Analyzing Consumer Confidence

Today I came across an interesting article on consumer confidence by Dan Ariely, who also wrote a book titled, “Predictably Irrational“. In the book Mr. Ariely introduces research from behavioral economics to explain for our seemingly irrational decision making.

Background on Dan Ariely (from Wikipedia)

Dan Ariely is the James B. Duke Professor of Behavioral Economics at Duke University. He also holds an appointment at the MIT Media Lab where he is the head of the eRationality research group. Although he is a professor of marketing with no training in economics, he is considered to be one of the leading behavioral economists.

Article Except (Via Ariely’s Blog)

We have a market paradox on our hands. Consumer confidence is close to a 40-year low, suggesting that the economy is in worse shape now than in times that seemed far darker, such as the early 1980s, when both inflation and unemployment crept into double digits. Yet many of the current economic indicators, including inflation and unemployment, are rather positive — or at least not as negative as consumer sentiment implies.

So why are consumers, myself included, so gloomy?

I suspect that one answer lies in a psychological condition caused by prolonged exposure to unpredictable negative events called “learned helplessness.”

Click Here to Read the Article on Consumer Confidence

About Miguel Barbosa

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29. August 2008 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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