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Consumer expectations: a new paradigm

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  • Richard Curtin

    (University of Michigan)

Abstract

Most scholars view the expectations held by consumers to be little more than uninformed guesses. Nonetheless, research has repeatedly found a close correspondence between aggregate trends in consumer expectations with the corresponding trends in national statistics. The theory of tailored expectations has reconciled the false paradox of micro-inaccuracy and macro-accuracy by shifting the focus from national data to the conditions people actually face. Processing, interpreting, and learning from economic information are largely accomplished by non-conscious cognitive activity. The inherent social nature of economic expectations generates cascades that can result in self-fulfilling expectations and consumers deserve equal billing with business and the government as having an independent and potent impact on the macro-economy. Lastly, the lament that non-conscious cognitive activity cannot be directly observed should not impede progress toward a more robust theory of economic expectations.

Suggested Citation

  • Richard Curtin, 2019. "Consumer expectations: a new paradigm," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 54(4), pages 199-210, October.
  • Handle: RePEc:pal:buseco:v:54:y:2019:i:4:d:10.1057_s11369-019-00148-1
    DOI: 10.1057/s11369-019-00148-1
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    References listed on IDEAS

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    1. Yash P. Mehra, 2002. "Survey measures of expected inflation : revisiting the issues of predictive content and rationality," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 17-36.
    2. Yiqun Gloria Chen, 2019. "Inflation, Inflation Expectations, and the Phillips Curve: Working Paper 2019-07," Working Papers 55501, Congressional Budget Office.
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    Cited by:

    1. Goldfayn-Frank, Olga & Kieren, Pascal & Trautmann, Stefan, 2024. "A Choice-Based Approach to the Measurement of Inflation Expectations," Working Papers 0742, University of Heidelberg, Department of Economics.
    2. Xiao, Wei, 2022. "Understanding probabilistic expectations – a behavioral approach," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    3. Zhao, Yongchen, 2023. "Internal consistency of household inflation expectations: Point forecasts vs. density forecasts," International Journal of Forecasting, Elsevier, vol. 39(4), pages 1713-1735.
    4. Zhang, Zhengfa & Keasey, Kevin & Lambrinoudakis, Costas & Mascia, Danilo V., 2024. "Consumer sentiment: The influence of social media," Economics Letters, Elsevier, vol. 237(C).
    5. Sommerfeldt, Nelson & Pearce, Joshua M., 2023. "Can grid-tied solar photovoltaics lead to residential heating electrification? A techno-economic case study in the midwestern U.S," Applied Energy, Elsevier, vol. 336(C).

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