The presidential election is still months away, and one of the major parties only now appears to have selected its candidate. But, this doesn’t prevent people from speculating about who might be the eventual winner.
Certainly this is a broad topic that can be approached from many angles or disciplines. Historically, however, analysts have found that economic conditions are among the more important set of factors influencing voting behavior. This year – when economic challenges are still obvious – the idea that economics might prevail in the election is even more compelling.
For several decades, one economist has been tracking the relationship between the economy and presidential elections. His name is Ray Fair of Yale University, and his updated book “Predicting Presidential Elections” just hit the bookstands.
Fair doesn’t claim that only economics matters to how we vote. But he does argue that economics is very, very important, and he has put his model of presidential election predictions to the test for almost of century of contests.
Fair writes that there are two big economic factors when we vote: growth and inflation.
For growth he uses two specific measures: how much the economy has grown on a per-person basis in the first nine months of the election year and in how many of the 15 quarters of the presidential term up to the election has the national economic growth rate per person exceeded 3.2 percent.
For inflation, Fair reasoned that most people like price stability. So, he used the average rate of price change (without distinguishing between price rises or price drops) for the 15 quarters of the presidential term up to the election.
Fair also included a couple of noneconomic factors related to the person and party holding the presidency. First, a sitting president has enormous power, and Fair’s statistical analysis found that an incumbent president running for re-election is a plus for that person in receiving another term. But second, people may become tired of the same party holding the presidency. Fair’s work found that the number of terms the incumbent party has held the presidential office was related to lower chances of that party continuing in office.
So how good has Fair’s model of predicting presidential elections been? Very, very good. In the 24 elections from 1916 to 2008, his model correctly predicted 21 of the contests. The three bad calls were 1960, when John Kennedy defeated Richard Nixon; 1992, when Bill Clinton beat George H.W. Bush; and 2000, when George W. Bush won over Al Gore.
Dr. Mike Walden is a William Neal Reynolds Professor and N.C. Cooperative Extension economist in the Department of Agricultural and Resource Economics at N.C. State University.