Government budgets. Tax reforms. Inflation targets. Interest rate adjustments. These concepts dominate headlines and political debates, shaping the direction of nations. But how do ordinary people—those not trained in economics or public policy—really perceive government economic activity?
That’s the question Erich Kirchler and Ingrid Wahl take up in their chapter “Lay Perceptions of Government Economic Activity.” Their findings are as surprising as they are illuminating: people’s understanding of the economy is often fragmented, emotionally charged, and shaped as much by trust and experience as by facts.
Understanding these perceptions isn’t just an academic exercise. It’s essential for good governance, effective communication, and democratic engagement. Because public policy doesn’t operate in a vacuum—it operates through the lens of how it’s perceived.
The Gap Between Policy and Perception
Most citizens are not economists, and most government economic activity is highly technical. This creates a knowledge gap—but not a vacuum. People still form opinions, make judgments, and vote based on how they feel about the economy.
Kirchler and Wahl found that many people rely on simplified mental models to understand government actions. For example:
- The government is seen as a household—if it overspends, it must tighten its belt.
- Taxes are viewed not just as obligations, but as fairness tests.
- Economic hardship is often blamed on government mismanagement, even when global factors are at play.
These mental models are not always accurate—but they are deeply meaningful. They provide a framework for making sense of a complex world. And when ignored by policymakers, they can breed frustration, distrust, and disengagement.
The Emotional Economy: Trust, Fairness, and Control
What shapes lay perceptions more than technical knowledge? Emotion.
Kirchler and Wahl emphasize three key emotional dimensions that shape public perceptions of government economic activity:
- Trust – Do people believe the government is competent and acting in the public’s best interest? If trust is high, policies are more likely to be accepted—even if they’re painful. If trust is low, even beneficial policies are met with skepticism or resistance.
- Fairness – Is the economic burden distributed equitably? People care deeply about whether others are paying their fair share. Perceptions of inequality or favoritism can erode social cohesion and policy compliance.
- Control – Do people feel like they have a voice in economic decisions? Or do they feel powerless, dictated to by remote institutions? A sense of control fosters civic engagement; its absence breeds resentment.
These dimensions reveal that economic behaviour is not just about numbers—it’s about narratives.
Taxes: A Moral and Psychological Story
Nowhere is this emotional complexity more evident than in attitudes toward taxation. Kirchler’s earlier research shows that people don’t just view taxes as financial burdens. They see them as moral tests—of citizenship, equity, and state legitimacy.
When people perceive the tax system as fair, they are more likely to comply—even voluntarily. But when they believe that others are cheating or that the system is rigged, compliance drops. It’s not just about the amount—it’s about meaning.
This insight has profound implications. It suggests that fostering a culture of tax honesty depends less on audits and penalties and more on building trust and fairness.
The Power—and Limits—of Economic Education
Can financial literacy fix these misperceptions?
To a degree, yes. But Kirchler and Wahl caution that information alone is not enough. People interpret facts through their values, emotions, and social experiences. If the source of information is not trusted, the facts won’t land.
Effective communication about government economic activity must be transparent, empathetic, and dialogue-based. It must respect the intelligence of citizens while acknowledging the real emotional and cognitive constraints they face.
In other words, good economic policy must be paired with good public conversation.
Final Reflection: Listening as Governance
In the end, this chapter invites us to take public perception seriously—not as a problem to fix, but as a mirror to study.
When people misunderstand government economic activity, it’s not necessarily because they’re apathetic or irrational. It may be because the system has failed to speak in their language, address their concerns, or earn their trust.
True democracy isn’t just about making the right decisions—it’s about helping people understand those decisions, feel heard in their reactions, and stay connected to the institutions that serve them.
So the next time a policy is launched, a tax reform proposed, or a stimulus announced, let’s ask not only: Is it economically sound? but also: Will people understand it? Will they trust it? Will they feel it was made with them in mind?
Because in the end, the economy isn’t just what governments manage. It’s what people believe about how they’re being managed.