There’s a well-known phenomenon in polling: Even though crime has been falling steadily since the 1990s, with only minor interruptions in the overall trend, people always say it’s going up. 

What feeds this gulf between perception and reality? Maybe it’s the media — after all, fear sells, and “if it bleeds, it leads” gets people to tune into TV newscasts. Maybe it’s politicians who know that fear will help them get votes. But whatever the reason, over and over again, polls reveal that huge majorities of Americans believe crime is on the rise, and actual numbers seem unable to make a dent in that perception.

The same thing, it turns out, is happening with the economy. The Detroit Regional Chamber of Commerce recently commissioned a poll that found Michigan residents’ perceptions of the economy are starkly at odds with reality. A few examples:

• As of April 2024, the inflation rate was at 3.4%. However, barely over a quarter of survey respondents realized it, with the vast majority saying inflation was much higher, and fully a quarter believing that it was at 8% or more.
• The Dow Jones Industrial Average has been posting significant gains for the past year, and in May it hit the 40,000-point mark for the first time ever. But a majority of respondents believed stock performance was either average or worse than average.

Where does the gap come from? It’s hard to pin down a single reason. As with crime, there are certainly politicians who will have an easier time getting elected if they can make us think the economy is terrible. In the media, no commentator wants to be seen as a cheerleader or a Pollyanna. There are also people who stand to profit from economic negativity: if we’re convinced that a collapse is imminent, that’s great for the guys hawking gold bullion on cable TV. 

But there are also real consequences. In many ways, consumer confidence is a self-fulfilling prophecy: When spending shrinks because people are afraid that disaster is right around the corner, it can actually help bring about a slowdown, while increased confidence can spur economic growth.

Of course, excessive optimism can be a problem too — witness the dot-com boom of the 1990s. But we should always make sure our perceptions are driven not by feelings or a prevailing media narrative, but by reality.