The public’s understanding of economic statistics
19 Jan 2021
Following the ‘Brexit’ referendum in 2016 a number of public organisations including HM Treasury, the UK Government Economic Service, the Bank of England and the RES, expressed concern at the level of public understanding of economics that the debate revealed.1 Johnny Runge2 reports on a recent survey.
I together with colleagues from the National Institute of Economic and Social Research (NIESR), Full Fact, Royal Statistical Society (RSS) and King’s College London recently published a report on the ‘Public Understanding of Economics and Economic Statistics’, carried out as part of the research programme of the Economic Statistics Centre of Excellence (ESCoE) and funded by the Office for National Statistics (ONS). We conducted a series of 12 focus groups with 130 people in October 2019 and a nationally representative YouGov survey with 1,665 respondents in February 2020, to explore how the general public view different aspects of the economy and economic concepts.
We found there is a reasonably good level of public understanding in some areas, where the economy is seen as important for people’s lives and personal finances. The main example is interest rates, driven by the impact on people’s mortgages and savings. The survey showed that 57 per cent of the British public could identify that interest rates were considered low (compared to 12 per cent who considered them high), and around 75 per cent understood the personal implications of lower and higher interest rates on savings and borrowings, respectively.
However, public understanding of broader economic concepts is generally very weak, leading to questions about people’s ability to understand economic news stories and evaluate the government’s economic performance. Many feel economics is confusing and complicated, and regret they are unable to understand it.
As an example, people’s understanding of Gross Domestic Product (GDP) is very limited. Around half (47 per cent) of the British public could identify the correct definition of GDP from a list of options, according to our survey. However, the focus groups showed that most people, even those who can broadly define it, have little or no understanding of GDP, and cannot speak in any meaningful way about it. Many said they had heard about GDP and seen it on the news, but they saw it as an example of economic jargon that contributed to the feeling that economics was inaccessible to them.
Around two-thirds (67 per cent) of the British public could identify that the UK government ran a ‘budget deficit’ (in February 2020, pre-Covid), as opposed to a surplus or a ‘balanced budget’. However, when the same question was put to people in more everyday terms, i.e. whether government spending was higher than its income through taxes, only 38 per cent answered correctly. Our focus groups suggested that people have heard a lot about the ‘budget deficit’ during the past decade, and often know that steps have been taken to reduce or eradicate it, but our survey shows that many have not necessarily fully understood what it means.
The general public also lack confidence in assessing and judging economic figures when they are reported as absolute numbers in millions or billions, or as proportions or rates in percentages. When participants were shown economic figures, such as GDP growth and the budget deficit, they struggled to make sense of them and tended to be more comfortable speaking in broad terms about economic statistics. In contrast, people were more confident in assessing economic figures that were more related to their everyday life, such as unemployment and inflation statistics.
However, around half (51 per cent) of the British public felt unemployment seemed higher than official figures suggest, and very few (4 per cent) felt it seemed lower. At the time of the survey in February 2020, the UK unemployment rate stood at 3.8 per cent. Focus group participants were often astonished that the figure was that low, contrasting it with daily struggles in their local community to make ends meet and difficult job prospects among friends and family. The most recent figure of 4.9 per cent for October 2020, in the midst of a pandemic causing business closures and redundancies, is likely to attract at least as much scepticism. This sometimes led to a lack of confidence in the accuracy and reliability of the unemployment statistics, which manifested itself in two ways.
First, some participants perceived the government as the source of the unemployment statistics, either because they assumed unemployment figures were based on benefit claimant data, held and collected by the Department for Work and Pensions (DWP), or because they associated economic data with politicians and the government who presented and discussed the figures in the news. This led some participants to believe figures were ‘massaged’, ‘fudged’ or ‘manipulated’ to reflect well on government performance. In reality, official UK unemployment figures are collected independently by the Office for National Statistics (ONS) through a large household survey.
Another way of making sense of the seemingly low figures was to focus on how unemployment figures were measured. Focus group participants often argued that the boundaries between employment and unemployment have become increasingly blurred in the modern labour market. They questioned whether this was captured accurately in official statistics, and argued that zero-hours contracts and other jobs with low or insecure hours and pay should not necessarily count fully as employment. Focus group participants often seemed to assume that unemployment statistics categorised everyone as either ‘unemployed’ or ‘employed’ and were very surprised to hear that a third category existed — the ‘economically inactive’ — and how that was excluded from the figures.
People’s reactions to official inflation figures were similar. Around half (51 per cent) of people felt prices had grown by more than official figures suggested (1.5 per cent at the time). Focus group participants often questioned whether the figures were measured in a way that reflected ‘someone else’s’ inflation. With a lack of knowledge about how inflation was calculated, they often suspected that the calculations placed too much emphasis on luxuries and failed to take into account large items such as council tax and housing costs that were relevant to their own consumption. Others assumed it was based on a very simple basket of everyday goods, such as bread, milk or alcohol. And those few who, to some extent, understood that the ‘basket of goods’ contained a weighted, representative, selection of goods and services often felt their own consumption did not closely match this average household.
Throughout the focus groups, and particularly in relation to unemployment and inflation statistics, it was clear that economics is not only relatively poorly understood by the general public, economists and economic figures are also often distrusted — what Andy Haldane, chief economist of the Bank of England, has called the ‘twin deficit’4 of economics. Such distrust is widely reported in surveys of trusts in different professions, and it came to the forefront at the time of the EU membership referendum in 2016 when Michael Gove claimed that ‘the people of this country have had enough of experts’,5 at least partly referring to economists, and when a lady in Newcastle shouted ‘That’s your bloody GDP, not ours.’6
Similarly, our focus group participants were often keenly aware that any economic data and statistics can be used to promote a particular view. The following quote from a participant in a focus group in Manchester sums up the scale of the problem: ‘You can make statistics say anything you want, can’t you really? If they don’t give you the right answer, broaden the sample to tell a different story’. Participants were often sceptical and cynical about any data they saw, and ultimately they didn’t know what to believe. Our research shows that official economic data, such as unemployment and inflation figures, are subject to the same public scrutiny as any other data, especially when people have misperceptions about how concepts are measured, and who produces and publishes the statistics.
In addition, our study showed people are disillusioned with the economy. Focus group participants often associated the economy with moments of national crises. The economy was seen as an external negative force outside people’s control and as a threat ‘constantly hanging over us’. Focus group participants said they had been ‘hit by the economy’ and ‘suffered because of the economy’.
Luckily, addressing the lack of knowledge and confidence in economic statistics, and the disillusion with the economy, arguably involves many of the same measures. It requires economists from a wide range of backgrounds, whether they work in public facing organisations, in universities, or in any other professional context, to communicate economic issues in a more accessible way. There is a need to engage more directly and actively with the public, and to take ownership of economic issues and statistics in the public realm. A failure to intervene may not be an option.
Communicating economic issues to the wider public needs to be a big priority. This is not achieved simply by writing more accessible explainers and briefings. It requires stepping out of our comfort zones, actively reaching out to people in their local towns and communities, and speaking to them directly about economic issues. There is a huge appetite for this among the general public. Our research shows that the general public are immensely interested in the economy, and often wish they had been taught it in school.
Our focus groups suggest there is an appetite to push for economic literacy classes in schools, and more broadly to learn more about economics and to speak directly to economists, without the media and politicians as intermediaries. This would potentially be an effective way forward to boost understanding and trust. Initiatives such as the Bank of England’s regional citizens’ panels7 and the work by the charity Ecnmy8 are examples of economists not only ‘preaching and teaching’ but ‘listening and learning’ about the public perspectives. The public ‘live and breathe the economy every day’,9 and economists can learn a lot from their often insightful and nuanced perspectives, both to inform how we approach our subject, but also to improve our communication to the public.
In 1985, the Royal Society published a report called The Public Understanding of Science, or the ‘Bodmer Report’.10 It provided an early roadmap to improve the general public's scientific knowledge and attitudes towards science, including a focus11 on the ‘need for scientists to learn how to communicate with the general public in all its guises, and to consider it a duty to do so’. The report is widely considered the birth of the Public Understanding of Science (PUS) movement in Britain. This movement has seen a cultural change among scientists towards public outreach, engagement and communication. Public Understanding of Science is considered a discipline in academia, with its own academic journal.12
Economics, too, pervades our everyday lives. Economics is often at the heart of decisions at home and at work, and it is key to most public policy decisions. While it would be irrational for everyone to take economics degrees and develop a complex understanding of economic theories, some understanding of economics would benefit everyone, including in people’s personal financial decisions and in evaluating government economic performance and policy, and informing democratic decision-making.
But, as an economics community, can we truly say we have had our Bodmer moment? Arguably, in recent years, we have increasingly come to recognise that we are not always in tune with the general public. In the past decade, through a financial crisis, austerity, Brexit, and now a pandemic, we have seen the challenges of communicating economic issues effectively, especially in a world awash with economic information and data. Our report provides further evidence that there is a significant gap in expert and public understanding of the economy.
However, as a community, we still need to make a strong commitment to a culture of public engagement and outreach among economists. This should be a requirement for a subject that is so close to people’s everyday lives and decisions. We need to explore in much more depth how to improve the general public’s economic knowledge and attitudes towards economics, and how to improve our own communication. Some progress has been made, but to give an example from my own field as an academic researcher. I reviewed the academic literature as part of our report. While there are some great interdisciplinary studies in this field which are summarised in the report and is worth a read, it is clear there has not been a consistent effort to explore the practice of economic communication in society.
In the coming months, we will organise a series of roundtables with a wide range of economists, from the ONS, Bank of England, journalists, researchers, public bodies and departments, policymakers, politicians, private and third-sector organisations, to take stock and discuss our findings in order to draw out recommendations on how to go forward from here, and how to improve public understanding of economics and economic statistics, for instance through better public engagement, education and communication. If you are interested in taking part, please send me an email. We are interested in both stakeholders based in the UK and abroad, and with as many different backgrounds as possible.
1. For example in Newsletters nos. 175 (October 2016) and 178 (July 2017).