But the most important thing is they should also understand that maybe we have a too-inflated or too-rosy picture of finance itself. While it's not nice to point out or study what goes wrong, I think that we owe it to the public, but we owe it to ourselves too. If we are true researchers, we should also investigate what goes wrong, not necessarily only the things that go well.
Pinsker: Can you think of any good examples of economists who have really taken advantage of this new ability to communicate directly with the public? What's good about the way they're communicating with the world?
Zingales: I think that one example is a colleague of mine, John Cochrane, at Chicago. I don't necessarily agree with everything he says, but I think that he has a very active webpage, where he explains and translates things to the broader public, and engages former-economists-now-journalists like Paul Krugman in debates, and challenges them. I think that 10 years ago, Paul Krugman was writing for The New York Times, and there wasn't an alternative voice out there. Now, there is, and John is one. There are others, and this makes it easier for people to form their own views.
Pinsker: Historically, one major thing standing between economists and the public has been the media, which is known to be drawn to really negative stories, especially if they're unflattering to bankers. What do you think financial journalists currently do well, and what could they do better?
Zingales: First of all, I think that the media world today is squeezed quite a bit, in the sense that it was, in the past, as you said, a big intermediary. Now, with webpages, blogs, Twitter, interviews, even what you're doing now, I think that this is filtered much less. So, we can't blame journalists if our message doesn't get across. I think that we can to some extent do that ourselves. As much as I would want to blame somebody else, I don't think that that's the case.
In terms of what journalists do well or do poorly, I think that journalists are very good at giving the details of scandals once a scandal emerges. In some cases, they've been instrumental also in pinpointing the scandals. What they're not particularly good at, but this is because it's not their job, is to look more broadly at what the regularities are, or even identifying problems that are not maybe so acute in one case, but are pervasive. Journalists, in this day and age of the business, like big stories with big companies going in one direction or the other. Sometimes, for the functioning of capital markets, what is more important is how the average company does, and whether the problem is pervasive or not.
One of the positive examples I cite in my paper is this case of this researcher who identified the practice of post-dating stock options. This is something that is not gigantic in terms of the amount that's appropriated, but is indicative of a pretty lax culture and can only be identified with good data analysis—and that's exactly what the researcher did.