Friday, September 9, 2011

Inside Information

Paul Krugman has a useful post up on the topic of inside information.
In the case of the new jobs proposal, however, the WH did make a point of giving me the plan in advance, under very strict embargo...And it felt as if I was really in the know — which, I suspect, is a big journalistic trap.
For the fact is that this kind of inside information — knowing the details of some proposal a few hours before everyone else — is deeply trivial...Yet the desire to be on the inside and have some kind of ultimately trivial scoop can, I realize, be a big motivator. Even I had to step back and say, hey, this doesn’t matter; what really matters is the kind of analysis that anyone with access to the web can do.
I've written about this before, but Bill James in one of the Abstracts had a terrific riff on this, which I really learned a lot from. It was when he had started to do work (consulting on arbitration cases, if I recall correctly) that gave him inside information for the first time. What he found was that in baseball what distinguished inside information from public information was only time. That is, basically everything he learned became public sooner or later. That matches my experience in politics...I've had times in my life where I was very plugged in and times when I wasn't, and I'm not sure that there's much that I ever learned from the plugged in times that stayed on the inside (not to mention that plenty of the "inside knowledge" turned out to be dead wrong).

The basic idea is that there doesn't appear to be two different types of information, inside and outside; there's just a conveyor belt in which things move from inside to outside, and different people hear about things at different points along the conveyor belt. Of course, it is possible that outsider-type analysis (what Krugman does, and what I do here) is sometimes wrong because there's inside information that would have been relevant. But most of the time, that's not the case. As far as politics (as opposed to economics or baseball) is concerned, sometimes the inside stuff does matter, so it's worth noting where the information gaps are (such as: what's Senator So-and-so's real bottom line on the tax bill), but it turns out that one can go quite a long way with only the outside side of things.

And of course the big difference between now and when James was writing in the 1980s is that the conveyor belt has switched to a much faster speed.


  1. Didn't James also make the point that those with access to inside information tended to overvalue the importance of that information -- kind of the way Joe Morgan (in his TV-analyst days) would constantly resort to saying that you couldn't really understand such-and-such unless you had actually played major league baseball? That's relevant to politics, too -- sometimes access to inside info can interfere with dispassionate analysis. Jonathan Chait, for example, predicted that the Dems would pass health reform even after Scott Brown's election precisely because he ignored what people in the know were saying and focused on the structural forces that made passing ACA a better play for Democrats than abandoning it.

  2. Paul Warnke, who had been Director of the Arms Control and Disarmament Agency, made the same point in a talk in 1981 - long before the internet brought us a light-speed conveyor belt.
    But more important than the fact that the insider's inside knowledge is only a nano-second ahead of the public's is the social psychology literature about how biased people are in favor of those who do them small favors.

  3. Good stuff. Secrets do have a tendency to get out. I think it’s a good example of being leery of the conspiracy themes that pop up in American political culture from the now seeming bizarre (Clinton is a drug dealing murder taking over America or the Army and Pentagon are filled with agents of the Kremlin) but keep popping up over and over again in our contemporary times. An ongoing theme of the events that led up to Watergate and followed was rampart incompetence and comedy of errors style screw ups. The idea of massive secrets kept in the shadows forever are far more unlikely than most people think.

  4. Interestingly, the thing that Krugman knew before everyone else was that a perceived $300 B plan was in reality a $450 B plan; a delta that would draw predictable, immediate outrage from the Tea Party right. Considering his politics, Krugman may have thought $450 B should have been $4500 B, but in any event he's likely the most intelligent and visible commenter who would make a coherent, persuasive argument in support of the larger number.

    Which may explain why Krugman is given the opportunity to interact with the conveyer belt earlier than all others. The WH is certain that Krugman is smart enough to realize that $450 B, (rather than $300 B), will draw serious pushback; maybe they want to give Krugman a few extra hours to frame the counterattack against the inevitable conservative attack.

    Further, making him feel insider-y may have been expected by the White House to be flattering to Krugman, thus motivating him more strongly to go to bat for the team. Its delightfully amusing - not in a mean way, just straight funny - the extent to which that failed :).


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