Friday, September 21, 2007

I'm OK but my neighbor's in trouble

People have a bias when they respond to surverys. They always think that they will do better than their neighbor. Ask them what they think of congress and they hate it. Ask what they think of their own congresscritter and they tend to like them

We got that again today in a survey on the Arizona economy. (See box on the right) While people tend to think that this year will be worse than last year, note the difference between what they think of their own financial situation versus the economy as a whole.

How do you expect the economy to perform this year compared to last?

Better
2006: 22 percent.
2007: 20 percent.

Same
2006: 44 percent.
2007: 35 percent.

Worse
2006: 34 percent.
2007: 45 percent.

How well off do you expect your family's finances will be this year compared with last?

Better
2006: 28 percent.
2007: 26 percent.

Same
2006: 44 percent.
2007: 37 percent.

Worse
2006: 28 percent.
2007: 37 percent.

Since individuals make choices based on what they expect in their personal lives, the second question provides a better prediction of the future than the first question.

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