Examining the Effects of Economic Knowledge

Abstract

Because of its position as a valence issue, perceptions of the economy are strongly tied to opinions on various issues, presidential and congressional assessments, and even vote choice. Among the chief assumptions made by many researchers in the area is that the way our perceptions are applied to many of these judgments is largely due to our possession or lack of knowledge. Despite the prevalence of these claims, very little research has actually attempted to test whether or not such a relationship exists, and if it does, what it means for how we form political judgments while using our perceptions of economic affairs as a barometer. Existing literature on political knowledge has shown that the public is generally uninformed on many issues and that this can lead to individuals holding opinions on issues that are different than they would hold were they fully informed. If we assume that the same is true for economic-specific issues, then we can also assume that people are holding opinions on economic affairs that are different than they would were they fully informed, and this may even be leading to other political judgments being distorted if the economy is used a decision-making tool. Using a nationally representative survey, I seek to uncover what people know about the economy and what factors influence the amount of knowledge held by which individuals. Using this, I then test how economic knowledge impacts our ability to form opinions on a variety of economic issues, showing that opinions would be different in a hypothetically fully informed world. I also show that, despite the claims of much of the previous research into presidential approval and economic perceptions, knowledge appears to have little to no impact on how people actually apply their perceptions to the feelings of the president. Additionally, using a unique survey experiment, I test how knowledge affects how people receive and respond to different types of information. The findings show that technical information about economic issues has a stronger effect than news reports in changing opinions, especially among low knowledge individuals. The implications of such findings in a world where news consumption has largely moved to social media platforms are discussed.