The difference is as wide as the Atlantic Ocean?

Though PolitiFact has determined that Social Security financing is definitely not a "Ponzi scheme," apparently the pay-as-you go retirement programs in southern Europe are Ponzi schemes:

(E)xperts warn of a looming demographic disaster in Southern Europe, which has among the lowest birth rates in the Western world. With pensioners living longer and young people entering the work force later — and paying less in taxes because their salaries are so low — it is only a matter of time before state coffers run dry.

“What we have is a Ponzi scheme,” said Laurence J. Kotlikoff, an economist at Boston University and an expert in fiscal policy.
(New York Times)

I don't get it.  Gov. Rick Perry says that Social Security's pay-as-you-go system is a Ponzi scheme and receives a "False" rating from PolitiFact.  Then "expert in fiscal policy" Laurence J. Kotlikoff says the same thing of a parallel system in Europe and the New York Times treats him as though he's some sort of expert?

Bring on PolitiFact Massachusetts!

The conscience of a journalist, Pt. 2 (Updated)

Having found information contradicting a series of PolitiFact stories about Ponzi schemes, I have since noted the evidence that the source newspapers have probably located the contradictory information via the Internet.

The other day I decided to ensure PolitiFact's familiarity with the conflicting evidence.  I sent an e-mail message to the PolitiFact Texas version of the story, W. Gardner Selby:

Dear Mr. Selby,

Two things.

First, Social Security is a Ponzi scheme (or game) as the term is used by economists.  That fact should not be overlooked in a fact check of this type at the very least for purposes of informing readers, though it also probably should affect the "Truth-O-Meter" rating.

Second, it's "Mitchell" Zuckoff, not "Michell."

A Ponzi scheme is a strategy of rolling over a debt forever and thereby never paying it back.
http://www.recercat.net/bitstream/2072/449/1/303.pdf


To Kindelberger and other writers on financial scams, the essential feature of Ponzi's activities was 'misrepresentation or the violation of an implicit or explicit trust' (1978: 79-80).  In economic theory, however, the label 'Ponzi' survives largely stripped of its connotation of fraud.
http://www1.gsb.columbia.edu/mygsb/faculty/research/pubfiles/3236/oznpd92.pdf

It simply isn't proper to ignore a large body of work in the professional literature recognizing Social Security-style financing as a Ponzi game without taking appropriate note of that fact.

One would think me an errant second-grader based on Mr. Selby's reply:

If it was a game, no one would play, no? It's not a game. It's a government program. If it was a Ponzi scheme, someone might be in jail by now. Ponzi schemes are illegal.

wgs

Dang it, why didn't I think of that?  If it's a game then no one would play!

Those familiar with game theory, realize that everything up to and including the government is a game in that sense--not the sense of deciding whether to play chess or checkers.  Selby's reply marks him as either ignorant of how "game" rightly applies even to a non-voluntary economic scheme or as a smartass with special emphasis on the second syllable.

I try to remain always inclined to offer charitable interpretation, but how can I assume Selby's ignorance after I provided information that ought to have dispelled ignorance?  Could it have been more obvious that Ponzi schemes as described in the material I provided him are not necessarily illegal?  His message made no sense.

I dashed off a reply:

I'm startled at your complete success in ignoring the unequivocal evidence I provided that you are wrong.  That evidence contradicts your reply.

I flubbed up and referred to Selby as "Mr. Gardner" in the salutation.  I hope that doesn't impact the chances of obtaining another response.

***

Of note, the online version of Selby's story continues to refer in two instances (the only two) to the mythical "Michell" Zuckoff.

It's as though they don't care.


Update:

In the Better Late Than Never department, PolitiFact finally got around to fixing a double misspelling of Mitchell Zuckoff's name (formerly "Michell").  Predictably, PolitiFact supplied no time stamp on the update.

Admitted errors are known errors and may affect the brand.

It will probably take considerably longer for PolitiFact to fix its thrice-repeated mistake on the subject of Ponzi schemes.  The linked story continues to totally ignore abundant evidence that "Ponzi scheme" is a perfectly legitimate way to refer to certain legal and potentially sustainable financing models that attempt to perpetually avoid paying off a debt.

PolitiFact blew it again

The folks at PolitiFact can't even seem to check their mailbag without a breach of the principles of objective journalism.

PolitiFact's latest mailbag update features the following title:

"PolitiFact blew it again!"

PolitiFact's sift through its mailbag is true to type.  Publish a few praises, publish a few brickbats.

I recognized one of my posts to PolitiFact's FaceBook page among the brickbats:

"PolitiFact blew it again with the Social Security/Ponzi comparison. Many (most?) of Social Security's participants do not know how the program operates, and economists do not consider fraud a necessary component of Ponzi-style financing."

Hmmm.  I wrote "PolitiFact blew it again."  Did somebody else make the same criticism, that it appeared as the title with an exclamation point grafted on at the end?

As it happens, nobody expressed the idea that PolitiFact "blew it" with a similar phrase.  Therefore, PolitiFact's title breaks with the normal standards of print journalism by adding the exclamation point.  If a journalist hears a person say "PolitiFact blew it again" in a loud voice, it is contrary to the standards of objective writing to add an exclamation point.  Instead, the journalist has the option of factually describing how the speaker raised their voice.

The transgression is no less notable in quoting the written word.

Why would a journalist add an exclamation point contrary to the standards of objective writing?

Maybe it's not objective writing.

Ignorance is one excuse.  Maybe the writer and editor simply do not know that objective writing does not permit that type of gamesmanship.  Regardless of whether ignorance was involved, the result fails to qualify as objective.

Perhaps writer and editor are acutely aware that their work is not objective journalism?

If that were the case it would still not excuse the breach of style.  Even opinion journalists are expected to reproduce quotations without altering them other than to match AP style.

The unavoidable conclusion? The mailbag piece was not objective journalism.

Now the question:  Given the downside of altering the quotation, why was it done?

Most likely the exclamation point was added as a signal to the reader that a person who says that PolitiFact "blew it" is emotional about it--the sort of person who we might expect would yell "PolitiFact blew it again!" if provided the opportunity to express the idea audibly.  It can't hurt to make the criticisms look like they come from unhinged loons.

My statement that PolitiFact blew its story about Ponzi schemes was a matter-of-fact statement accompanied by verifiable supporting statements.  And I'd have no need to yell in making the point, assuming anything resembling an attentive audience.

There's at least one charitable interpretation that replaces sinister non-objective intent with minor incompetence.  Perhaps an early draft of the story contained the exact quotation used in the title but the second quotation was cut during the editing process and the team simply didn't get around to altering the title to match the quotation they used.

For what it's worth, here's the quotation complete with context:

If a representative of PolitiFact had visited the provided link they might have had the opportunity to read something like this:

The strategies we investigate are perfect foresight versions of the "Ponzi schemes" discussed by Minsky (1982) and Kindleberger (1978), where individuals or companies pay out funds to some parties by borrowing funds from others.  Since the perfect foresight assumption rules out schemes based on imperfect information (e.g., swindles), or irrationality of lenders (e.g., fallacies of composition), we are asking under what circumstances these Ponzi games can continue indefinitely.  When, in other words, is it feasible for a government to incur debt and never pay back any principal or interest?  We call such a policy, where all principal repayments and interest are forever "rolled over," i.e., financed by issuing new debt, a "rational Ponzi game."

The quotation, from the International Economic Review journal, unequivocally illustrates the use of the term "Ponzi" to describe systems like Social Security without any necessary reference to fraud or inevitable collapse.

PolitiFact publishes the criticism, at least in part, but never addresses it.