An economic interpretation of the 2004 race

Although Rocket Man has properly noted the pseudo-scientific nature of Marxism, economists persist in trying to develop models into which they can plug economic data and thereby succesfully predict the outcome of elections. They do this, of course, by “predicting” the outcome of past elections and then using the most successful formula to predict the next race. It is my understanding that economists have had some success at this (that is, predicting the “next” race), although the last election was a set-back. Gore won more votes than Bush, as the models predicted, but many fewer than the economic data had led the model-makers to expect.
Lawrence Kudlow in the Washington Times reports that the economic model of liberal Yale economist Ray Fair has President Bush capturing 58 percent of the popular vote this year. The prediction isn’t terribly suprising, with 2004 growth expected to be about 4 percent, inflation low, and the number of jobs rising.
The problem, though, is that the economy seems destined to play less of a role than usual this year, and not just because the media understands that Bush wins an election that’s about the economy. Fair’s model, of course, assumes that there are no issues other than the economy. That’s never true, and it certainly isn’t true during a war, or in a situation when the candidates disagree about whether we are at war. To be sure, the present war-like context may well favor Bush in November — he might run better than the best economic model would predict. However, issues of terrorism and war create too much uncertainty to place great faith in such models this year.
At Dartmouth, Rocket Man and I had a friend named Steve Rosenthal. Steve was a conservative, but he indulged my Marxist chatter, and even seemed to find it occasionally insightful. He once pointed out, however, that economc theories of history have much less power to explain things that happened before the advent of modern capitalism since, of course, the advent of modern capitalism expanded the domain of the economic sphere. In short, economics always matters, but it matters overwhelmingly only when it matters overwhelmingly. In 2004, it will matter, and maybe matter a lot, but probably not as much as usual.
HINDROCKET adds: Steve is and was a good man–among other things, my first-year law school roommate. Steve, if you’re out there, phone home!
The biggest danger in political punditry is the failure to see how the future will not be like the past. It’s like predicting baseball pennant races (where, by the way, Deacon was the unchallenged master–among other things, he studied statistics in college almost entirely for the purpose of improving his baseball predictions). If you apply a statistical analysis to next year’s baseball races, you will inevitably predict them to be just like last year’s. Likewise in politics: if you assume that this year’s race is the same as 2000, or 1996, or 1992, then it is easy to predict the winner. The hard part is predicting where the the course of the future will diverge from the past.
I may be wrong, but I think things have changed since 1996, the last election when the President was viewed mainly as a good luck charm on the economy. Two reasons: One, the electorate has become a bit more sophisticated. Some people have figured out that the media sold them a bill of goods in 1992, when the economy was in fact exploding at the very moment when Bill Clinton was claiming that it was the worst economy since the Depression. Two, I think many people have a better perspective on the chief executive’s significant, but limited, influence on the economy.
Beyond that, I think most people realize that we are at war. The difference between a 5.4% and a 5.7% unemployment rate is no doubt significant, especially to the .3% who make up the difference. But that is a very thin group on which to predicate a Presidential campaign. All of us have a common interest in not being blown up by terrorists. Presumably that common interest will trump whatever mileage the Democrats can gain from advocating 16th century economics and socialized medicine.