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.