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The consumer confidence index is one of the most well-known and influential statistical indexes. Economists follow it, as does the Federal Reserve, and it is widely reported in the national media.
Stephen Bruestle ’07 (Pennington, N.J.) is conducting research to improve its accuracy in a project that could have significant impact on economic forecasting.
Bruestle is conducting the research for Mark Crain, William E. Simon Professor of Political Economy, who sees a shortcoming in the way the index is calculated and thinks a refinement will improve its predictive power.
The two are collaborating as part of Lafayette’s distinctive EXCEL Scholars program, in which students assist faculty with research while earning a stipend. The program has helped make Lafayette a national leader in undergraduate research. Many of the more than 160 students who participate in EXCEL each year go on to publish papers in scholarly journals and/or present their research at conferences.
“This is a wonderful opportunity,” says Bruestle. “I am getting training from an experienced economist and getting the chance to do real academic theoretical work.”
Bruestle began the project by researching and analyzing how the index, formally called the American Customer Satisfaction Index (ACSI), is calculated. After gaining an understanding of the models and theories behind the index, he is calculating standard deviations, probability values, and other economic statistical data to create a more accurate measure of consumer confidence, “one that doesn’t just focus on the mean, but focuses on the range,” says the mathematics major.
Currently the index is calculated by taking the average score (0–100) of sample respondents. This is an accurate measure of consumer sentiment when people are relatively uniform in their perceptions, but not when there is a large variance in the scores, reports Crain, who explains the problem with a simple example.
“Suppose in one case, some of the respondents are blissful, with scores near 100, but others are neutral, with scores of 50. In another case, the variance in the individual respondents is minimal, and the result is 75. Both cases yield the same mean index value, 75, though they represent quite different situations,” he says.
“Professor Crain has a vision for the project,” says Bruestle. “He gives me a concept, then I’ll go research it, test it, and bring the results to him. I implement his theories and come to him and say ‘this is what I think we should do’ and then we talk about it. Then he sets me out with some new goals. I’m learning what academic research is all about.”
“Work [students get] in the classroom has already been done, and the projects are small,” he adds. “But this is trying to understand something that hasn’t been done before, and it’s an incredibly big project.”
Crain, who recently completed his first year at Lafayette, sees the EXCEL program with fresh eyes.
“I’ve been at three other institutions where so much research effort went into graduate and Ph.D. students,” he says. “Normally this kind of research that Stephen is doing would go to those candidates. It’s refreshing to see it [at Lafayette]; the students are very bright here and the school is giving them the same kind of attention that graduate students get elsewhere. EXCEL is providing them with graduate-quality research.
“He’s seeing a project all the way through. It’s an important part of the training to think about the whole project – how does one get from start to finish, how do you carry it through while maintaining a balance between being open to discovery versus ‘this has to be done by the end of the day,’ setting deadlines and staying on track – and he is learning that procedure.”
For Bruestle, the EXCEL project will have long-lasting significance.
“I know I will look back on this experience and realize how much I have been influenced by it and Professor Crain. He’s incredibly knowledgeable; he’s published more than 100 articles in books and he’s increased my appreciation for academic research. He has gotten me a lot more excited about economics, and whereas I was thinking about a career in business before, now I am considering academic work as well,” he says.
Bruestle’s extracurricular activities include the History Club, Pep Band, Student Government, poetry workshop, and Marquis Players, a student group that produces and performs an annual musical to benefit charity.
As a national leader in undergraduate research, Lafayette sends one of the largest contingents to the National Conference on Undergraduate Research each year. Thirty-nine students were accepted to present their research at this year’s conference.