Voting based on the economy is dumb

Conventional wisdom – backed by a fair bit of statistical evidence – suggests that how governing parties and politicians fare in elections has a lot to do with how well the economy seems to be doing, on the day when people go to the polls. If growth seems strong, and unemployment low, people conclude that those in power are doing a good job. This is both misleading and dangerous.

It is misleading because the impressions that voters, pundits, and economists have about the strength of the economy can be out of joint with reality. More importantly, it is misleading because those in power are largely not responsible for current economic conditions. It is dangerous because it worsens the degree to which politics and policy-making focus on the short term. If you are desperate to have unemployment dip down before November’s election, you are likely to create policies that sacrifice long-term interests for short-term gains.

1) The people in charge are largely not responsible for it

Why does an economy like that of Canada or the United States grow quickly or produce jobs? Partly, it has to do with innovations in techniques and technologies. Partly, it has to do with global economic conditions. Partly, it has to do with demographic trends. Other factors involve include long-term policy evolution – such as the development of the tax system – and trends in global historical development. When the global economy experiences profound changes, some industries rise while others fall. Politicians can have some effect on this, through things like infrastructure and training investments, but it is largely outside their control.

And yet, voters behave as though the government of the day is ‘responsible’ for unemployment being at whatever level it is. Similarly, when they see the value of their retirement investments fall (possibly because it had been grossly over-inflated by excessive optimism earlier), they blame those who currently hold power. By behaving in this way, voters give credit for success to people who did not engineer it, and respond to failure by punishing those who are largely innocent.

Unelected central banks also play an important role in establishing the economic situation in which countries find themselves, though central banks are often (and intelligently) insulated from day-to-day politics, as protection against them being exploited for short-term political advantage.

2) Focusing on it creates bad incentives

Far more problematic than failing to properly assign credit or blame is creating an environment where short-term outcomes are overwhelmingly important. This has obvious implications for climate change. In the long run, relying on fossil fuel power profoundly threatens our prosperity, because it risks undermining the climatic stability that society depends on. In the short term, however, shifting away from fossil fuels risks increasing unemployment and raising energy prices for consumers – both results likely to make voters howl and throw out whoever is in office.

Just as corporate CEOs need to be judged on the basis of how they worsened or improved their company across the long-term – rather than on what quarterly results they cooked up – politicians and political parties need to be judged on the basis of how they contributed to society, as understood in a long-term way. Politicians who produce short-term growth while simultaneously creating peril for the future should not be rewarded, just as those who call for reasonable sacrifices now to avert larger catastrophes later deserve to be praised for their vision and dedication.

Also, while economic statistics do convey important information about how the level of human welfare in a society is changing, they are not a perfect reflection of everything that is important. They do not tell us whether we are burning up tomorrow’s capital for the sake of today’s consumption; they also fail to value critically important but non-financial goods and services, including all the ecological processes which are absolutely necessary for the continuation of human life (as well as human prosperity). Governments deserve to be judged for the long-term effect they have on such things, as well as the influence they have on jobs, incomes, and taxes.

Unfortunately, nothing like that seems likely to happen in democratic societies anytime soon.

38 thoughts on “Voting based on the economy is dumb

  1. .

    “Mr Ruven of argues that had Mr Obama not fulfilled his pledge to withdraw troops from Iraq, he and his fellow Democrats would be in even deeper trouble than they already are. He concedes that some Democratic activists have been turned off by Mr Obama’s enthusiasm for the war in Afghanistan, which will probably have some impact on both turnout and fund-raising. But he does not believe that many people, on the left or the right, will cast their vote in the mid-terms based on their views of the two wars. It is the economy that will galvanise them.

  2. Tristan

    I agree with this article about 95%. I think voting based on the economy might be possible only if the voting public happened to be much more financially literate – if people on average understood that neo liberal reforms have drastically increased the number of financial crises, reduced world economic growth, and stagnated wages as a share of GDP, I think we would have the conditions required to elect a leader who would reverse the financialization of the economy. This wouldn’t be, however, “voting based on the economy” in the short-term up or down of today’s pundit analysis.

  3. Milan Post author

    neo liberal reforms have drastically increased the number of financial crises, reduced world economic growth, and stagnated wages as a share of GDP

    I don’t know if this sort of statement (or one disagreeing) can ever really be justified on the basis of evidence. Rather, what you think about the claim is mostly a matter of personal ideology. People can never access the reality of how the economy works or how policies affect it. Rather, they are exposed to competing stories about those things, and choose one on the basis of their personal experiences, intuitions, education, etc.

  4. Tristan

    “People can never access the reality of how the economy works or how policies affect it”

    I thought I was the post-modernist here?

  5. Milan Post author

    Economics is just a really crappy ‘science’. And one that rarely even uses the (low) level of rigour possible when working with the data available.

  6. .

    “A potentially brutal poll for incumbents yesterday suggests most Americans aren’t buying the hype that the economy is improving. The Gallup poll of national “economic confidence” shows a steep drop in the number of respondents who say they think things are going to get better anytime soon.

    The poll found 63% of Americans say the economy is getting worse — a jump of 10% over the number who said the same thing in September 2009. That figure, however, is not a huge increase over the number who were saying things are getting worse at the beginning of August, when 60% of Americans told Gallup things are heading in the wrong direction. But where Americans’ feelings about the economy were on the upswing last year, now they’re feeling worse and worse about things as the election draws nearer.”

  7. .

    ” COLUMBUS, Ohio—Steve Nicholson barely opens the storm door for the Democratic campaign volunteer trying to talk to him about the Ohio governor’s race. “I don’t care for either one,” he says, “I just want jobs.” The volunteer says that’s exactly why he should vote for the incumbent, Democrat Ted S­­­trickland. “Not voting is a vote for Kasich,” she says, referring to Republican challenger John Kasich. “Strickland will be better for jobs,” agrees Nicholson, 30. So will he vote? No. Does he at least want a little campaign literature to learn about the race? No. The storm door closes.

    Rachel Harris lives two blocks away and sounds at first a lot like her neighbor up the street. “I want the same thing everyone else wants,” she says. “Jobs.” At 29 years old, Harris is the mother of five and makes $7.50 an hour working as a cashier at a dairy. “I don’t know which is which,” she says of the candidates. But as the volunteer goes through the slate, Harris softens. “That means good jobs,” she says when she hears about renewable energy programs. “Thank you for informing me,” she says, promising that she’s likely to vote for the Democrats.

    For the Democratic Party, the difference this year between a rout and survival may come down to Steve Nicholson vs. Rachel Harris. Neither is likely to vote Republican. But it’s unlikely that both will vote Democratic. As Nov. 2 approaches, Democrats face a highly motivated opposition. The search for ways to excite people—not just their core voters but anyone who might be receptive to their message—grows more desperate by the day. “Folks, wake up!” President Obama told a group of Democrats Monday night. “This is not some academic exercise.””

  8. .

    Mr Obama faces a delicate marketing job. His approval ratings on the economy have tanked but voters are alarmed about the deficit and convinced, unfairly, that his previous fiscal stimulus didn’t help (see chart). In a speech on September 8th in Parma, Ohio Mr Obama avoided the word stimulus and instead labelled the proposals as “additional steps to grow the economy”. They are also designed to minimise the hit to the deficit. The investment tax credit could cost $200 billion in the first two years but just $30 billion over ten years since businesses will have less to deduct later on. Making the R&D credit permanent would cost $100 billion over ten years but this is only $30 billion more than if the credit were simply renewed every year. That, as well as the $50 billion to be spent on infrastructure, would be paid for by eliminating tax breaks for multinationals and oil and gas companies.”

  9. .

    ” The most wrenching recession since the 1930s ended a year ago. But the recovery—none too powerful to begin with—slowed sharply earlier this year. GDP grew by a feeble 1.6% at an annual pace in the second quarter, and seems to have been stuck somewhere similar since. The housing market slumped after temporary tax incentives to buy a home expired. So few private jobs were being created that unemployment looked likelier to rise than fall. Fears grew over the summer that if this deceleration continued, America’s economy would slip back into recession.

    Fortunately, those worries now seem exaggerated. Part of the weakness of second-quarter GDP was probably because of a temporary surge in imports from China. The latest statistics, from reasonably good retail sales in August to falling claims for unemployment benefits, point to an economy that, though still weak, is not slumping further. And history suggests that although nascent recoveries often wobble for a quarter or two, they rarely relapse into recession. For now, it is most likely that America’s economy will crawl along with growth at perhaps 2.5%: above stall speed, but far too slow to make much difference to the jobless rate.

    Republicans argue that Barack Obama’s shift towards “big government” explains the economy’s weakness, and that high unemployment is proof that fiscal stimulus was a bad idea. In fact, most of the growth in government to date has been temporary and unavoidable; the longer-run growth in government is more modest, and reflects the policies of both Mr Obama and his predecessor. And the notion that high joblessness “proves” that stimulus failed is simply wrong. The mechanics of a financial bust suggest that without a fiscal boost the recession would have been much worse. “

  10. .

    “”When you have an incumbent president who has launched a bold plan to save the economy,” says David Frum, author of Comeback: Conservatism That Can Win Again, “and it hasn’t worked and the economy is worse than ever, the opposition doesn’t need any plan at all. There’s probably not going to be reform right after the GOP wins. Organizations that are highly successful don’t make changes rapidly.””

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  12. .

    Consider a few facts: There has been no surge in overall government spending under Obama. Increases in federal spending have just barely compensated for cuts in state and local spending and are largely accounted for by automatic safety-net spending like unemployment insurance and Medicare, not new government programs. Overall, government spending is rising at about the same rate it did under Bush. The big bank bailout, TARP, was initiated under Bush and has turned a profit for the government. The auto bailout saved tens of thousands of jobs and two major American companies at far lower cost than expected. The stimulus was 40 percent tax cuts; Obama has cut taxes for 95 percent of Americans. The health care bill is projected to reduce the long-term deficit even as it subsidizes the private health insurance industry. The climate bill would also have cut the long-term deficit.

    In other words, the DC narrative of Obama as an overreaching, quasi-socialist tax-and-spender is just wildly out of sync with reality. Yet that narrative is driving how voters see Obama. It’s shaping how the media covers him. It’s shaping his ambitions, and Congress’s.

  13. .

    The more likely explanation for our paradox, of course, is that people are voting out the Democrats because the economy is not going well and the Democrats are in charge, even if voting them out means handing power back to the party that most Americans blame for getting us into the mess in the first place.

    That may not make sense, but the hidden brain is not in the rationality business. When we are stuck in a bad place, whether that bad place is a marriage, a traffic jam, or a weak economy, it is very tempting to try something new. Psychologists call this the action bias—and it turns out to have surprisingly broad ramifications.

  14. .

    In one analysis of 293 penalty kicks in elite championship soccer, researchers Michael Bar-Eli, Ofer H. Azar, Ilana Ritov, Yael Keidar-Levin, and Galit Schein found that goalies had a 14 percent chance of stopping a goal when they dived to the left and a 13 percent chance when they dived to the right. The chance of stopping a goal when they stayed in the center was 33 percent. But, like voters and people stuck in traffic jams, goalies facing penalty kicks are drawn to action, not inaction. The analysis of the championship penalty kicks found that goalies stayed in the center only 6 percent of the time.

    Why do we habitually choose action over inaction when things are bad? The intuitive answer is that action promises to get us out of the mess we’re in. But that intuition turns out to be wrong. The action bias is driven less by the fear of failure than by the fear of regret.

    Goalies experience less regret when they dive and allow a goal than when they stay in the center and allow a goal. Stockholders experience less regret when they sell—even if the market later rebounds—than when they hold onto a losing portfolio and watch it drop. In the run-up to the Iraq war, Sen. Hillary Clinton summarized the action bias when she said, “In balancing the risks of action versus inaction, I think New Yorkers who have gone through the fires of hell may be more attuned to the risk of not acting. I know that I am.”

    A goalie who dives and misses is heroic. A goalie who stays in the center and misses is just … ineffectual. Goalies dive because they seek to minimize their emotional losses, not their actual losses.

  15. .

    But, in our view, the rage directed at Mr Obama is overdone.

    Consider the main reason why Americans are angry: the economy. The slow pace of job re-creation is primarily the result of consumers and companies trying to rebuild their finances. Balance-sheet recessions always take time to recover from. Mr Obama is guilty of promising that the pain would be over sooner than was ever likely. But he did not cause the bust, and he deserves more credit than he is getting for steering America clear of a much worse fate, especially considering the constraints of a political system designed to make big changes difficult. He was right to go for a big, bold and immediate stimulus plan. He has been right to resist, with minor exceptions, calls for a wave of protectionism. He is guilty of having no credible medium-term plan to reduce the deficit. But then nor do the Republicans; and it was they, after all, who oversaw the tax cuts, the entry into two wars and the financial collapse that are the source of most of America’s gigantic deficit.

  16. .

    Unemployment and elections
    Testing the rule
    The link between jobs and seats is less clear than many suppose

    Oct 28th 2010 | Washington, dc

    History’s message is also mixed. Bad economies tend to produce bloodbaths: in 1982, the last mid-terms with a comparably bad labour market, the ruling Republicans lost 26 House seats (see chart), and a sinking economy contributed to the historic Republican massacre after Watergate in 1974. But high unemployment is not a certain kiss of death. Republicans did better in the 1986 mid-terms, losing just five House though eight Senate seats, despite an unemployment rate of near 7%. Joblessness was at its worst in nearly a decade when George Bush junior faced his first mid-terms in 2002—and he saw his congressional majority increase. (To be fair, the terrorist attacks of 2001 and his resolute response to them had a lot to do with that.) Some of recent history’s biggest reversals for the president’s party have occurred when the economy has been growing, as in 1994 and 2006. In other words, it’s often the economy, stupid; but not always.

  17. .

    These explanations mirror those offered to explain Obama’s long slide in the polls. He didn’t emote enough, pundits said. His speeches didn’t connect. He went too far left. “During the first two years of his presidency, Barack Obama failed to sell his agenda to Americans,” a pundit wrote yesterday. “It cost his Democrats control of Congress.”

    With respect, all this stuff is marginal, at best. At worst, it’s hooey. Neither Obama’s decline nor his modest recovery have much to do with speeches, politics, or mojos.

    It’s the economy, stupid.

    In 2009 and 2010, Barack Obama could have given speeches that put Shakespeare to shame. He could have played Congress like a Stradivarius. He could have had the mojo of Austin Powers. And his approval rating would have slid just the same. Indeed, with the United States enduring the worst recession since the Great Depression and an unemployment rate over 10 per cent, the wonder is that Obama’s numbers didn’t plunge even deeper.

    And now, in the last couple of months, the unemployment rate and Obama’s approval rating have both shown some modest improvement. Occam’s razor, anyone?

    The point is underscored by Ronald Reagan. In the second quarter of 1983, unemployment finally stopped climbing. Reagan’s approval rating stopped falling. In the third quarter of 1983, unemployment started falling. And Reagan’s approval rating started rising like Lazarus. It topped 50 per cent — where Obama is now — in November 1983.

    Of course Reagan went on to win a massive landslide in 1984. Does the fact that Obama is now well ahead of where Reagan was at the same point mean he will do the same? Or better? Re-election is looking increasingly likely. But a landslide is questionable. The recession that hammered Reagan’s approval rating into the floor was intensified by the high interest rates Federal Reserve chairman Paul Volcker used to strangle inflation. When inflation gave up the ghost and Volcker relented, the economy surged. Today, interest rates are at rock bottom so it’s hard to see how the economy could surge between now and election day, 2012.

    But then, in early 1983, few people saw happy days ahead and the pessimists had a hundred reasons why things would get worse. So who knows?

    The only thing we can say with confidence is that both the unemployment rate and the president’s approval rating were worse in January 1983, than they are in January 2011. And that as the economy goes, so goes Barack Obama’s fortunes.

  18. .

    As to what those problems of tomorrow are, Mr Obama has plainly learnt the error of his ways. Jobs, jobs, jobs, is the new mantra. A recent Pew survey reported that 84% of Americans thought jobs should be his priority. With unemployment at 9.4% (see chart 2) and more than 14m Americans still out of work, the president knows that he stands to lose his own job in 2012 if he fails to expand employment.

    To that end, he started to change the direction of his administration well before this week’s speech and its emphasis on jobs and competitiveness. He is starting the second half of his first term with a new staff and new focus. Rahm Emanuel, a pugnacious congressional infighter, may have been the right chief of staff when the president’s priority was to push big bills on Capitol Hill; but Mr Obama has now tempted the smooth William Daley, once Mr Clinton’s commerce secretary, back from Wall Street to run a more business-friendly White House. One change sums it all up: the Economic Recovery Advisory Board, which Mr Obama created two years ago, is being replaced by a Council on Jobs and Competitiveness under Jeffrey Immelt, the chief executive of GE.

    The Republicans insist that they are just as eager to restore jobs—but by unleashing the private sector, not government action. Mitch McConnell, the Republican leader in the Senate, heaps scorn on Mr Obama’s talk of “investment” in education, research and infrastructure. To Republican ears that is just fancy wording for more public spending and ever-bigger deficits. The deficit worries a lot of voters, too. The same Pew survey that found jobs such a concern reported that 64% of Americans also call the deficit a priority now, compared with 53% in 2009. Hence the Republican plan, in Mr Cantor’s phrase, to “cut and grow”.

  19. .

    Sir Arnold: “I presume the Prime Minister is in favour of this scheme because it will reduce unemployment?”
    Sir Humphrey: “Well, it looks as if he’s reducing unemployment.”
    Sir Arnold: “Or looks as if he’s trying to reduce unemployment.”
    Sir Humphrey: “While as in reality he’s only trying to look as if he’s trying to reduce unemployment.”
    Sir Arnold: “Yes, because he’s worried that it does not look as if he’s trying to look as if he’s trying to reduce unemployment.”

  20. Pingback: Why keep trying?

  21. .

    In all likelihood, then, the economy will still be in a shambles when Mr Obama faces the voters next year, and he will struggle to evade the blame. Whether this dooms him depends on whether it really is the economy that makes or breaks a presidential campaign. The evidence in that regard is not quite as straightforward as the pundits make it sound. There is no clear correlation between unemployment rates and election results, for example. Franklin Roosevelt got himself re-elected under even grimmer circumstances; Richard Nixon won a second term despite a sharp rise in unemployment, and so on.

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  23. Pingback: Business and job creation

  24. .

    Andrew Coyne: The things no party leader will say in Thursday’s debate

    Indeed, for all their emphasis on the things on which they disagree, there is much more on which the parties are agreed. This is perhaps best expressed in the negative: by the things that none of the party leaders will say in the debate, beginning with the above — that the economy doesn’t much care who is in power.

    The government doesn’t actually “run” the economy, at least in the way that people in politics like to pretend. Governments have little ability to influence the rate of economic growth in the short run, at least in the positive sense: though they can certainly screw it up, notably by letting inflation get out of hand. It is achievement enough for any government that it avoids doing so. But I doubt you will hear any of the leaders say, “If elected, I promise not to screw things up.”

  25. .

    Yet there is more talk than action, and the government’s shallow coffers are only partly to blame. Economic growth—which in the absence of meaningful elections is the party’s only claim to legitimacy—trumps everything else. Powerful officials in the provinces ignore rules made in Hanoi, and powerful state-owned firms often seem untouchable. A justice system that deals swiftly and ruthlessly with dissidents fails dismally at enforcing quotidian regulation. Whereas smog-fighters in Beijing have begun closing factories and restricting car usage, bigwigs in Hanoi still struggle to prevent scooter-riders from parking on the pavements. Smouldering ire over pollution will make it harder for the party to cope with political or economic shocks.

  26. .

    Today, almost ten years after the most severe financial crisis since the Depression, a broad-based economic upswing is at last under way (see article). In America, Europe, Asia and the emerging markets, for the first time since a brief rebound in 2010, all the burners are firing at once.

    But the political mood is sour. A populist rebellion, nurtured by years of sluggish growth, is still spreading. Globalisation is out of favour. An economic nationalist sits in the White House. This week all eyes were on Dutch elections featuring Geert Wilders, a Dutch Islamophobic ideologue (see article), just one of many European malcontents.

    This dissonance is dangerous. If populist politicians win credit for a more buoyant economy, their policies will gain credence, with potentially devastating effects. As a long-awaited upswing lifts spirits and spreads confidence, the big question is: what lies behind it?

  27. .

    PUNDITS and political scientists don’t always agree. When it comes to predicting electoral outcomes, though, both tribes assume that the economy is the most reliable oracle. Numerous studies have found a strong correlation between GDP growth and voting behaviour. Whether or not those in power are responsible for the economy, it has been responsible for whether or not they get re-elected.

    You might think that more voters shopping around between parties would increase the importance of objective measures such as economic performance. Instead, the opposite has occurred. Updating data provided by Ms Dassonneville and Mr Lewis-Beck, The Economist has carried out a cross-country analysis of post-war elections in Western Europe. Although there was a correlation between GDP growth and voter behaviour before the financial crisis, we could find none since then (see chart).

    Voters have become deeply hostile towards governing parties, who now lose support regardless of how well the economy is faring. Incumbent governments have lost votes between elections in 29 out of 35 elections since 2008. Seven years after the start of the euro crisis, European economies are at last recovering. But if governments think more money in voters’ pockets will keep them in power, they are in for a nasty surprise.

  28. .

    A good temperament has generally proved to be more important than brains in an American commander in chief. That is why Ronald Reagan, a man of modest intellect but sunny disposition, proved to be a very successful president, while the presidency of the brainy but brooding and paranoid Richard Nixon ended in scandal and shame. A first-class temperament guided John F. Kennedy through the Cuban missile crisis, while the intellectual Woodrow Wilson wound up a broken man after the failure of his grand plan to forge a peaceful, democratic international order following the First World War.

  29. .

    Donald Trump is not the architect of American growth. But in the short term, things are set to go his way

    Mr Trump over-eggs things, of course. He claims each good jobs report and each new peak in the S&P 500 as his own achievement. In fact, he was lucky in his inheritance. The market has risen by 25% since his election, but is up by 195% since 2009. The unemployment rate fell from a peak of 10% to 4.7% under Barack Obama and then to 4.1% on Mr Trump’s watch. His administration says that a mix of deregulation and corporate-tax cuts will spur sustained GDP growth of 3%, well above the 2% average of recent years. As the economy approaches full employment, an astonishing pickup in productivity would be needed to accomplish that.

  30. .

    The province boomed under her government, enjoying record high employment, record low unemployment and sharply rising wages — especially for the lowest paid workers. Under Wynne, the province emerged as one of North America’s top magnets for foreign investment, just behind California, with Google leading the parade. The good times rolled on.

    And Kathleen Wynne took the blame, her popularity plummeting as the economy soared. Suffice it to say that current public opinion in Ontario will seem just as mysterious in the future as it does today.

  31. .

    “Unemployment numbers best in 51 years. Wow!” tweeted Donald Trump, America’s president, last month. Theresa May, the British prime minister, bragged in February that “employment is at a near-record high and unemployment at a near-record low.” The month before, Scott Morrison, Australia’s prime minister, crowed that “more than 730 jobs were created every day last year under our government.” Around the same time his Japanese counterpart, Shinzo Abe, let it be known that “the employment rate for young people is at a level surpassing all previous records.” Hence the swagger of politicians, who believe that they are special. But they are not. Jobs abound because of forces that largely have nothing to do with them.

  32. .

    Polling and consumer confidence
    American voters don’t care about the economy
    If you’re a Republican, it looks great—and vice versa

    James Carville, who worked for Bill Clinton’s presidential campaign, hung a sign in his Arkansas headquarters in 1992. Designed to keep the candidate on-message, it read: “Change vs. more of the same. The economy, stupid. Don’t forget health care.” The second injunction has become famous. It is common knowledge that a strong economy helps an incumbent, whereas a weak one is a liability. But this is less true than it used to be.

    Mr Trump’s election in 2016 was followed by a rapid switch in attitudes. From the six months before the election to the six months after, YouGov measured a 45 percentage-point increase in the share of Republican-aligned Americans who believed the economy was getting better. Democrats became sharply more pessimistic. So it’s not any longer the economy, stupid. It’s the partisanship.

  33. .

    A recent study by George Ward of the Massachusetts Institute of Technology confirmed the political significance of happiness. He looked at what best explains the variation in the incumbents’ share of the vote in 15 European elections between 1973 and 2014. Life satisfaction, he found, was twice as important in explaining how incumbents did as the unemployment rate and about 30% more important than GDP growth. Mr Ward also found that, in these 15 elections, almost half of those who were very satisfied with their lives said they would vote for the incumbent while less than a third of those who were not at all satisfied would. Research from America suggests that happiness has as big an effect on voting patterns there as education.

  34. .

    Does the economy affect elections any more?

    Robots may have swung the 2016 presidential election in America

    The state of the economy must still matter in extremis: would President Donald Trump’s approval rating really hold up if unemployment went from 4% to, say, 20%? But the old rules of thumb about the business cycle and voting patterns are being replaced by a new narrative. This holds that ups and downs in gdp or wages matter less in elections than they used to. Instead, economic factors that shape people’s sense of identity matter more—and could help explain the shift towards populism in many places. Two are particularly important. The first is the sense of insecurity that accompanies globalisation. The second is frustration about sky-high housing costs.

    A raft of new research, meanwhile, has drawn attention to the political consequences of the housing market. A house is most people’s biggest investment, so changes in its value determine satisfaction with the status quo. Homeowners in areas where the property market is buoyant feel richer than those where it is flat. The housing market also affects people’s perceptions of personal freedom. Those living in an area with low house prices may feel trapped, since they would struggle to afford a move to somewhere more vibrant. Such effects may well have strengthened in recent decades, since in many developed countries the gap between house prices in the richest areas and the poorest has widened.

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