How Social Media Shapes Economic Perception
tiktok, inflation vs jobs, and discontent
how tiktok warps the brain
Economic Sentiment in an Election Year
One thing I’ve been trying to square lately is online discourse and real world action.
I spend a lot of time on this topic (like a lot of time) and it’s because I think it’s important. A lot of people will shrug off how people feel because people are people, and it’s volatile and prone to change, but there is always something within the weeds of these whispers that can be informative to thinking about change.
The economy is weird right now. We all know this. We all feel this.
Political Narratives and Economic Policies
We are about to go into an election year, there was a debate last night, some key gubernatorial races this week (go Kentucky!!!) and of course, political sentiment is going to shape economic sentiment - and divide. I was fortunate enough to interview David Dayen of the American Prospect this week, and he said -
Republicans are going to focus on inflation, even if the inflation statistics are pretty moderate at that time… They think it's a winning issue. The Democrats are going to focus on the fact that over 10 million [jobs] have been created under Biden's presidency. That the unemployment rate is at historic lows that the gap between the black and white unemployment rate is at historic lows… There is a problem with touting the economy too much when people's circumstances don't feel like that they're in the same place. I don't know if I would say demeaning, but it seems like it sort of erases people's experience to a certain degree.
And people CARE about inflation. They feel like their experience has been erased.
Dissecting Polls: What Voters Really Want
YouGov asked 1,063 registered voters what their top priority was and 64% said "lower prices on goods, servces and gas" while 7% said "jobs".
The NY Times and Siena College released the results of a similar poll, and found that:
Discontent pulsates throughout the Times/Siena poll, with a majority of voters saying Mr. Biden’s policies have personally hurt them… two-thirds of the electorate sees the country moving in the wrong direction.
Voters under 30 — a group that strongly voted for Mr. Biden in 2020 — said they trusted Mr. Trump more on the economy by an extraordinary 28 percentage-point margin after years of inflation and now high interest rates that have made mortgages far less affordable.
This is not that surprising, but it is weird. People are tired and upset and frustrated. And it’s so many things -
The 'Weird Economy': Perceptions vs. Reality
Things are fine, but they could be better
They are okay: As Joey said, “Americans are richer than at any time before in history but are substantially poorer than a person in 1998 would expect.” Also, as Joey points out again1, middle income families have been squished by cars and gasoline.
But there are points of growing concern: The NY Fed reported that delinquencies on auto loans and credits cards were rising sharply - and with consumer credit surging 16% past pre-Covid levels, that is going to put a constraint on households as people pay down debt.
People also want prices to go DOWN
Return to ‘Normal’: Simply slowing the rate of price increases isn't enough; people want actual prices to decrease. Lisa Cook stated - “Americans may be pessimistic because they are not just looking for slower inflation but for prices to return to where they where before the pandemic” - but the problem is, if prices return, we have deflation, which is a monster and a beast and not something we want to deal with.
Housing affordability is one thing, but now nothing is affordable: Talmon Joseph Smith wrote - “The cumulative inflation since 2019 feels like theft to our readers. the "deal" people got in the Trump economy was that true financial security was out of reach but at least "stuff" was cheap. now corporate america has ensured even stuff isn't cheap. so voilà. anger.”
The labor market is getting funky again:
Slow: We have quickly slowing nominal wages. People are slowing down hiring again, specifically in tech and finance (the continuation of the techcession). Ian Siegel, ZipRecruiter CEO said “job seekers are taking longer to find work and those currently employed are changing jobs with less frequency.”
Employers: Alex Williams states that "the economy sucks because, where workers gained leverage, their employers tended to push the cost of that leverage onto customers, which intensified a vicious cycle of service workers and customers getting mad at each other"
Changing industries: Part of that is the vibe shift is in tech, as Will Mandis points out - “where the last 10 years of saas were defined by "sales"-- highly mechanized, process driven, incremental growth we're entering the "deals" era. ex: openai/anthropic. complex legal agreements, one contract that governs hundreds of cos”
Slowing industries: And then of course, a lot of industries have been in a recession, like retailers, freight, homebuilders, big tech, airlines, etc as Conor Sen highlights offset with things like education, healthcare and hospitality
People also don’t know what Biden has done.
The Biden administration has done a lot. The American Rescue Plan was one of the best economic policies of the past several decades, and has allowed the US to have the highest economic growth of any G-7 country post-Covid. But they haven’t focused on the right things (or at least marketed it in the right way).
Part of it is oblivion, (which I’ve written about before)
A lot of people are mad that Biden broke the rail strike (despite his administration actually helping with negotiations) and think that he has undermined the working class, despite being the first president in history to walk a picket line with the UAW.
Part of it is misallocated blame
The Supreme Court struck Biden’s attempt to cancel student loan debt, and a lot of people are upset with Biden over that. But he’s still trying to provide student loan relief, particularly for those who owe more than they borrowed (what an absurd system), those who have been paying for more than 25 years (again, absurd), and those that got wrecked by for-profit colleges (I won’t repeat it a third time).
Part of it is the THE TRUTH that THEY don’t want you to know mindset
Semafor - “Just over half of voters said they had heard that inflation had fallen from 8.3% to 3.2% since 2021, for example. But by a 24-point margin, voters said they did not believe that inflation had fallen that far.”
And this last bullet point is really key. People don’t believe.
Media's Role in Economic Perception
You would have to be a fool to point to one thing (including vibes) as the reason that the economy is weird, but !media! is a big forcing function in how we perceive the economy. How people see the world is formed by “information communicated to them secondhand” as Will Stancil explains -
Almost all of that information ultimately comes from media. “Crime” also a compelling illustration of how people’s conception of the world is built with facts gathered from media. Put lots of crime news on their TV and phone, and they’ll almost always think crime is a growing problem, even if it falls. Why would the economy be different?
The ever-brilliant Claudia Sahm -
The question is not why people are gloomy. Duh, high inflation. The question is, why are they so much more gloomy than in the past when inflation was high. It's not new that people care about the level of prices. Look at patterns in the past surveys, that doesn't explain it… Really, truly, people, the economy is not as bad as in the 1970s/early 1980s. We do not have stagflation. We do not have a decade of big increases in the price level. But the news heard now is way worse.
This is a sentiment analysis of news headlines over time - as you can see, it’s sucked. A part of this is the unfortunate business model of media - to drive clicks, you have to freak people out. But there are consequences to clickability!!
Like this freaking WSJ headline -
Like what are we DOING here. What is this? No wonder people feel bad! You have major media outlets touting things like “hey dude, I know things have been kinda hard and circumstances have been extraordinary, but consider quitting your job <3”
Social Media: The Amplification of Discontent
So that’s one part of the problem, but then there is the vortex of social media. A place built to air grievances, where virality is a function of saying wrong things loudly, and incentives are totally misaligned. Eyeballs are monetization tools, and the only way that you are going to attract them is if you give them something to stare at.
There’s also the symbolism involved with social media
Showing anxiety is the way to prove that you care.
People will attach themselves to opinion because there is safety in certainty, even if the certainty is misplaced. Emotional regulation via based takes.
But the problem with this is that it creates grandstanding, where someone’s personality and self-worth becomes completely tied into the suffering of others. The takes become completely detached from those that some claim to be advocating for because it’s all signaling to others that they get it. Social desirability bias, which can shape elections too.2
And TikTok is really bad about this! As a ‘TikToker’ (bleh) I can say that because I see it, and am very aware of the incentives at hand.
If I make a video that is inflammatory, telling people that the world is on fire and I alone have the extingusher, that video is going to do well.
If I make a video explaining the downsides of deflation, it will do fine, but not great.
There’s so much to say here too. Because of the way that TikTok is designed, it creates this ‘what-about-me’ effect. The For You Page serves you videos based on your interests, driven by an algorithm that is probably the closest thing we have to a supernatural deity. So when someone watches a video, they say “for ME” and when they disagree with it, they get MAD. Because what about them? Why would it not include their biases and viewpoints and confirm their echo chamber?
It’s FOR ME.
So TikTok is effectively the worst echo chamber you can imagine, because the creators are incentivized to tell the audience exactly what they want to hear, the audience wants to consume things that confirm their pre-existing views, and so on and so forth. Even if you’re a young person that doesn’t use TikTok, others do around you, which brings that warm halo of confirmation bias around you too.
I won’t continue for too much longer on this tirade, but this is a function of the loneliness crisis, people feeling stagnant and frustrated, the little animal part of our brain that seeks negative news, and the desire for things to be different. It’s complicated and not easily summarized.
A lot of stuff is this -
Navigating Economic Challenges: Real Pain Points
But there are real pain points too. That can’t be discounted. People are hurting and they are trying to find a home for that. Things are loud and confusing and overwhelming and it’s endless destruction that we witness through our little glow boxes. Of course people aren’t okay. Of course they log onto TikTok to scroll and to try and numb the frustration and comment something to feel a sense of control.
One thing I try to do whenever I fly on planes (which is basically once a week) is to talk to the person sitting next to me. I normally learn something utterly heartbreaking - a lost child, a divorce, a dream they don’t know how to fulfill. But then I learn something totally magical - a mountain climbed, a new job, a recently celebrated 60 year anniversary.
I know I get so existential in these pieces, but I do think we owe it ourselves and others around us to listen. People are nuts, but when they speak, it’s almost always a reflection of something inward. Sometimes they just need someone to listen.
On a more tangible note - how do we fix this?
Solutions: Government Action on Prices and Productivity
As Bharat Ramamurti wrote with regards to people really just caring about prices -
One possible approach is to rapidly increase the supply of a good. That's essentially what the Administration did with its SPR releases. A Treasury Department analysis found that those releases reduced gas prices by more than 30 cents a gallon. We happen to have a strategic reserve for oil. We don't have one for steaks or bacon (sadly) or other goods that have seen large price increases. The government's ability to engineer a big supply increase in short order is fairly limited (but not impossible).
Another approach is through regulation. The Administration enacted a law that capped insulin prices at $30 a month through Medicare. That was a large de facto price decrease. Not coincidentally, it was very popular. There are lots of creative ways to use regulation to cut prices, but almost all require congressional cooperation that doesn't seem very forthcoming right now. And it's important to consider downstream effects of such changes, including on supply.
The bottom line is that people hate higher prices, even if higher income and government transfers leave them with as much or more capacity to cover higher prices than before. And it will take real creativity for the government to produce the type of prices cuts people want.
Then, from the brilliant piece “Remove Barriers to Productivity” by Eli Dourado -
If we can’t counterbalance the supply shock in every granular manifestation, we can at least take action to boost productivity and aggregate supply. Macroeconomic textbooks don’t focus on this policy lever because they assume that the supply side of the economy is already optimized. Yet it is manifestly evident that American society is not maximizing its productivity. If we wanted to raise American productivity, for example, we could simplify geothermal permitting, deregulate advanced meltdown-proof nuclear reactors, make it easier to build transmission lines, figure out why high-speed rail is so expensive, fix permitting generally, abolish the Jones Act, automate our ports, allow drones to operate autonomously, legalize supersonic flight over land, reduce occupational-licensing requirements, train more medical workers, build more hospitals, revamp our pandemic-response institutions, simplify drug approvals, deregulate land use to allow denser housing and mixed-use neighborhoods, allow more immigration, cancel inefficient programs, restrict cost-plus procurement contracts in favor of more effective methods, end appropriations based on job creation, avoid political direction of scientific research, and instill urgency in grantmaking.
The complexity of economic sentiment cannot be understated here, and neither can the tangible hardships people face. The disconnect between the economic data and public perception highlights the important role that all types of media play in shaping opinions. The government's is trying to do their best, but that needs to be communicated more clearly to rebuild trust. As we approach another election year, it is essential that both media and policymakers not only address the statistics but also the stories behind them. The economy is people, after all.
The Effect of Macroeconomic Uncertainty on Household Spending | Past and Future Effects of the Recent Monetary Policy Tightening | The Linear Representation Hypothesis and the Geometry of Large Language Models | The death of omegle | Do You Have Free Will | Abiding in the Asking by Jane Hirshfield | Inside James Comey’s Bizarre $7M Job as a Top Hedge Fund’s In-House Inquisitor | Relationships are coevolutionary loops | In The Right Context, Full Employment Can Support A Pickup In Productivity | The Housing Market Won’t Crash at 8% Mortgage Rates, Even if the Economy Struggles | Blue Is the Color of Desire: The Science, Poetry, and Wonder of the Bowerbird
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