Newspapers and the bubble

For those of you who can access it: this is a nuanced account of the role of newspapers during the Irish property bubble by a former student of mine and Roy Foster’s.

5 replies on “Newspapers and the bubble”

I’d have to pay €36 to read this article as it is behind an academic paywall. I read the abstract but this subject has been flogged to death at this stage. Could I humbly suggest that researchers might now turn their attention to the contribution of newspapers and academic economists in failing to predict the recovery with all the problems that have ensued from this? Why did official bodies such as the CSO consistently overestimate emigration and underestimate immigration? How could the Irish Times run a series called ‘Generation Emigration’ when the population was increasing? Why was there wild exaggeration of the number of ghost estates and empty houses in the country? Why does even the Taoiseach refer recently in the European Parliament to Ireland’s “4 million population” when it was just under 4.8 million in the last census (which may be an underestimate according to some official bodies) and will certainly not be under 5 million in 2020.

Related to this is my view that the media – irrespective of its left wing or right wing biases – is essentially middle class in its concerns. Journalists, newspaper editors and executives are middle class and, for example, everyone middle class in Ireland knows some graduate who has emigrated. This then becomes a narrative of ‘Generation Emigration’. We see this class bias in the widespread and continuing coverage given to the Berkeley balcony collapse issue compared to the almost complete silence on the Carrickmines traveller community deaths.

Thanks Kevin. All I can access is the abstract.

“The article argues that the key fault of the newspapers therefore lay in the failure of management to prevent the tone and coverage of the market from being skewed by external interests.”

What was the Null Hypothesis on this one? That the MSM did not (with their various and multitudinous coverages) pump-up the valuations of residential properties? The alt-hypothesis being …….

I entertain the alternative belief that MSM coverage did indeed contribute to a residential property value bubble, and are continuing to do so. Coverage is very seductive. Mind you, it has been long known that the purchasers themselves also contribute in a significant manner to commodity valuation bubbles. Problem is, their chasing of the values upward just seems the ‘right’ thing to do in the circumstance. Exuberance, panic or stupidity? Bad outcomes are 100% assured.

Current residential property values (in Dublin area) are probably 80% – 100% higher than they should be (in the sense of purchaser affordability costs*) as opposed to their actual construction costs. Its the purchaser affordability of residential properties that is the foundation issue. It was, for at least 5 decades, widely known (and practiced) how to estimate purchaser affordability so as to reduce the actuarial risk of default to less than 1% – its just that now in contemporary financial terms, that settled historical wisdom has become a very inconvenient impediment. So, just pump on regardless! – and disregard the negative externalities. The taxpayer will fund the clean-up.

One of our Spaghetti Pillar banks has just admitted to legally repossessing 15 residential properties – when it should not have done so. Pardon? What are we missing here?

* affordability out of after-tax income (mortgage and interest; fire insurance; RPT; maintenance).

Lack of credibility and impartiality is why newspapers are increasingly seen as irrelevant in today’s world.
In the Irish Times on Tuesday Kathy Sheridan’s opined that Piers Morgan’s interview with Donald Trump was “ toe-sucking PR. “ She may well be correct even though I would have used a different part of the President’s anatomy.
But her assertion that a simpering,star-struck Morgan opened the sit-down interview by saying “ I’ve missed you Mr President “ was a lie.
It was the greeting the President himself gave to the former winner of his US TV show The Celebrity Apprentice as he entered the room and before the interview began.
More importantly,The Guardian newspaper’s review of the programme the day before Sheridan’s piece also made the same basic error which the author then admitted was a mistake.
So did Kathy Sheridan pan the programme without watching it and instead plagiarised another newspaper’s review of it ?
I’m all for Trump-bashing but when newspapers just make up stuff it’s hard to take them seriously.

Can only access the abstract, which doesn’t include the nuanced analysis. Have to say the Abstract tells me stuff I already knew, but perhaps having “proof” will be useful. Perhaps the techniques could be applied to the current “boom”.

Headlines like “Priced out of Stoneybatter? Try Leitrim” have appeared again. As have discussions on what to do about so-called “key workers”…..a topic that I mentioned in one of the main newspapers in 2006.

John Corcoran says:
July 13, 2015 at 5:43 pm
Newspaper Bubbles:

I would say that a speculative bubble is a peculiar kind of fad or social epidemic that is regularly seen in speculative markets; not a wild orgy of delusions but a natural consequence of the principles of social psychology coupled with imperfect news media and information channels.

At the center of this definition are the epidemic spread, the emotions of investors, and the nature of the news and information media. Bubbles are not, to my mind, about the craziness of investors. They are rather about how investors are buffeted en masse from one superficially plausible theory about conventional valuation to another.


One thinks of how a good debater can take either side of many disputes and, if the debater on the other side has weak skills, can substantially convince the audience of either side. College debate teams demonstrate this phenomenon regularly, and they do it by suppressing certain facts and amplifying and embellishing others. In the case of bubbles, the sides are changed from time to time by the feedback of price changes, with the proliferation, caused by price increases, of reminders of basic facts that a debater might use to defend the bubble.
The newspapers are much better at presenting cases than are typical college debaters.

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