Using data from the Business Surveys Unit of the European Commission as a long-running-continental-scale experiment, this paper examines how, and how accurately, people assess economic systems. Data show both commonsense (e.g. people know the past better than the future) and puzzling results...

Permanent and widespread psychological biases affect both the subjective probability of future economic events and their retrospective interpretation. They may give rise to a systematic gap between (over-critical) judgments and (over-optimistic) expectations – the ‘‘forecast” error. When...