what tax they would increase to balance the books, you would not say that this shows opinion polls are inherently biased. Instead you would just conclude that the person commissioning the poll had a political agenda. You might also ask whether the polling company should have accepted the commission.

Tuesday, 15 April 2014

Inequality, inheritance tax and the UK election battleground

In an earlier post I sketched out what I thought would be the essential macroeconomic battleground for the forthcoming (2015) general election.

●    The Conservatives would lead on austerity and growth. In May 2012 I suggested the line: “Austerity laid the foundation for our current growth, so we need to stick with it to ensure growth continues”, and the Chancellor has certainly followed my advice! Having linked austerity and growth, the Conservatives will go on to claim that only they can be trusted to deliver more austerity, and therefore continued growth.

●    Labour, on the other hand, will lead on how living standards have stagnated over the last five years, which current growth is unlikely to change before the election. Having offered the Chancellor some spin in May 2012, in that post I thought it was only fair to offer something to the opposition, which was this chart.

This is all nonsense of course. Osborne’s claim is Orwellian: austerity was not necessary for achieving growth, but actually delayed it. In Labour’s case we have no idea what lies behind the productivity collapse which is the main factor behind the chart above, so ascribing it all to government policy is a bit heroic. Having said that, the more the Chancellor tries to claim credit for employment growth, the more he opens the government up to the idea that they are responsible for the decline in living standards.

For those who are tired of this focus on traditional macroeconomics, there may be some better news. One additional element in the battleground to come might be the issue of inequality, but only if Labour chooses to fight on this ground. The reason is that the Conservatives have signalled that they will reprise their ambition to raise the exemption threshold for inheritance tax from £325,000 up to £1m.

President Obama has said that inequality is the “defining challenge of our time”. Thomas Piketty's “Capital in the Twenty-first Century” emphasises the importance that concentrated wealth is likely to play in increasing this inequality if it is allowed to be transmitted across generations. Inheritance taxes are clearly central to all that. So the Conservative proposal to raise the inheritance tax threshold is in effect saying that they do not regard increasing inequality as a problem.

Will Labour respond by raising the issue of inequality? They have been reluctant to do this in the past, which seems paradoxical. One of the reasons for this paradox that I speculated on here was a view that to be elected Labour has to have some backing from the business sector. This position was recently outlined by Alan Milburn (former Labour cabinet minister) in this FT article. “Labour cannot afford a rerun of the 2010 election campaign, when not a single major corporation was prepared to endorse it. Overcoming that …. will need Labour to embrace a more avowedly pro-business agenda and match it with a more overtly pro-business tone.” He goes on: “Being a “One Nation” party means governing in the interests of all sections of society, better and worse-off alike. Reintroducing a 50p higher income tax rate does not match that objective.” There we have Labour’s dilemma in a nutshell. Taking action to reduce inequality is seen as anti-business, and it is argued that Labour cannot win without some business sector support.

So I read with interest a piece by Ed Balls in the Guardian today. There he majors on the cost of living, but there is just a hint of something more: “the ongoing cost of living crisis is deeper and broader than one or two sets of figures. It's about whether most people on middle and lower incomes see their real earnings grow in line with the growth in the economy.” But inequality is not mentioned once, and fairness is only mentioned in the context of “balancing the books”.

This is hardly raising inequality as a “defining challenge of our time”. Does this reflect a genuine difference between the left on either side of the pond, or simply that Obama is in power and Ed Balls is not? If it is the latter, is Labour right to fear that going strong on inequality would lose them the election? Let me end with some encouragement from an unlikely source. A recent Financial Times leader argued that
“ratcheting up the IHT threshold to £1m cannot be justified at present. Making this promise is good pre-election Conservative politics. Implementing it in these austere times would be socially unjust.”
They make a number of important points. Even if thresholds remain unchanged, and despite high house prices, the OBR estimate that just 10% of estates will be liable to pay any tax at all. Implementing the £1 million threshold would cost the Treasury more than £3bn, which in times of austerity is money that could be better used elsewhere. And finally they say that redistribution is vital if inequality is not to be exacerbated. When the FT starts worrying about inequality, perhaps this is after all a battle that Labour can win. 

Monday, 14 April 2014

The Fed’s macroeconomic model

There has been some comment on the decision of the US central bank (the Fed) to publish its main econometric model in full. In terms of openness I agree with Tony Yates that this is a great move, and that the Bank of England should follow. The Bank publishes some details of its model (somewhat belatedly, as I noted here), but as Tony argues this falls some way short of what is now provided by the Fed.

However I think Noah Smith makes the most interesting point: unlike the Bank's model, the model published by the Fed is not a DSGE model. Instead, it is what is often called a Structural Econometric Model (SEM): a pretty ad hoc mixture of theory and econometric estimation that would not please either a macro theorist or a time series econometrician. As Noah notes, they use this model for forecasting and policy analysis. Noah speculates that the Fed’s move to publish a model of this kind indicates that they are perhaps less embarrassed about using a SEM than they once were. I’ve no idea if this is true, but for most academic macroeconomists it raises a puzzling question - why are they still using this type of model? If the Bank of England can use a DSGE model as their core model, why doesn’t the Fed?

I have discussed the question of what type of model a central bank should use before. In addition, I have written many posts (most recently here) advocating the advantages of augmenting DSGE models and VARs with this kind of middle way approach. For various reasons, this middle way approach will be particularly attractive to a policy making organisation like a central bank, but I also think that a SEM can play a role in academic analysis. For the moment, though, let me just focus on policy analysis by policy makers.

Consider a particular question: what is the impact of a temporary cut in income taxes? What kind of methods should an economist employ to answer this question? We could estimate reduced forms/VARs relating variables of interest (output, inflation etc) to changes in income taxes in the past. However there are serious problems with this approach. The most obvious is that the impact of past changes in taxes will depend on the reaction of monetary policy at the time, and whether monetary policy will act in a similar way today. Results will also depend on how permanent past changes in taxes were expected to be. I would not want to suggest that these issues make reduced form estimation a waste of time, but they do indicate how difficult it will be to get a good answer using this approach. Similar problems arise if we relate growth to debt, money to prices (a personal reflection here) and so on. Macro reduced form analysis relating policy variables to outcomes is very fragile.

An alternative would be for the economist to build a DSGE model, and simulate that. This has a number of advantages over the reduced form estimation approach. The nature of the experiment can be precisely controlled: the fact that the tax cut is temporary, how it is financed, what monetary policy is doing etc. But any answer is only going to be as good as the model used to obtain it. A prerequisite for a DSGE model is that all relationships have to be microfounded in an internally consistent way, and there should be nothing ad hoc in the model. In practice that can preclude including things that we suspect are important, but that we do not know exactly how to model in a microfounded manner. We model what we can microfound, not what we can see.

A specific example that is likely to be critical to the impact of a temporary income tax cut is how the consumption function treats income discounting. If future income is discounted at the rate of interest, we get Ricardian Equivalence. Yet this same theory tells us that the marginal propensity to consume (mpc) out of windfall gains in income is very small, and yet there is a great deal of evidence to suggest the mpc lies somewhere around a third or more. (Here is a post discussing one study from today’s Mark Thoma links.) DSGE models can try and capture this by assuming a proportion of ‘income constrained’ consumers, but is that all that is going on? Another explanation is that unconstrained consumers discount future labour income at a much greater rate than the rate of interest. This could be because of income uncertainty and precautionary savings, but these are difficult to microfound, so DSGE models typically ignore this.

The Fed model does not. To quote: “future labor and transfer income is discounted at a rate substantially higher than the discount rate on future income from non-human wealth, reflecting uninsurable individual income risk.” My own SEM that I built 20+ years ago, Compact, did something similar. My colleague, John Muellbauer, has persistently pursued estimating consumption functions that use an eclectic mix of data and theory, and as a result has been incorporating the impact of financial frictions in his work long before it became fashionable.

So I suspect the Fed uses a SEM rather than a DSGE model not because they are old fashioned and out of date, but because they find it more useful. (Actually this is a little more than a suspicion.) Now that does not mean that academics should be using models of this type, but it should at least give pause to those academics who continue to suggest that SEMs are a thing of the past.

Sunday, 13 April 2014

Secular Stagnation and Three Period OLG

For macroeconomists. This post is a kind of introduction to the new paper on secular stagnation by Eggertsson and Mehrotra. As usual, any misinterpretations are my fault.

A basic idea behind secular stagnation is that the natural real rate of interest might become negative for a prolonged period of time. A simple way to model this would be to allow the steady state real interest rate to become negative. That cannot happen in basic representative agent models, where the steady state real interest rate (absent growth) is given by

1+r = 1/b

where b<1 is the utility discount factor. With population growth (at rate = n) this becomes

1+r = n +1/b

Note that a fall in n will reduce the real interest rate, which is a useful result if we want to relate secular stagnation to falling population growth, but rates cannot fall below the rate of time preference.

In a standard two period OLG model we have more flexibility. If agents only work in the first period, then they need to save in that period to be able to smooth consumption between their working lives and retirement. If we allow them to do that through investing in capital, and if α is the exponent on capital in a Cobb Douglas production function, then with log utility the real interest rate in steady state is given by

r = k + kn        where              k = α(1+b)/b(1- α)

If one period is about 25 years, then b could be 0.5 (annual b = 0.973), and with α = 0.4 then k=2. So now the impact of a fall on population growth on the real interest rate is magnified, but the steady state real interest rate is also likely to be above the representative agent case. (If n=0 and b = 0.5, then we have r=1 and r=2 respectively. For a 25 year period this would correspond to annual interest rates of around 2.8% and 4.5%.)

In a three period OLG setup, we can have saving without capital. The middle aged work (receiving income Y), and they lend to the young, and in retirement get paid back by the now middle aged. Suppose, however, that because of some credit friction the amount the young can borrow gross of interest payments is fixed at D, and let d=D/Y<1. The middle aged would like to lend them enough to smooth consumption, so the supply of loans in steady state is (given log utility)

b (Y-D)/ (1+b)

where Y-D is middle age income net of repaying loans taken out when young. The demand for loans is

D (1+n)/(1+r)

The borrowing limit is gross of interest, so with no population growth actual borrowing is D/(1+r). With population growth there are more of the young than middle aged, so we need to scale up loan demand accordingly. The real interest rate equates demand and supply, which implies

1+r = j + jn       where              j = (1+b)d/b(1-d)

Now if d is small, j could be less than one, which reduces the sensitivity of interest rates to population growth, although a fall in population growth still reduces rates. However this also means that the gross interest rate (1+r) could be less than one, so the steady state real interest rate could be negative.

The middle aged need to save for retirement, but the only way they can do this is by lending to the young. The higher the real interest rate, the less the young can borrow because of the credit friction. In that situation, the real interest rate could easily be negative, because only then will the young be able to borrow enough to allow the middle age to consumption smooth when they retire.

The key result that Eggertsson and Mehrotra explore is that a credit crunch - a fall in D - could lower real interest rates into negative territory, and could therefore generate secular stagnation. They consider how inequality could be incorporated into the model, and then embed the model in a nominal framework. Nominal wage rigidity is added (using a similar mechanism to that in the Schmitt-Grohe and Uribe paper I discussed here), and the implications for monetary and fiscal policy explored. So I have only touched on the paper here, but as this three period OLG set-up is not standard I thought this post might be useful.

Saturday, 12 April 2014

The IMF on Bank Subsidies

If a bank is too important to fail (TITF), it in effect gets a subsidy from the public. That subsidy is like an insurance contract for those who lend to these banks: if the bank looks like it will fail, it will be bailed out by the government and depositors will get their money back. This in turn means that TITF banks can borrow more cheaply, so they get the benefit of this subsidy every year. TITF banks could do various things with this subsidy: they could make their loans to firms or consumers cheaper (thereby undercutting competition from smaller banks), they could make higher profits that go to either shareholders or as bonuses to bankers themselves, or they could take excessive risks. They will probably do some combination of all of them.

In 2009 the Bank of England calculated the value of this subsidy at £109 billion: that is about £1750 for each person in the UK. The TITF banks of course dispute this figure. (Donald MacKenzie has a very readable account of one example in the London Review of Books.) A week ago the IMF published their own study (pdf), using two different market based methods to measure this subsidy. (The IMF chapter is very readable, but Simon Johnson also has a good summary here.) This is a very imprecise science, but the IMF confirm that subsidies to TIMF banks are very large, although the £109 billion figure quoted above is probably at the upper end of the range of estimates (as the Bank also acknowledged in a later study). However, if we described this number as each member of the public’s contribution to help pay bankers bonuses (which it could well be), I think everyone would agree even a more modest figure is unacceptable.

There are two particularly interesting features of the IMF analysis: it calculates numbers across countries and across time. On the first, some might have assumed that TITF subsidies would be largest in the US, but this is not the case. In dollar terms subsidies in the UK and Japan are of a similar size to the US, and of course the UK is a smaller country, so per capita subsidies are larger in the UK. In dollar terms subsidies appear largest in the Euro area. The IMF also calculate subsidies before the crisis (2006-7), during the crisis (2008-10) and after the crisis (2011-12). The worrying aspect of these calculations is that the subsidies do not seem to have fallen substantially in the post crisis period compared to pre-crisis.

Worrying, but hardly surprising. In principle the TITF problem is fairly easy to solve: as Admati and Hellwig convincingly argue the proportion of the bank’s balance sheet that is backed by equity should be much much higher. (In simple terms, if a bank gets into trouble there are many more shareholders able to absorb losses before a government bailout is required.) The problem of TITF banks is political. As I discussed here, the lobbying power of the TITF banks is enormous. This is not just a matter of bribing campaign contributions to politicians. In the UK there is some evidence that the depth of the recession is partly down to lack of lending by banks, and the bank’s response to any proposals to tighten regulation is to imply that this will ‘force’ them to lend even less. If it is suggested that additional capital could come from reducing bank bonuses, they say all the talent will migrate to overseas banks. Quite simply, the TITF banks have immense power. Until the political will to take on the banks is found, we will each continue to subsidise bank bonuses.

And there will be further financial crises. For those in the UK who think the Vickers Commission put this problem to bed [1], it is essential to read this article by one of its members, Martin Wolf. In reviewing the Admati and Hellwig book, he writes: “Once you have [understood the economics], you will also appreciate that we have failed to remove the causes of the crisis. Further such crises will come.”

Postscript: for more, see this discussion via Mark Thoma.

[1] Because the IMF study tracks estimates of the subsidy to TITF banks through time, it can look at how the subsidy changed when the Vickers report was published (Table 3.2 and Figure 3.8). Publication is associated with a significant fall in the subsidy, but it was not nearly enough to eliminate it.   

Friday, 11 April 2014

Austerity, journalists and the financial sector

The argument that current growth (since 2013 in the UK and maybe from 2014 in the Eurozone) vindicates austerity is ludicrous. Anyone who comes to the debate without existing baggage can see that developments in the UK and Eurozone have been entirely consistent with what academic critics of austerity have been saying. So rather than go over the arguments yet again, let me ask why some people continue to make or support this ludicrous argument.

In some cases asking this question does not tell you a great deal. For George Osborne, for example, you could simply say ‘he would, wouldn’t he’. Still I think there are two interesting points to note: first, here is a Chancellor who feels no inhibition in allowing sound bite to trounce economic logic, and second, he feels confident that he can get away with it, which tells you a great deal about the UK media.

Which brings me to the Financial Times (ex Martin Wolf). Now, to be pedantic, the FT tends not to say outright that current growth vindicates austerity, but instead that George Osborne is justified to claim that it does. Yet this subtlety aside, why do they pursue this line? It would be easy to lump them in with the politicians, but I think that would be both wrong, and miss some important points.

I thought about this partly because of the latest Chris Giles article on the issue (HT Alan Taylor), but also because of Paul Krugman’s comment on my earlier post that discussed the weakness of the European left on macro policy. He makes the point that Obama also showed similar weakness on austerity, and explains this in terms of the influence of what he terms ‘Very Serious People’ (VSP), “whose views on economics tend in turn to be driven largely by the financial industry.” Now at this point I usually add a caveat that there are some good economists who work for financial institutions, but generally the sector’s view on austerity is that it is necessary, and often that it is unlikely to have much impact on domestic output.

Why does the financial sector (the City, or Wall Street, or whatever the equivalent name is in other European countries) have this view? There are probably many reasons, but one that I think is very important is the 2008 recession. This recession should have been disastrous for the influence of finance: the activities of part of the financial sector brought the economy as a whole to its knees, and parts of that sector had to be bailed out with huge amounts of public money. Economists, the public and possibly some politicians began to question whether the continuing financialisation of economic activity might be detrimental rather than helpful to economic growth. No amount of expensive hospitality should have been able to repair that blow to its reputation and prestige.

Of course attempts were made to blame it all on US monetary policy, or global imbalances. The intellectual basis for these alternative stories was pretty thin, but also beyond the academic debate they did not resonate. What was really required was to change the story. The 2010 Eurozone debt crisis was therefore a godsend to finance. The focus was now on the dangers of high government debt, and the necessity of austerity to end this new crisis. Here was a story that certainly did resonate (just look at Greece), and was also an ideal distraction from the problems caused by the financial sector.

I’m not suggesting that one crisis was manufactured to distract from the other. What I am suggesting is that those working in finance understood the importance of changing the story. There was a clear party line, which fitted the dominant ideology. The state bailing out banks is terrible for neoliberalism, while a story based on the evils of excessive government spending fits the ideology perfectly. For VSPs, economic journalists or politicians it was natural to turn to the prophets of finance during the debt crisis, and so any distrust VSPs might have had of these prophets as a result of the financial crisis faded away. Although the level of economic analysis within the FT is generally high, they were perhaps also bound to follow the City/Wall Street line.

On Chris Giles’s article specifically there is much to say, and Jonathan Portes has the patience to say it once more. So let me make just one point. Chris as a good economic journalist recognises that the ‘growth vindicates austerity’ line is nonsense, so instead he tries to accuse the other side of equal mendacity. To see how silly this idea is, consider the following quote:

“It was precisely the chancellor’s fiercest critics who were themselves unable to distinguish between correlation and causation during the period of stagnation and have thereby legitimised Mr Osborne’s rhetorical victory lap. They have only themselves to blame. The lesson to learn is that the economy is complicated and everyone should be deeply sceptical of anyone drawing strong conclusions from simple links that appear momentarily true.”

Of course it is completely the other way around. If there is a simple idea here, it belongs to those who support austerity, and it is the view that monetary policy can always control the level of activity. It was austerity’s critics (beginning with Paul Krugman) who emphasised the complication of nominal interest rates hitting a lower bound. Analysis of austerity based on complex macro models almost always supports the critics view (e.g. here). Criticisms of austerity are rooted in long established theory, while the idea of expansionary austerity or the 90% critical debt level relied on simple correlations.

So Chris, there is no symmetry here between Osborne and most of his economist critics. One of the reasons I started this blog is that I found, perhaps for the first time in my adult life, finance ministers arguing positions which directly contradicted the received wisdom I was teaching undergraduate and graduate students. In an ideal world economics journalists would also recognise when this happens, and tell people about it. 

Tuesday, 8 April 2014

When the definition of a recession matters

The official definition of a recession in nearly all developed economies except the US is two consecutive quarters of negative growth. In the US a recession is ‘called’ by the NBER. Economists, of course, just look at the numbers. This is obviously the sensible thing to do, because a fall in GDP of 3% followed by positive growth of 0.1% is clearly worse than two periods of -0.1% growth, but only the latter is an official recession. The media on the other hand behaves differently, so we had the silly situation in the UK before 2013 when tiny revisions to GDP led to headlines like ‘UK avoids double dip recession’.

Yet this minor annoyance for people like me has been turned into an opportunity in a recent paper (pdf) by two political scientists at the LSE (HT David Rueda). Andrew Eggers and Alexander Fouirnaies look at the data to see if the announcement of a recession causes any additional impact on macroeconomic aggregates compared to what you might expect from the GDP data itself. In other words, does the announcement of a recession reduce consumption or investment in OECD countries, conditional on actual economic fundamentals? For ease I’ll call this an announcement effect.

For investment they get the answer that economists would hope for - there is no announcement effect. Firms are well informed, and just look at the numbers. However for consumption they do find a significant announcement effect, both in terms of the actual data (and the size of the impact can be non-trivial) and in terms of consumer confidence indicators. One final result they emphasise, which makes clear sense from a macro point of view, is that the impact of recession announcements on consumer spending in smaller in countries with more robust social safety nets.

There are many reasons why this is interesting, but let me focus on one that I have discussed before. In this post I pointed to a potential paradox. On the one hand I believe that for most macroeconomic problems, rational expectations rather than naive expectations is the right place to start. On the other hand I also think that media reporting can have a strong influence on the average persons view on certain highly politicised issues, like is man-made climate change a serious problem, or how important is the cost of welfare fraud. I discussed this paradox here, and argued that it could easily be resolved by thinking about the costs and benefits of obtaining information. In particular, the costs of researching climate change are significant, whereas the cost to the individual of getting their own view wrong is almost zero. (This is just a variation on the paradox of voting.)

In the example from this paper, we have a standard macroeconomic problem, which is trying to assess what level of consumption to choose. The importance of the announcement effect suggests that for consumers the costs of ‘looking at the numbers’ (and, of course, interpreting them) to some extent exceeds the benefits of going beyond media headlines. If the media can have an influence on something that clearly has a significant financial pay-off for individuals, then it is bound to influence attitudes when the personal costs of making mistakes is almost zero.