WHAT MAKES A GOOD ECONOMY? EVIDENCE FROM PUBLIC OPINION SURVEYS

Analysis of 35 years of previously unstudied survey data shows how the American public evaluates the health of the macroeconomy. Survey responses are multidimensional, distinct from indexes of consumer sentiment, and based mostly on genuine perceptions of economic conditions, not media reports of economic statistics. As such, they contain unique information about current and future values of these statistics, particularly consumption growth, a longstanding focus of the literature. Both intangibles and macroeconomic fundamentals explain substantial variation in the survey data; the public equates 2 to 5 percentage points of inflation with 1 percentage point of unemployment. (JEL E32, E27, E01)