50 shades of public interest This is one for the list of things you intuitively know, but have never bothered to fully formulate: the "issue-attention cycle" as laid out by Anthony Downs in a 1972 issue of The Public Interest. It describes how a society travels from blissful ignorance to intense interest about a topic, only to smack into cruel reality and then transition to boredom or indifference. In a previous post, FT Alphaville discussed the climb down changes to the Liquidity Coverage Ratio for banks, while noting our general thoughts about how regulation sometimes seems to work: Another, very similar chart, that's based on Downs (1972) from a book called "Social Movements" by Suzanne Staggenborg: A huge H/T to Professor Philip Cowley of the University of Nottingham for seeing our chart and pointing out the Downs paper to us. Although ours related to a process and Downs" relates to a single issue, the similarity is striking. It gets even creepier when you go back and read the original paper. Increased concern about the environment in the US is the main example explored, but the general outline of the issue-attention cycle reminds us of many things in the sphere of finance and economics. Let's get started: The pre-problem stage. This prevails when some highly undesirable social condition exists but has not yet captured much public attention, even though some experts or interest groups may already be alarmed by it. Usually objective conditions regarding the problem are far worse during the pre-problem stage than they are by the time the public becomes interested in it. For example, this was true of racism, poverty, and malnutrition in the United States. A few more recent issues come to mind... subprime mortgage lending, the amount of leverage in banks, bespoke CDS written by AIG, rating agencies as enablers, excessive borrowing by Greece at Germany's rates, housing bubbles all over the place, off-balance sheet vehicles holding long-term assets while funding themselves with commerical paper, etc. Alarmed discovery and euphoric enthusiasm. As a result of some dramatic series of events (like the ghetto riots in 1965 and 1967), or for other reasons, the public suddenly becomes both aware of and alarmed about the evils of a particular problem. Hey, did Lehman just go under? This alarmed discovery is invariably accompanied by euphoric enthusiasm about society's ability to "solve this problem" or "do something effective" within a relatively short window of time. And so it was decreed from on high that broker-dealers shall becometh bank holding companies and have access to the discount window forevermore. The combination of alarm and confidence results in part from the strong public pressure in America for political leaders to claim that every problem can be "solved." Umm, really? In older and perhaps wiser cultures, there is an underlying sense of irony or even pessimism which springs from a widespread and often confirmed belief that many problems cannot be "solved" at all in any complete sense. That's better. Only recently has this more pessimistic view begun to develop in our culture. Growing up is hard to do. Realizing the cost of significant progress. The third stage consists of a gradually spreading realization that the cost of "solving" the problem is very high indeed. Really doing so would not only take a great deal of money but would also require major sacrifices by large groups of the population. Austerity bites. Our most pressing social problems, however, usually involve either deliberate or unconscious exploitation of one group in society by another, or the prevention of one group from enjoying something that others want to keep for themselves. #Occupy Gradual decline of intense public interest. The previous stage becomes almost imperceptibly transformed into the fourth stage: a gradual decline in the intensity of public interest in the problem. As more and more people realize how difficult, and how costly to themselves, a solution to the problem would be, three reactions set in. Reactions: discouragement, feeling threatened, getting bored, or a combination thereof. Amen. Consequently, public desire to keep attention focused on the issue wanes. And by this time, some other issue is usually entering Stage Two; so it exerts a more novel and thus more powerful claim on the public attention. Hey, did someone say something about the fiscal cliff a Trillion Dollar Coin? The post-problem stage. In the final stage, an issue that has been replaced at the center of public concern moves into a prolonged limbo - a twilight realm of lesser attention or spasmodic recurrences of interest. However, the issue now has a different relation to the public attention than that which prevailed in the "pre-problem" stage. For one thing, during the time that interest was sharply focused on this problem, new institutions, programs, and policies may have been created to help solve it. The ESM, EFSM, EFSF, APS, FPC, PRA, FCA, TARP, PPIP, TALF, MMIFF, CPFF, AMLF, all three Maiden Lanes, Dodd-Frank, Volcker, Basel, the EBA, OMT, QE, QE2, yo momma, Operation Twist, QE3, Asset Purchase Facility, Timmy!, FLS, the Office of Financial Research, CFPB, and the FSB - we salute you. Any major problem that once was elevated to national prominence may sporadically recapture public interest; or important aspects of it may become attached to some other problem that subsequently dominates center stage. Therefore, problems that have gone through the cycle almost always receive a higher average level of attention, public effort, and general concern than those still in the pre-discovery stage. A difference between FT Alphaville's graph and that of Down's is thus made apparent: when it's a single issue rather than a process, the issue probably doesn't travel all the way back down to its previous state. But then again, processes can evolve too and perhaps we didn't give that enough credit. Perhaps the line we drew at the end of our graph shouldn't have gone all the way back to the level on the y-axis where it started. We highly recommend you go read the whole paper by Downs, but we'll leave you with this: A problem must be dramatic and exciting to maintain public interest because news is "consumed" by much of the American public (and by publics everywhere) as a form of entertainment. As such, it competes with other types of entertainment for a share of each person's time... Each issue vies not only with all other social problems and public events, but also with a multitude of "non-news" items that are often far more pleasant to contemplate. These include sporting news, weather reports, crossword puzzles, fashion accounts, comics, and daily horoscopes. In fact, the amount of television time and newspaper space devoted to sports coverage, as compared to international events, is a striking commentary on the relative value that the public places on knowing about these two subjects. For shame. Now for a quick, one-question poll. If you cannot see the box below, please click here reveal it, thank you.