John Cochrane reproduces a graph showing a post-election surge in economic confidence among Republicans and a corresponding decline in economic confidence among Democrats. As John points out, this raises doubts about the meaning of surveys of economic confidence.
I suppose when they all move in unison it’s a signal of something, but overall the responses seem much more volatile than any underlying business cycles.
The implications of results like these could be very large indeed. There are two possibilities which are not mutually exclusive.
1. If the responses are sincere, then perceptions of general conditions are more heavily influenced by tribal identification than real factors.
2. The public is by now so familiar with the preference-cascade / sounding-board purposes of surveys that many participants are consciously ‘stuffing the ballot box’ with a view towards affecting the public influence of the published result.
If each group (R,D,I) was equally represented then you have a 60 percentage point increase for Rs, a 10 point increase for Is and a 25 point decrease for Ds. The net result is a substantial 25 point increase in improved economic confidence.
All this data should do is make you very concerned about sampling issues in surveys, the net result doesn’t change is its veracity unless you are worried that knee jerk partisan reactions are non random but non predictably spread.
Another possibility is that the two parties have become significantly segregated by industry/economy/location, and this graph correctly measures economic confidence in the specific industries or locations.
After all if one politician supports industry A and the other politician supports industry B, you can expect voters in A to have more confidence when the first politician is elected. Though this possibly says that government has (or is perceived to have) too much control over which industries are successful.
I mean, if we look back at the last 8 years on the graph, maybe the Democrats were correct to spike upwards in 2008 if the coastal economies did well, while the Republicans were correct to stay depressed if the economies in rural/flyover America were doing poorly. Which ends up mapping to the 2016 election results.
Good point. Democrats in government (or government-funded) jobs, for example, have less reason to be optimistic than Republicans in the energy industry.
If PSST holds, along with Rohan’s point, then this could be expected to be exactly correct. Had Hillary won, a “renewable energy economy” may have been more sustainable. Having Trump makes the status quo more sustainable. Then we need to explore what people mean by “confidence.”
It is interesting that John Kerry says Trump just “put America last” with a straight face and he seems like he really believes that.
Anybody know of any stocks only held by Democrats/Republicans?
More seriously, where is the best place for prediction markets? Making fun of people in hysterics is good, but making money for doing it would be great.
I’m still waiting for “Mr. Trump’s toxic nationalism” and I plan to keep waiting.
Of all possible explanations, the one that most fits is that people are completely and utterly incompetent at answering the question “do you think the economy is getting better?” and therefore, lacking any sense whatsoever, take the costless leap of rooting for their side.
Can we change this poll so it asks the question only to Scott Sumner, Arnold Kling, and Don Boudreaux — three people who have similar and educated views of the economy but differing views on monetary signals? That would at least make the result more useful.
Yeah, the last thing I would use the results of this poll for is to help me determine if the economy is heading up or down.
This effect goes back a really long time. It’s not new, and it’s present in other cultures.
The economy did improve over the last years, not at a great rate but gradually, not necessarily for everyone, but most, so we have one party that sees reality and one that refuses to. The question is whether this will reverse. In the near term perhaps, in the longer term perhaps not. Both were correct at the end of the Bush administration.
Really? Which party is pessimistic now as the economy continues to grow?
You really have to be carrying a lot of water for your party to not see the mismatch between the hysteria and reality these days.
The economy continues on but there is less room for growth as we are nearing peak employment and this may be anticipatory but early. We are closer to the end of this cycle than the beginning.
In this I am taking it at face value that they are or are supposed to be responding to the economy. If they are responding to broader concerns then these may be valid but misleading.
What was the media saying by the end of the 80s? They couldn’t claim the economy hadn’t grown. So they said the boom was sinful and unholy.
We got denunciations of greed and wickedness. They took The Book of Lamentations as their style guide.
Whereas at the start of the 80s they were preaching from The Book of Revelations. Prophecies of apocalypse. Reagan was the anti-Christ.
Republicans tuned it out, and even Democrats didn’t listen all that seriously to Dan Rather’s sermons.
Now Anderson Cooper’s low on economic confidence. Samantha Bee’s low on economic confidence. If growth ever gets back to 80s levels, the TV hosts will make a different argument. Or they’ll focus on their climate models, or the Russian invasion of America.