I’ve often expressed skepticism about survey questions regarding macroeconomics. Thus why ask the public whether they like inflation, if less than 5% of the public even knows what inflation is? (I ask my class if the cost of living has risen when both wages and prices rise by 10%, and 95% say no.)

I recently came across a graph in a Financial Times article that almost perfectly encapsulates my problem with macro surveys:

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I see three major problems with the FT interpretation of this survey of Chinese opinion:

1. The FT headline suggests that the appetite to consume has fallen sharply, but the downward blip in March looks like random noise. Overall, all three categories look pretty stable in recent years.

2. The three categories are also quite peculiar. In any principles of economics textbook, you’ll see the following identities:

GDP = C + I = C + S = GDI

This implies that S = I.

Saving is the portion of income that is used to finance investment, and investment is the portion of output that is not consumed.

But if saving and investment are two sides of the same coin, then what does it mean to talk about saving and investment as two alternatives?

3. It is true that the public may conceive of saving and investment in a different way from how economists define the terms. But this leads to a third objection. What makes you think the public is going to provide any sort of coherent answer to the following question?

Considering current prices, interest rates and income levels, are you more inclined to consume, invest or save?

What do people mean when they say they are not “inclined to consume”? People who don’t consume will die. Obviously people have something else in mind, perhaps “not consume at above normal levels.” But the question is so vague that it’s not at all clear what the answers might indicate. After all, it’s always been fashionable to say that it’s wise to save, wise to avoid consuming too much. In many cultures, people are taught that saving is virtuous, or at least prudent. So perhaps survey respondents are merely giving a politically correct answer.

Notice that the share of the public that believes it’s a good time to consume has stayed around 12% or so, even as Chinese consumption levels have risen dramatically. My hunch is that if very few people say it’s a good time to consume, it is because it sounds better to say it’s a good time to save or invest.