”Broader Horizons”: Listen to the people
Politicians should listen more to people and understand their perceptions of themselves and the world around them to come up with better policies. This was the overarching message of award-winning young economist Stefanie Stantcheva in her “Broader Horizons” TED-style talk at this year’s Brussels Economic Forum.
Politicians should listen more to people and understand their perceptions of themselves and the world around them to come up with better policies. This was the overarching message of Stefanie Stantcheva in her “Broader Horizons” TED-style talk at this year’s Brussels Economic Forum.
"Academics and policy makers need to listen more to people," said Stantcheva, a Professor of economics at Harvard University. “And we do this through well-designed, well-targeted and well-represented surveys, because there are things that we cannot see in other data unless we ask people directly; things like peoples’ perceptions about themselves, others, fairness and the economic system.”
Perceptions of fairness and of our own financial situations definitely matter as they are what shape today’s policies she explained, while warning that if politicians didn’t listen, the populists would and they would continue to come up with their solutions.
Perception versus reality
There is a huge discord between public perception and reality, which is fuelling the rising tide of populism throughout Europe. Pointing to a survey that her team carried out in six countries, Professor Stantcheva revealed a startling contrast in public perception when it comes to the number of immigrants living in a country, which many had estimated at double the actual amount.
Such misconceptions are not just the preserve of the low-skilled or “ill-educated”, anyone can be wrong no matter their level of education or skill.
To labour this point further Prof Stantcheva cited a study in Denmark in which tax returns were part of a survey on public perception. What it showed was surprising: “The rich overestimate how rich others really are and they underestimate their own wealth,” she added.
On the other hand “the poor think everyone is poorer than they actually are.”
When it comes to social mobility, the power of the “American dream” means that people in the US tend to be much more optimistic about their prospects than in Europe, even though the reality is quite different, said the Harvard professor. A person’s chances of climbing into the highest 20% of earners is significantly higher in Europe than in the US, she noted.
Such public misconceptions are shaping views and leading to less progressive, less distributive policies and should not go unchallenged. Such ideas could be corrected with more and better information, argued Professor Stantcheva.
What’s fair, what’s not?
When it comes to income, what’s fair and what is not in the eyes of the public? “People tend to think it’s fair to tax away income that’s not gained by hard work such as stock market profits or inherited wealth,” she said.
Invisible dynamics at play
Although hugely revealing, data sets such as scanned retail data and tax returns do not show the real picture of what’s going on. Surveying people for their opinions is the only way to really tell what’s going on in someone’s financial situation, which could lead them to vote one way or another.
Take fuel taxes, for example. Economic theory suggests that fuel taxes should help reduce fuel consumption and CO2 emissions if users can switch to alternatives. If public transport data show no increase after a rise in fuel taxes, policy makers could be tempted to conclude that they should raise taxes further. However, the reason could be something not captured by the data but which a survey would reveal, such as the fact that for many people in rural area public transport may not be practical.
Understand the constraints that people live with, these invisible dynamics. Ask their opinions, listen to them and then we can propose much better policy solutions. “This direct way is the quickest, most effective way,” Professor Stantcheva concluded.