The delusive economy: how information and affect colour perceptions of national economic performance

Abstract

Economic knowledge plays a central role in many theories of political behavior. But empirical studies have found many citizens to be poorly informed about the official state of the economy. Analyzing two waves of the Eurobarometer database, we re-examine the distribution of public knowledge of three macroeconomic indicators in two dozen European countries. Respondents with high income and education give more accurate estimates than others, in line with previous studies. As we show, however, such differences in knowledge do not only reflect varying levels of information. People’s estimates are also shaped by affective dynamics, in particular a more pessimistic outlook that leads to overestimation of official unemployment and inflation (but not growth) figures. We find that emotive factors can bias inflation and unemployment estimates of respondents who find themselves in a privileged economic situation in a direction that incidentally also makes them more accurate, even though respondents are not necessarily being better informed. In real-world politics, official economic statistics thus do not function as a shared information backdrop that could buttress the quality of public deliberation. Instead, knowledge of them is itself driven by personal socio-economic circumstances.

The economic effects of perceptions of the Russia-Ukraine war in Ecuador

“…On the other hand, differences found in economic groups could be explained by the magnitude in which inflation and poverty influence the below-average group’s decision-making and the constraints it would create for earning a living. Likewise, this type of reasoning is consistent with the tendency to reflect one’s current situation in economic opinions and attitudes ( Linsi et al , 2022 ). Thus, it should be credible that members of the below-average group would worry more about inflation and poverty since they already have experienced difficulties coping with the current economy.…”

“…Also, responses serve as an unorthodox measure of students’ economic knowledge if we consider how objective knowledge makes part of their judgment. Literature has reported that decision is not knowledge-based solely ( Linsi et al , 2022 ), we contribute to that statement since it is clear that a vast majority of economic topics were ignored by respondents even though the war has a major impact on them, which is to say that there are other aspects like socio-demographic characteristics or other unmeasured variables that condition their opinion. In addition, we offer some insights about how well respondents detect the economic consequences of war for their own country when the corresponding conflict affects markets and prices globally due to other circumstances, even though the respondents’ country does not participate directly in the conflict.…”

“…However, objective knowledge is not all that plays a role in people’s assessment of the economy. Political and personal gloom taints economic knowledge, including reporting estimates of economic indicators that are very far from being accurate, and involving personal economic distress (one’s personal situation), both of which tend to be reflected in an individual’s economic expectations ( Linsi et al , 2022 ). Thus, we believe these personal circumstances are associated with the economic class students find themselves in.…”