When Does the Public Get It Right? The Information Environment and the Accuracy of Economic Sentiment

• Author: Matthew M. Singer,Timothy Hellwig,Ryan E. Carlin,Gregory J. Love,Cecilia Martínez-Gallardo
• Date: 01 August 2021
• Published date: 01 August 2021
• DOI: 10.1177/0010414021989758
• Subject Matter: Articles

https://doi.org/10.1177/0010414021989758

Comparative Political Studies

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DOI: 10.1177/0010414021989758

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Article

When Does the Public

Get It Right? The

Information Environment

and the Accuracy of

Economic Sentiment

Ryan E. Carlin1, Timothy Hellwig2,

Gregory J. Love3, Cecilia Martínez-Gallardo4,

and Matthew M. Singer5

Abstract

Public evaluations of the economy are key for understanding how citizens

develop policy opinions and monitor government performance. But what

drives economic evaluations? In this article, we argue the context in which

information about the economy is distributed shapes economic perceptions.

In high-quality information environments—where policies are transparent,

the media is free, and political opposition is robust—mass perceptions

closely track economic conditions. In contrast, compromised information

environments provide openings for political manipulation, leading perceptions

to deviate from business cycle fluctuations. We test our argument with

unique data from eight Latin American countries. Results show restrictions

on access to information distort the public’s view of economic performance.

The ability of voters to sanction governments is stronger when democratic

institutions and the media protect citizens’ access to independent, unbiased

1Georgia State University, Atlanta, USA

2Indiana University, Bloomington, USA

3University of Mississippi, University, USA

4University of North Carolina at Chapel Hill, USA

5University of Connecticut, Storrs, USA

Corresponding Author:

Cecilia Martínez-Gallardo, University of North Carolina at Chapel Hill, 361 Hamilton Hall,

Chapel Hill, NC 27599, USA.

Email: cmg@email.unc.edu

989758

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research-article2021

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information. Our findings highlight the importance of accurate evaluations of

the economy for government accountability and democratic responsiveness.

Keywords

economic perceptions, information environment, consumer confidence,

accountability, government performance

In a representative democracy, citizens require access to information to select,

retain, and sanction representatives effectively. Just how much information

they need is unclear, however. Some scholars set a low bar, asserting that citi-

zen control over politicians requires little more than the capacity to observe

“changes in their own welfare” (Fiorina, 1981, p. 5). Less optimistic research-

ers argue that “very considerable logical and informational difficulties faced

by retrospective voters” make performance assessments exceedingly hard

(Achen & Bartels, 2017, p. 92). Although true for most policy areas, this

debate is particularly relevant to mass evaluations of the government’s eco-

nomic performance. The economy is a highly salient benchmark. Citizens

observe it directly, through personal experience, and indirectly, through pub-

lic and private information channels. But despite its relevance, we still know

little about how citizens form economic assessments. Do economic percep-

tions closely track economic indicators, or does the public hold a biased view

of the national economy? In particular, do systemic barriers to information

skew citizens’ evaluations the state of the economy?

In addressing these questions, this article builds on evidence that citizens’

economic perceptions do not simply mirror economic outcomes but are also

influenced by political factors (De Boef & Kellstedt, 2004; Duch & Stevenson,

2011; Duch et al., 2000). We advance this agenda in new directions, however,

by showing how the political climate in which information is disseminated,

or the information environment, structures the connection between macro-

economic activity and economic perceptions. A simple observation motivates

this study: in many of the world’s democracies, formidable barriers hinder

the public’s access to economic information. In most advanced democracies

citizens can acquire the information needed to make financial and political

decisions. While not beyond reproach, economic data in these countries tend

to be reliably collected and widely disseminated. As a result, public economic

sentiment tends to track, if not exactly parallel, objective economic condi-

tions (Anderson & Hecht, 2014; Duch & Stevenson, 2011).

However, these information-rich environments are the exception, not the

rule. In many countries where neither liberal democracy nor the market econ-

omy has become fully established, governments can more easily withhold, or

Carlin et al. 1501

Carlin et al. 3

manipulate the public’s access to, high-quality, unbiased information about

the economy. In these low-information contexts mass economic sentiment is

more likely to deviate from objective economic conditions. This incongru-

ence between reality and perceptions arguably damages the public’s capacity

to assess policy outcomes, hold leaders accountable, and serve as “critical

citizens” (Norris, 1999). The availability of economic information can affect

levels of corruption, government spending, and even the stability of the polit-

ical regime itself (Hollyer et al., 2018; Islam, 2007; Lindstedt & Naurin,

2010). In short, an open and dense information environment is an essential

prerequisite for a healthy democracy.

This article provides the first investigation of the formation of mass eco-

nomic sentiment outside industrial democracies. Below, we test a novel argu-

ment about how the information environment shapes the connection between

the real and the subjective economies using original measures of aggregate

economic sentiment and the information environment in eight Latin American

countries. Results suggest publics can discern the state of economic affairs

with some accuracy. Yet the transmission from economic indicators to sub-

jective assessments is not inevitable. It hinges on a high-quality information

environment,1 characterized by government transparency in data dissemina-

tion, a free press, and robust political competition. Further analysis suggests

the slippage between economic perceptions and conditions is due mainly to

the strategic manipulation of data rather than the quality of the data itself.

We make several important contributions. Most immediately, we extend

the literature on accountability by showing how limits on access to informa-

tion impede citizens’ capacity to develop accurate and reliable assessments of

government performance. While previous research shows how institutions

(e.g., Hellwig & Samuels, 2008), exogenous shocks (e.g., Campello & Zucco,

2016), and individual attributes like partisanship (e.g., Tilley & Hobolt, 2011)

impede attribution of responsibility for policy outcomes, our work identifies

elite-engineered barriers to the information citizens need to form evaluations

of policy performance in the first place. Citizen evaluations of the economy

are causally prior to, but no less important than, responsibility attribution in

the accountability chain. Consistent with our informational theory, we show

that the connection between economic conditions and perceptions sharpens

where the political context allows the dissemination of comprehensive and

unbiased economic information.

A key implication of our study is that a low-friction information environ-

ment is a prerequisite for democratic accountability. In classic models of ret-

rospective voting, voters can effectively sanction government performance

when their evaluations correspond to real economic fundamentals. But these

models say little about whether the economy in people’s heads actually tracks