Benchmarking in public updating of economic perceptions

How do people respond to new information about social conditions? For example, does an improvement always lead people to say things are “better”? We argue that people update their views differently depending on whether preexisting perceptions are positive or negative, meaning equivalent changes in conditions can elicit different public reactions. To test this possibility, we update a classic model of aggregate public responsiveness to economic conditions by including recent public perceptions as a moderator variable. This reveals a substantial source of heterogeneity: changes in the economy matter either a great deal for public perceptions or not at all, depending on the prior levels of those perceptions. The results imply that updates of public perceptions are benchmarked to the recent past.