I subscribe to and like a Substack called “Economic Forces.” Brian Albrecht, one of its two writers, put out a post yesterday called “Don’t Ask People How the Economy is Doing,” in which he notes the big discrepancy between surveys in which the public gives its opinion about economic growth, inflation, unemployment and other areas where economists collect lots of data and create seemingly objective numbers.
Right now public perception of the economy is very negative. Dr. Albrecht says “Yet, lots of economic indicators are quite good. GDP growth is good. Inflation is cooling. Unemployment is low. Why do people think things are bad?”
He points out ‘…there’s an important distinction we need to make between "how are you feeling economically (financially)" and "how is the economy doing." …commenting on overall economic conditions requires data and analysis that everyday folks simply don't have…Asking them about the economy gives us approximately zero information…’
I would completely agree with him, if I thought that the numbers that economists use to measure the economy, are what tell us the truth about the economy. To economists, they do, but to everyone else, they do not.
Other than economists and securities traders, nobody really cares what the GDP growth rate or any other data say. What they do very much care about is their own living standards, which is their ability to buy what they want, whatever that may be. Since nobody can know what goods and services would make other people happy if they could afford to buy them, a living standard index is inherently incalculable.
That is inconvenient for economists, but it doesn’t change the fact that the purpose of the economy ought to be to maximize the living standards of as much of the population as possible, not to maximize statistics that can be calculated easily but are irrelevant to most people’s lives.
We can’t read other people’s minds, but people know very well how they themselves are doing. The fact that prices for many things are going up less quickly than they have in the last couple years is no consolation to the millions who need those prices to go down quite a bit before they can buy them again. People know perfectly well what they used to be able to afford but no longer can, and are not ignorant or irrational to be disgruntled.
In other words, the problem is not that the public doesn’t understand the economy, but that economists don’t want to know what people actually want because it can’t be mathematized.
As Sir John Banham said, “We are in danger of valuing most highly those things we can measure most accurately, which means that we are often precisely wrong rather than approximately right.”
Granted, the general public shouldn’t be expected to know the current state of macroeconomic statistics. Neither should economists take as gospel statistics that most of the country believes are not applicable to themselves and those they know.