On the Predictive Value of Consumer Intentions and Attitudes: A Comment

Abstract

just as proponents of a new theoretical approach speak in enthusiastic terms, so those who reject their approach often appear ready to condemn it on inadequate evidence. The purpose of this note is to discuss Tobin's statistical findings rather than to analyze differences in the theoretical approach. The reinterviews incorporated in the I952-53 Surveys of Consumer Finances, which Tobin uses, are adequate to warrant his conclusion that in that year expressed buying intentions did have predictive value (even though the buying intentions questions in those surveys are far too brief). But those data are insufficient and irrelevant for any test of the predictive value of attitudinal questions other than buying intentions. Therefore Tobin's assertion denying such predictive value (page iO) has no bearing on the Survey Research Center's position regarding the relation of consumer expectations to consumer demand for durable goods. Tobin tries to achieve the impossible by constructing an attitude index out of four questions, (i) the evaluation of past changes in personal financial conditions, (2) information about past income changes, (3) the evaluation of current marketing conditions, and (4) income expectations for the next year. Two of the questions used by Tobin (i and 3) are also contained in the six-question index constructed from the Center's Periodic Surveys. By adding question 2, Tobin loads his index with material about past changes in personal finances. Regarding Tobin's fourth question, Katona and Mueller showed six years ago (in Consumer Attitudes and Demand, pages 69-70), that it is realityoriented and insensitive rather than reflecting people's hopes and fears; the Center has therefore substituted other questions to measure personal financial expectations in its Periodic Surveys. There is not a single question in Tobin's index which reflects the more volatile expectations (the Center's six-question index contains four such questions). It is not at all surprising that Tobin's index duplicates to a large extent the predictive information contained in financial data and has no independent forecasting value. Our position, as it will be set forth soon again in detail, is that both buying intentions and other attitudes should be used to supplement (not to supplant) financial information. The tests of the predictive value of certain consumer expectations are being continued. It may be mentioned that in 1957 consumer expectations other than buying intentions became pessimistic earlier than buying intentions and in I958 they turned optimistic well before buying intentions. In spite of this evidence, Tobin is right in arguing that more observations are needed before conclusions can be based on rigorous statistical tests. There are many other points of disagreement, for instance, regarding the conclusions drawn by Tobin from Eva Mueller's article in the I957 American Economic Review, or regarding Tobin's notion that adding to liquid assets is a sign of pessimism. I wish to contradict particularly Tobin's statement that our treatment of price expectations is arbitrary (see his footnote 7). This treatment has been derived from the theory of psychological economics; additional empirical data supporting the treatment are being published in the May I959 issue of the Quarterly Journal of Economics. * James Tobin, On the Predictive Value of Consumer Intentions and Attitudes, this REVIEW, xui (February I959),