Rational Exuberance: The Stock Market and Public Support for Social Security Privatization

Some pundits argue that public support for Social Security privatization is unaffected by stock market downturns. Others worry that majorities might flip with each major market swing. Cross-sectional and longitudinal analyses support a third perspective, consistent with theories of a rational public, where citizens update their opinions in reasonable ways in response to changes in the Dow Jones Industrial Average, the Standard & Poor's 500 index, and an average of the major markets. Therefore, the stock market affects Social Security privatization attitudes, particularly when movements in the markets remind citizens of the risks inherent in investing. These findings open new possibilities and create new challenges for including the public in policy debates.