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The New York Times Misleads On Economics, Too [Updated]

Paul and others have devastated David Kirkpatrick’s dishonest reporting on Benghazi in the New York Times. Kirkpatrick is obviously trying to minimize the Benghazi scandal in order to lend a hand to the Democratic Party in general, and Hillary Clinton in particular.

Simultaneously, another controversy has been brewing over dishonest reporting by the Times, this time in the field of economics. I wrote about it here: Times reporter David Kocieniewski falsely accused two economists, Craig Pirrong and Scott Irwin, of corruptly “reaping rewards” by “defending Wall Street” as “one part of Wall Street’s efforts to fend off regulation.” Specifically, Pirrong and Irwin have contradicted, on academic and empirical grounds, the perennial left-wing canard that “speculators” drive up prices in commodities markets. Kocieniewski’s reporting is wrong, and not even consistent, as it relates to Pirrong and Irwin, for the reasons reviewed in my earlier post.

Now Professor James Hamilton has entered the fray. He reprises the attacks that others have made on the Times’s dishonest reporting. He begins:

David Kocieniewski of the New York Times is guilty of some outrageously bad journalism in the form of a groundless ad hominem attack on the reputation of two professors for the sole purpose of reinforcing the prejudices of his misinformed readers.

Harsh words, but Hamilton backs them up. Having established that Kocieniewski smeared the two economists groundlessly, he goes on to address the underlying question: are speculators responsible for rising prices in recent years of, for example, crude oil? This is a question that Kocieniewski did not directly address, but the whole point of his hit piece was to try to discredit those who have demonstrated that one of the Left’s favorite talking points is false. Hamilton writes:

Let me pose the question a little more precisely for anyone who actually wants to investigate this issue. Do financial speculators drive the price of oil to a value at which the quantity physically produced exceeds the quantity physically consumed? Because if the answer to that question is no, then it is fundamentals of supply and demand, not financial speculators, that are all you would need to know to calculate what the price of oil will be.

That is an empirical question that can be answered, and the overwhelming weight of academic research demonstrates that the New York Times theory of commodity prices is wrong. Hamilton quotes from his own paper which will be presented next weekend at an Allied Social Science Association meeting:

One common strategy is to interpret a simultaneous unanticipated rise in prices and commodity inventories as reflecting speculative demand pressure. Kilian and Murphy (2013) and Kilian and Lee (2013) concluded that such a model rules out speculative trading as a possible cause of the 2003-2008 surge in oil prices. In related work, Lombardi and van Robays (2011) and Juvenal and Petrella (2011) found only a small role for speculation using alternative specifications….

Brunetti, Buyuksahin, and Harris (2011) used proprietary CFTC data over 2005-2009 on daily positions of traders disaggregated into merchants, manufacturers, floor brokers, swap dealers, and hedge funds. They found that changes in net positions of any of the groups could not help to predict changes in the prices of futures contracts for the three commodities they studied (crude oil, natural gas, and corn)…. Stoll and Whaley (2010) used the public SCOT for 12 agricultural commodities over 2006-2009 and found that changes in the long positions of commodity index traders predicted weekly returns for cotton contracts but none of the other 11 commodities. Alquist and Gervais (2011) used the public CFTC Commitment of Traders Report to measure net positions of commercial and non-commercial traders, and found that changes in either category could not predict monthly changes in oil prices or the futures-spot spread over 2003-2010, though there was statistically significant predictability when the sample was extended back to 1993.

But the Times isn’t interested in truth with respect to the economy, any more than it is with regard to Benghazi. The Times is all about politics of the crudest, most know-nothing sort.

It is interesting to read the opinions about the New York Times that are expressed by Hamilton’s highly knowledgeable readers in the comments on his post. “It’s not a newspaper; it’s a party rag” is typical. Sophisticated observers of all political stripes recognize that the New York Times has no credibility on any topic where the interests of the Democratic Party and the Left are involved.

UPDATE: You should check out the comments on the post, including one from Craig Pirrong that sheds more light on the Times’s dishonest agenda.

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