Copyright ©2012 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

RENEE MONTAGNE, HOST:

As the candidates modulate their messages, they keep an eye on changing economic numbers. One of those numbers is the Dow Jones Industrial Average. It's our most common barometer of the economy. And the Dow just broke a four-year high, by the way.

But as Adam Davidson of NPR's Planet Money team reports, it doesn't tell you much.

ADAM DAVIDSON, BYLINE: You hear it so often, it's just the background noise of your day.

SCOTT PELLEY: The Dow gained more than 156 points to close at 12,862.

BRIAN WILLIAMS: So, the Dow went on a run today up 339.

MARIA BARTIROMO, NEWS ANCHOR: The Dow Jones Industrial Average down fractionally, about 17 points, finishing the day at 12,845.

DAVIDSON: That was Scott Pelley of CBS News, Brian Williams of NBC News, Maria Bartiromo of CNBC. They've all read the Dow's latest moves. I should say we, I've done it myself.

We use the Dow to constantly check the temperature of the economy. A lot of people - maybe most people - don't even know what the Dow is. Well, it's just the stock price of 30 big American companies summed up and roughly averaged. That's it. And what does the daily movement of this number have to do with the lives of most Americans? Not much.

JOHN PRESTBO: In 2011, well we had days where it would go up several hundred points, and then the next day it would go down several hundred points. You can't really argue that the mood and outlook of the entire country was changing that rapidly.

DAVIDSON: This is John Prestbo. He's one of the leading critics of the obsessive way the Dow is covered in the media, which is surprising because he's the editor and executive director of Dow Jones Indexes. We asked him how often he checks the Dow.

PRESTBO: Not every day. And I'm one of the people responsible for it.

DAVIDSON: He says the Dow Jones Average is great for a very specific purpose - to get a long-term sense of how the leading U.S. companies are doing. But its moment-by-moment or even day-by-day movements are pretty much meaningless. In fact, the guy truly responsible for it, Charles Dow, who created it in 1896, Prestbo says Charles Dow didn't bother to comment on his own metric more than once a month. So what happened? How did we develop this 24-hour fixation on the Dow? Well, we panicked.

PRESTBO: The panic of 1907

DAVIDSON: Prestbo points out that 1907 was a lot like now - a severe recession, banks were collapsing. Everybody was trying to make sense of a disastrous economy. They wanted some handy metric that could tell you clearly, in an instant, what each day's news meant.

PRESTBO: So they looked around and they found the Dow Jones Industrial Average. It took on a life of its own, shall we say.

DAVIDSON: Newspapers started referring to it. Then, during the Great Depression, it became a daily requirement. Now, of course, we can follow it every second of the day, which might satisfy that same need. We are still confused and we want to know what the latest scary or hopeful economic news means. So, we look around, and there's still this one thing available. It always has an answer for us, even if the answer doesn't actually mean anything.

Adam Davidson, NPR News.

(SOUNDBITE OF MUSIC)

MONTAGNE: And you're listening to MORNING EDITION from NPR News.

Copyright © 2012 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.