Hindsight bias in economic expectations: I knew all along what I want to hear.

Abstract

Hindsight bias in economic expectations was investigated with particular focus on the moderating effects of attitudes. Stronger hindsight bias was expected for subjectively favorable economic developments. Six months before and after the introduction of the euro as the official book currency of the European Monetary Union, participants rated the probabilities of several economic developments. Results show that hindsight bias occurs with economic expectations and that it is moderated by attitudes. Euro supporters showed stronger hindsight bias for positive economic developments than for negative ones, whereas euro opponents showed the opposite pattern. The results support the notion that hindsight bias is a reconstruction bias in which self-serving tendencies can influence the reconstruction selectively for favorable and unfavorable outcomes.