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Editor's introduction

American Journal of Economics and Sociology, The, Nov, 2004

This fifth issue is the place where we traditionally publish our annual supplement. But it is not here. The 2004 Annual Supplement to the AJES can be found in the April issue (63:2) because it was the second volume in Dr. Robert Andelson's two-volume Critics of Henry George. The first volume of Andelson's work appeared in the November 2003 issue of this journal (62:5), and we wanted to keep the publication of both volumes as proximate as our resources would allow. So what you have before you is a regular refereed issue of the journal, and if you are interested in the annual supplement you have to hunt back several numbers to find it.

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But this November issue is an interesting one with some unusual approaches to older subjects. Our lead article by Professor William L. Anderson is relevant to the public debate about journalist Dan Rather's stunning recantation. Rather relied on forged memos to try to discredit the incumbent on the eve of the forthcoming presidential election. The forged memos are now considered to be compute-generated frauds and poor, pathetic frauds at that. Rather has admitted as much and apologized for his mistake.

Conservative pundit Patrick J. Buchanan opined that this error has now brought "an inglorious end to [Rather's] long career" (Buchanan 2004). That may or may not be so. But does a scandal of this notoriety bring a knock-out blow to the chin of the investors who own shares in CBS? That is an interesting economic question.

The short answer is "maybe yes." Certainly, the market system has punished newspapers in the past when their staff has published hoax stories that were passed off as "news." On September 28, 1980, something analogous to the Rather report greeted the morning commuters in the District of Columbia. By afternoon that same story had galvanized the nation.

Star Washington Post reporter Janet Cooke told about a minor child who was addicted to cocaine while his mother looked on and the mother's drug-pusher boyfriend provided a never-ending flow of white powder. Cooke gilded that story for days, insisting on its veracity and refusing to tell the police where the boy lived. She cited confidential sources and a journalist's privilege. It turned out that no such child could be found because Cooke's child never existed.

In the opinion of many, Cooke simply made up that story in a quest for a Pulitzer Prize. This was by no means her first lie. Her resume indicated that she had learned her skills at Vassar College, earning a degree. Vassar's registrar indicated otherwise.

The Washington Post was properly blamed for shoddy news coverage and especially for mismanaging its staff. How could Janet Cooke have risen so high? If the public cannot rely on this "fourth branch of government" to do its job better, then how can democracy survive? This brings me to our lead article. Professor Anderson has written an excellent piece about the economic and financial implications of the Janet Cooke affair. He wants to know whether the hoax was profitable for the investors, since throughout the history of journalists and their hoaxes, spiking newspaper sales seems to have been the one motivation for deception and guile.

Anderson has found that the market process punished the investors by discounting the value of the stock they held. Competing newspapers found that their stock had appreciated in tandem with the public's appreciation for their not making the same kind of errors. Anderson concludes his article with the remark that "truth and accuracy mattered to readers and to the market."

This is reassuring for those pro-market system advocates who believe that competition brings out quality, and accuracy, not shoddy goods and services and worthless lies. Perhaps Professor Anderson or another of our readers can check to see if the Rather affair is another confirming instance of the market's impatience with those who play fast and loose with the truth.

Next, Dr. Heige Peukert stirs things up among the economic sociologists who have been pointing to Max Weber as a thinker with much to offer economists if only they would look at Weber's writings. Peukert's search of Weber's texts did not prove fruitful at all. All he could find in Weber's writings was a "very elementary" mainstream view" of economic theory. Weber's genius may perhaps be found in his methodological insights, but aside from this, there is not really much by the way of economics in Weber's writings. According to Peukert, whatever the status of Weber for sociologists, for economists his work had best be passed over as it has been for several decades.

No doubt Peukert's impatience with Max Weber has something to do with his own vision of what social science is and what methods may be best for its study. But what is the real subject matter of economics? Can economics be insulated entirely from the other social sciences?

G. R. Steele, our next contributor, reviews the old debate about whether economists can perfect their models without benefiting from the ideas of modern psychology. Steele insists that economics deals with complex phenomena and, at the same time, purposeful action in markets. Although past generations of economists have tried to avoid any involvement with the findings of modern biology, anthropology, and psychology, Steele recommends that economists need to take better notice of this body of material.

Business Services Industry

Editor's introduction

American Journal of Economics and Sociology, The, Nov, 2004

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