A story in three acts, dear reader, that you may have seen in various forms before:
Act one: An activist or TV talking head declares that the economy is failing, particular for those who are struggling most, and economic conditions are terrible.
Act two: An economist interjects that actually, the economy is doing quite well, and as evidence cites all manner of statistics and perhaps tosses in some graphs for good measure.
Act three: The aforementioned activist rolls their eyes and says this is why everyone hates these egghead economists. Sure, you can put your blinders on and just look at what your charts say, but if you ever descended down from your ivory tower and just talked to ordinary people, you’d learn how much everyone is struggling to make ends meet. Keep your charts and graphs, I’m putting my trust in what people on the ground are telling me!
To be fair to the hypothetical activist, there are fair criticisms that can be made about trying to infer too much about people’s genuine well-being from aggregate economic statistics. It could be the case that numbers that seem too be very good drastically overstate how much people’s lives have improved. Of course, it can also be the case that those numbers drastically understate the improvement in people’s lives. To me, the latter scenario seems to apply far more often, but others may disagree.
On the other hand, there are good reasons to be skeptical of what the “people on the ground” say about how they view the economy. To see one example of why, consider this rather striking graph:
When asked how the economy was doing when Obama was President, the opinions of Republicans was very low and Democrats was pretty favorable. Then, when a Republican became President, suddenly Republican opinion skyrocketed ad Democratic opinion steadily declined. When the COVID pandemic derailed the world both parties lowered their assessment sharply, but Republican opinion quickly rebounded while Democratic opinion stayed at rock bottom. That is, until a Democrat was elected to the Presidency, at which point Democratic opinion immediately shot up and Republican opinion plummeted. And according to this article, these positions have already been reversed, again.
The takeaway? To say we should try to gauge the strength of the economy by just going out and talking to people presupposes that the answers people give are meant to reflect some kind of objective assessment of economic conditions. But as I’ve argued before, many people talk about politics as if they were political noncognitivists. That is to say, their statements aren’t really meant to make factual assessments about the objective state of the world – their statements are simply a mean to express particular attitudes or loyalties. A given Democrat who rated the economy highly a few months ago but is now suddenly saying the economy is in the dumps isn’t really trying to say the state of the economy has been radically transformed in a handful of weeks. They were just saying “Hooray Biden!” before, and are saying “Boo Trump!” now.
