Thursday, November 25, 2010

Grading Politifact... Gardner Selby gets an F....

Sublime Bloviations blog does a great job fact checking Politifact and finds they are full of it (link). Excerpt follows...

Grading PolitiFact (Texas): Rick Perry and Ponzi schemes
This again?  It's illuminating to find PolitiFact so unrepentant regarding its failures.  PolitiFact has found the comparison between Social Security financing and Ponzi schemes "Barely True," "False" and now "False" again.
Just one problem:  It's true.  A reasonable effort by PolitiFact should find it "Half True" or better.

The key PolitiFact finding is that the "Ponzi scheme" is fraudulent by definition.  And if you can get journalist and non-economist Michell/Mitchell Zuckoff to proclaim that as a fact in his role as expert source then it's mission accomplished, in a manner of speaking.
Michell (sic) Zuckoff, a Boston University journalism professor who has written a book on Ponzi, noted critical dissimilarities between Social Security and a Ponzi scheme, which by definition is both fraudulent and unsustainable.

"First, in the case of Social Security, no one is being misled," Zuckoff's January 2009 article in Fortune magazine says. "...Social Security is exactly what it claims to be: A mandatory transfer payment system under which current workers are taxed on their incomes to pay benefits, with no promises of huge returns."
(bold emphasis added)
The problem for Zuckoff and PolitiFact is that economists don't see it that way:
A Ponzi scheme is a strategy of rolling over a debt forever and thereby never paying it back.
Kevin X. Huang and Jan Werner are not alone:
To Kindelberger and other writers on financial scams, the essential feature of Ponzi's activities was 'misrepresentation or the violation of an implicit or explicit trust' (1978: 79-80).  In economic theory, however, the label 'Ponzi' survives largely stripped of its connotation of fraud.
(The New Palgrave Dictionary of Money & Finance)
What gives Mitchell Zuckoff (and PolitiFact) the right to discount the definition of "Ponzi scheme" as understood by economists?
Nothing.  Nothing at all.
Zuckoff and PolitiFact make the claim of exclusive definition out of apparent ignorance, though I have evidence that staffers at the Providence Journal(source of PolitiFact Rhode Island) took note of the criticism and didn't care enough to change the story.
When three teams of journalists successively flub a similar fact check it starts to resemble a pattern.
The grades:
W. Gardner Selby:  F
Brenda Bell:  F
Perhaps there's a tendency to trust their colleagues at PolitiFact.  Regardless, it's unacceptable and appalling that PolitiFact got this fact check wrong on three consecutive tries.

Really a great read... even Paul Krugman has called Social Security a Ponzi scheme... Politifact is awful... period...

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