Letter from Pennsylvania: Optimism & the Economy

So, what comes first, economic optimism or a good economy?

It’s a form of the classic chicken-egg metaphor that has been debated by economists for years. In fact, there’s a whole field of scholarly study devoted to this kind of “causality dilemma.”

That is, does optimism in the economy create a good economy? Or is it a good economy that creates the optimism?

To that point, the Lincoln Institute for Public Opinion’s new Spring Keystone Business Climate Survey suggests a decided uptick in economic optimism among Pennsylvania business owners.

But as a scholar at the Allegheny Institute for Public Policy found in the data (in Policy Brief Vol. 17, No. 18), it might be premature to break out the pom-poms and rah-rah-sis-boom-bahs about the Keystone State’s government leaders.

The Lincoln Institute survey asked 325 executives about the state of the economy, about current policy issues and about the performance of state- and federal-level officials.

“Over the past few years, iterations of this survey have shown optimism to be in short supply,” reminds Frank Gamrat, a senior research associate at the Pittsburgh think tank, “but the 2017 version shows changes.”

To wit, when asked how they would rate business conditions in Pennsylvania today compared to six months ago, 26.6 percent of the respondents answered that conditions are better.

Though still a small percentage, it represents a marked increase from the spring and fall 2016 surveys in which, respectively, 5.7 percent and 4.97 percent of the respondents expressed optimism.

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“Furthermore in the current survey, 50 percent claimed that the conditions were the same as six months ago, up from 39.5 percent and 45 percent in the two previous surveys,” Gamrat says.

Only 19.6 percent said economic conditions…