University of Illinois ag econ professor Scott Irwin, who I think has always struggled to escape the shadow of colleague Darrel Good, has emerged into the sunlight of a bizarre NYT "expose". David Kocieniewski's amateurish hack-job purporting to show proof of academics for hire, is oddly devoid of, you know, facts pertinent to his conclusion.
Over the Felix Salmon at Reuters for the brutal takedown:
Ostensibly Respectable Academic Is In Fact A Hack: it’s a hardy perennial, and an enjoyable one at that. The best example is Inside Job, where big names like Ric Mishkin and Glenn Hubbard got their well-deserved comeuppance. And it’s a genre I’ve indulged in myself: last year, for instance, I spent 4,500 words on a paper by Bob Litan, showing how he lies with numbers to arrive at his paymasters’ predetermined conclusion.But here’s the thing: for this kind of article to carry any weight, it has to demonstrate the mendacity or venality of the academics in question — and, ideally, those academics should have a high-profile reputation which deserves to be tarnished.Which is why David Kocieniewski’s article about Craig Pirrong and Scott Irwin this weekend is such a disappointment. It’s currently doing very well on the NYT’s most-emailed list, but it’s easy to guess who’s doing the emailing: people who love to hate Wall Street, and who will use just about any possible excuse for doing so. Because in this case Kocieniewski has missed the mark. Neither Pirrong or Irwin is mendacious or venal, and indeed it’s the NYT which seems to be stretching the facts well past their natural breaking point.Let’s start, for instance, with the one part of the article almost everybody will read: the big picture at the top of the article, showing the gleaming and extremely expensive University of Illinois business school. “The Chicago Mercantile Exchange has given more than $1.4 million to the University of Illinois since 2008,” says the caption, “with most of the money going to the business school.”That number — a very big sum, which is more than enough to buy research from for-sale economists — gets repeated further down the article:
Mr. Irwin, the University of Illinois and the Chicago exchange all say that his research is not related to the financial support.
This is carefully written to be as damning as possible. Yes, it makes perfect sense that the CME would fund a major business school right in its own backyard — and that it would fund activities related to its own business of commodities trading. But surely Kocieniewski is about to show us how the grants are linked in some way to Irwin’s research: no NYT reporter would write such a thing unless he had reason to believe that there was some kind of quid pro quo, or that the grants to the business school were written in gratitude to Irwin.
Except, if you keep on reading to the point at which you’re 2,500 words into the piece — and pretty much nobody reads that far — you’ll find this:One of the most widely quoted defenders of speculation in agricultural markets, Mr. Irwin of the University of Illinois, Champaign-Urbana, consults for a business that serves hedge funds, investment banks and other commodities speculators, according to information received by The Times under the Freedom of Information Act. The business school at the University of Illinois has received more than a million dollars in donations from the Chicago Mercantile Exchange and several major commodities traders, to pay for scholarships and classes and to build a laboratory that resembles a trading floor at the commodities market.While the C.M.E. has given more than $1.4 million to the University of Illinois since 2008, most has gone to the business school and none to the School of Agriculture and Consumer Economics, where Mr. Irwin teaches. And when Mr. Irwin asked the exchange’s foundation for $25,000 several years ago to sponsor a website he runs to inform farmers about agricultural conditions and regulations, his request was denied.This is real jaw-on-the-floor stuff. The NYT has published an article about how academics who write nice things about Wall Street “reap rewards”, in the words of the headline — and its main illustration is donations to a business school where the academic in question doesn’t even work! Anybody trying to hold academics to standards of intellectual honesty has to be intellectually honest themselves. And the fact is that there’s zero reason to believe that there’s any connection between the business-school donations and Irwin’s research.
Felix has little heavy lifting to do to show this article is not supportive of its innuendo or tone. In fact, it's an embarrassment to the NYT editorial staff, IMHO.
The basis for this exercise is many want to believe speculators are ruining things for investors (or farmers), but as unlikable as those guys are, there isn't much proof to support this claim. Besides, as I see it, any farmer who climbs in the ring with these guys at the urging of a market consultant shouldn't whine when he loses his shirt.
I'll stick with cash markets and forward contracts, thanks all the same. The kitchen looks too hot from where I stand.