I had sympathy for British chancellor Jeremy Hunt last week when he was mocked for trying to explain inflation with a coffee mug and a black felt pen. I’ve made quite a few explainer videos myself over the years, so I know how difficult it can be to get the tone right.
You want to sound like you’re talking to a smart friend in the pub, but it’s easy to sound like you’re pandering to your child instead. I also think that making the economy more understandable is a worthy endeavor, especially today. Unfortunately, Hunt’s video is a perfect example of what not to do.
Why try to explain economics better? Because the profession suffers from what Andy Haldane, former chief economist at the Bank of England, calls “twin deficits”, understanding and trust.
In a 2019 British survey, 40 percent of respondents said it was becoming more difficult to understand the economy when making informed decisions about voting in elections and referendums. Only 14 percent said it had gotten easier. An in-depth study in 2020 found that many members of the British public do not understand concepts such as gross domestic product and distrust statistics such as the unemployment rate.
Part of the translation problem. Most of the economic concepts are not complicated, but they are in a language that makes no sense to people who cannot speak them.
Economists keep saying that the UK has a problem with rising economic “inactivity”, for example, but how many people know this group including students and carers? If someone calls me inactive while I am on maternity leave, I will follow them. “People not working or looking for work” would be a clunkier but clearer label.
There was another example last week, when similar statistics led to the headlines “UK wages rising at fastest pace” from one news organization and “real-term UK pay falling at fastest rate for 20 years” from another. Nothing is wrong. One focuses on cash increases, the other on payments after inflation is taken into account. But you can see why people might be confused.
A 2020 study found that people don’t know what the terms “nominal” and “real” mean, and as a result mistrust them. “I’ve heard of this ‘real term,'” said one participant. “[I] keep hearing news and more. But I was just playing with words, a little. I don’t really buy it.”
Misunderstandings lead to mistrust, which journalists like me can do. But politicians don’t help when they twist statistics to mislead. Former prime minister Boris Johnson, for example, was chastised by the UK Statistics Authority last year for saying that more people were working than when the pandemic started. They choose to refer only to paid employees (a figure that ignores the employees themselves). In total, there were about 600,000 people working at that time.
The good news is that there are practical ways to improve public understanding and confidence in economic statistics. The Behavioral Insights Team, owned by innovation foundation Nesta, is running a new experiment with the Office for National Statistics that has promising results.
The researchers presented labor market statistics in six different ways to different study participants, then tested their understanding. The study found that simpler language that related statistics to real-world examples led to better comprehension scores. This does not mean “breaking down”: in fact, other information can be helpful. Versions that explain how exactly the statistics are collected cause people to report higher levels of trust.
All of which brings us back to Hunt and his cup of coffee. The big problem isn’t that they think so. He blamed several global factors for the rise in inflation, such as the pandemic and the war in Ukraine, then said the government would cut inflation in half by the end of the year through policies such as investment in renewable and nuclear energy. .
But such a policy will take years to take effect. In fact, inflation is set to halve by the end of the year anyway – the Office for Budget Responsibility estimates inflation will be about 3.8 percent in the fourth quarter.
This is propaganda masquerading as an explanation – just the kind of thing that makes the public more annoyed and distrustful. Anyone can see the flaw in the story that does not blame for the rise in inflation, but claims all the credit for the return down. You don’t need to be an economist to know you’re being stupid.
sarah.oconnor@ft.com