A story in three acts, dear reader, which you may have seen before in different forms:
Act 1: An activist or TV talking head declares that the economy is failing, especially for those who are struggling the most, and that economic conditions are terrible.
Act two: An economist notes that the economy is actually doing quite well, and cites all kinds of statistics as evidence and maybe throws in some graphs for good measure.
Act 3: The aforementioned activist rolls his eyes and says this is why everyone hates these jerk economists. Sure, you can put on your blinders and look at what your cards say, but if you ever came down from your ivory tower and talked to regular people, you would learn how much everyone struggles to make ends meet. Save your charts and graphs, I trust what people on the ground tell me!
To be fair to the hypothetical activist, there are valid criticisms of the attempts to infer too much about people’s real well-being from aggregate economic statistics. It could be that numbers that seem too good drastically exaggerate how much people’s lives have improved. It is of course also possible that these figures increase drastically underestimate the improvement of people’s lives. To me, the latter scenario seems to apply much more often, but others may disagree.
On the other hand, there are good reasons to be skeptical about what the ‘people on the ground’ say about how they view the economy. To see an example of why, check out this rather striking graph:
When asked how the economy was doing when Obama was president, Republicans’ opinions were very low and Democrats’ opinions were quite positive. When a Republican subsequently became president, Republican opinion suddenly skyrocketed and Democratic opinion steadily declined. As the COVID pandemic derailed the world, both parties sharply lowered their ratings, but Republican opinion quickly recovered while Democratic opinion remained at a low point. That is, until a Democrat was elected president, at which point Democratic opinion immediately skyrocketed and Republican opinion plummeted. And according to this article, these positions have already been reversed.
The takeaway? Saying that we should try to gauge the strength of the economy by simply going out and talking to people assumes that the answers people give are meant to reflect some kind of objective assessment of economic conditions. But as I have argued before, many people talk about politics as if they were political non-cognitivists. That is, their statements are not really intended to provide factual judgments about the objective state of the world; their statements are simply a means of expressing certain attitudes or loyalties. A certain Democrat who rated the economy highly a few months ago but now suddenly says the economy is in the dumps isn’t really trying to say that the state of the economy has changed radically in a handful of weeks. They just said “Hurray Biden!” rather, and say “Boo Trump!” now.