The developments that led to the current banking crisis seem to have been incremental, took place over a number of years, and together affected the whole system. Is that why journalists failed to see its demise?
I wonder about the role of human psychology, as one of many possible factors that worked against the reporting on developments that contributed to the current crisis.
…the most important “defaults” of the human mind are to look for discrepancies in the world, to ignore what is going on constantly, and to respond quickly to sudden shifts, to emergencies, to scarcity, to the immediate and personal, to “news”.
So wrote psychologist Robert Ornstein and biologist Paul Ehrlich in New World, New Mind nearly 20 years ago. They argue that the human brain is poorly equipped to tackle many modern challenges: still primitive, it responds primarily to dramatic sensory changes (fight or flight and all that). In contrast, contemporary issues that tend to be evident mostly through gradual changes are seen as less significant or urgent.
For millions of years these “defaults” of the mind have worked well. They do not work well in a world where 2 billion people could be killed by a simple misjudgment, and our defaults do not even work so well in the day-to-day world of modern life…
Ornstein and Ehrlich focused on environmental change — but perhaps their theory applies validly to other areas, too. A psychology of news values in journalism? You read it here first. Probably.
There’s a tenuous link with some of the more familiar factors being put forward. Alex Brummer, the Daily Mail’s City editor, says few financial journalists understood the systemic problems that were piling up. He also highlighted the difficulties for journalists in dealing with powerful PR and threats of having access withdrawn:
Brummer says that too many financial journalists are bamboozled by the ‘manipulative’ PR operations of big companies, and some are too fearful that they will lose access if they are too critical. ‘The duty of a journalist is always to be sceptical. But they are up against very powerful institutions who lie and cheat.’
James Robertson, who wrote the piece, also quotes Dan Bögler, the FT’s managing editor, on why his paper didn’t do better:
Why didn’t we spot it? Unfortunately, financial journalists — and the FT has better-trained financial journalists than others — don’t really understand this stuff, and they join a long list of people that starts with bank regulators, central bank regulators and money managers.
No journalists appear on the list of ten people who “predicted the financial meltdown”, compiled by the Money Central blog at Times Online (tagline: Advice you can bank on). Perhaps no surprise there, although there are some honourable exceptions, such as those mentioned in the comments on that post.