It is the next guy that is in trouble

In his online article The 4 Boneheaded Biases of Stupid Voters, Brian Caplan, a Professor of Economics at George Mason University, describes the pessimistic bias of the public.

As a general rule, the public believes economic conditions are not as good as they really are. It sees a world going from bad to worse; the economy faces a long list of grim challenges, leaving little room for hope. We can call this the pessimistic bias, a tendency to overestimate the severity of economic problems and underestimate the economy’s performance in the recent past, the present, and the future.

At a time when declining consumer sentiment is being reported in the media as if it really mattered, it is good to keep the pessimistic bias in mind. An interesting fact about the pessimistic bias that Brian Caplan does not mention is that people are typically much less pessimistic about their own finances and future, it is generally the next guy and society in general that they believe is in trouble. This is probably due to the fact that they actually know and understand their own financial situation while the only information they have on the rest of society is from the media.

Keep the above in mind and read the below quote from WSJ Real Time Economics.

The nation’s chief executive officers expect a slowdown in U.S. economic growth over the next year, but remain optimistic about their companies’ prospects.

The latest survey by the Business Roundtable, made up of chief executives of major companies, showed that 70% expect higher sales over the next six months. That was slightly higher than when the survey was last conducted in September. In addition, their employment and spending plans edged up. That lifted the overall economic outlook to 79.5 from the 77.4 recorded in September. The survey was conducted Nov. 5-20. A level above 50 indicates economic expansion.

The survey that WSJ Real Time is referring to can be found here. The 160 chief executives who are members of Business Roundtable run companies with a total of 10 million employees and $4.5 trillion in annual revenues, that is roughly 1/3 of the United States GDP.