The economy and elections

Commenter Krystian asks:

Do government get tossed out because of difficult economic times, or more because of their own incompetence plus the presence of difficult economic times?

Andrew Leigh has asked himself exactly that question, and come to the (data-laden) conclusion that unemployment does affect election results but ‘luck’ – global or national economic conditions – counts for more than ‘competence’, how well a jurisdiction is doing relative to the gobal or national economy.

He puts this down to

something psychologists call ‘the fundamental attribution error’, which is the fact that humans aren’t very good at separating situational factors from ability when making assessments.

But it seems voters used to believe that governments have more influence over the economy than they do now. The Australian Election Survey has a question about what effect respondents think the government will have on the economy twelve months from now. The first couple of times the question was asked, in 1987 and 1990, about 60% of respondents thought that the government could have either a good or a bad effect.

Subsequently, only about 40% have typically believed the government would have an effect, dropping to around 30% for the 2001 and 2004 elections before heading up again in 2007. Perhaps the early 1990s recession broke confidence in government economic management, or perhaps the increased role of the RBA and global trade have encouraged voters to locate economic influence elsewhere.

However there were some polls last year suggesting that the public was supporting the then (clearly wrong!) macroeconomic wisdom that contractionary fiscal policy was necessary. So perhaps things are trending back towards people believing government can make a difference. But is that good news or bad for Kevin Rudd? In the short term, probably good – opinion poll rewards for his do something, anything approach. But in the longer term, it is bad news as it means he will share more of the blame for a prolonged recession.

Update: An Essential Media poll finds the public almost equally divided on whether or not the government can protect the Australian economy from the effects of the GFC.

2 thoughts on “The economy and elections

  1. Andrew, that’s a neat way to look at it. One other relevant finding is that Justin Wolfers and I noticed that Australian voters are less responsive to the economy than US voters. I wonder if you can find a similar question that’s been asked in US election surveys.

    As to the fluctuations in Aussie voters’ beliefs, it looks like they’re answering the question “will the government have a big impact?” rather than “does the government have the potential to have a big impact?”. You’d expect the former to be counter-cyclical, while the latter should be roughly a function of the tax take.


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