Optimism Alone Can’t Fix the Economy

Many economists and businesses look to survey data to judge the state of the economy. These data can provide interesting insight and will certainly sway markets, but whether they can actually capture real economic phenomena is up for debate.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

In order to gain insight into the state of the economy, some analysts utilize consumer and business surveys. Randomly-selected consumers and businesspersons are asked to provide their views about the state of the economy. If a survey shows that the majority of those surveyed express optimism, it is regarded as good news for the economy. Conversely, if the majority of those surveyed are pessimistic, it is taken as a bad omen.

Since the information regarding economic conditions is dispersed, the chances of any particular individual having an accurate picture of the state of the economy are low. Hence, it would appear that selecting a large number of individuals randomly has a higher likelihood of securing an accurate picture of economic conditions than one individual. It is quite possible that a group of individuals will have more information than any given individual. However, more information does not necessarily mean a better understanding of economic conditions.