Monday, August 9, 2010

How to Lose an Election Without Really Trying

New York Times opinion "How to Lose an Election Without Really Trying" (August 7th, 2010) discusses political "amnesia", a concept that sounds particularly non-economical. Corrections suggests an alternative model.
Betting on amnesia is almost always a winning, not a losing, wager in America. Angry demonstrators at health care town-hall meetings didn’t remember that Medicare is a government program, and fewer and fewer voters of both parties recall that the widely loathed TARP was a Bush administration creation supported by the G.O.P. Congressional leadership.
There may be a real reason for political "amnesia." We might take a "regime switching" model as an explanation. The republican party can take on two values. One in which most Republicans want to reduce government intervention, and one in which they do not.  Individuals do not know what state or "regime" Republicans are in, but have signals.  (regular readers will see the familiarity between this Regime Switching model and our earlier article introducing the Kalman Filter).

In any case, we can generate a random variable in which Republicans are in a "regime."  They have a 95% chance of staying in whatever regime they are currently in next period, and a 5% chance of switching regimes.  In our case, we have a signal with noise which broadly tracks the true regime (because of the noise, we can get "false" signals).  In this case, we observe the following signal.  As the blue line is close to one, we see high legislative activity and Republicans are likely to be in a pro-government mood, though they may or may not be.  Using the blue line, our probabilities, and a standard regime switching model, as James Hamilton outlines here (gated) and here (ungated), we can make a "best guess" of what our regime is.  Graphically below, we display our signal in blue and our "best guess" as a red dotted line.  The red line is the "probability"we assign to each state (click to enlarge).

A measure of our success is the following graphical display, in which we again graph the probability that we assign to each state, while also graphing the "truth" (something we wouldn't ordinarily observe) (click to enlarge).  We call this a 'Hamiltonian' Regime Switch simply because we're following Hamilton's outline, not in relation to the mathematical concept.  Note that times when our guess (red dotted line) spikes and our regime (solid blue) doesn't change  were noise that lead us to believe regimes switched when they did not.  Also note that we are (asymptotically) efficient with our estimator--linear weightings cannot do better, ex ante.

This modeling situation appears to be more appropriate than suggesting "amnesia."  We can extend this situation in the case of having no signal as well.  In the case of having no data and predicting what regime or state we are in, or the case of forecasting what state we will be in at some future period, probabilities will slowly converge to our unconditional probabilities--a 50/50 probability of being in Regime 1 or Regime 2.

This seems to be an adequate story for voter "amnesia."  Voters observe strong signals of the regime Republicans are in when they have legislative power.  This may be the Medicare Prescription Drug Improvement and Modernization Act of 2003, for instance.  In such a case, voters understand with a clear signal "where" Republicans are.  When they are out of power for a time, or with a noisy signal, they may be less sure than they were two years ago--they recognize the regime can switch.

Corrections suggests that this sort of model is more satisfactory and economical than a model positing "amnesia" in voters.

1 comment:

  1. The challenge is how to vote for a candidate who represents your philosophy. For practical purposes voters likely fall in one of two persuasions: (1) Those who believe in the values of Classical Liberalism and (2) those who believe in some variant of the collectivist statist creed of the Left. The creed of Classical Liberalism focuses on maximization of liberty through: small frugal limited government, low taxation, individualism with individual empowerment to make the important decisions in their lives and individual responsibility for the consequences of those choices, free enterprise, and individual selection the philosophy or religion they choose (historically some variant of Christianity most commonly) as a source of values. The creed of the Left owes its roots to Marxism and to Utilitarianism focusing on the maximization of the good of the many through social controls manifested through: large expensive unlimited intrusive government, high taxation, group rights with government making or influencing all the important choices in the life of an individual and their family, enterprise either shackled by regulations or co-owned or directly controlled by government and inculcation of a state ideology through a government controlled educational establishment and captive media. If the icon of Classical Liberalism is the yeoman farmer and the small businessman, the icon of the Left is the welfare dependent or the union (preferably government union) employee.
    Those who believe in the collectivist statist ideology have a clear choice at this time –Democrats. there was some uncertainty since the "Moderate Democrats" claimed they would deviate from the normal collectivist, statist Democrat line. But given that virtually all of them voted all the time for the recent orgy of state expansion in the first two years of the Obama/Pelosi/Reid period, this group is now known to be ideologically statist/collectivist.
    Those who believe in Classical Liberalism had a more difficult choice. One group of Republicans, RINOs, rose with the Democrat-lite Bush "compassionate conservatism" adopted the Democrat model of purchasing votes by raiding the federal treasury. A second group of Republicans stand foursquare in the camp of Classical Liberalism. It will take time for the Republicans to regain trust and articulate their new coherent message (an updated version of the Reagan/Thatcher/Goldwater message) – meanwhile the Democratic market share is declining but the people abandoning it are moving into the moderate group not joining the Republican party – a situation where 25% of registered voters are Republican but >40% of registered voters identify themselves as Conservatives.
    This uncertainty led to the rise Tea Party Movement, a movement completely aligned with Classical Liberalism, American Exceptionalism, Individualism and Christianity. The Tea Party movement has the effect of purging the Republican party of RINOs in all except the most urban, leftist jurisdictions. This process will not be complete in 2010 because of a combination of local factors and the fact that only 1/3 of the Senate is up for election at a given time. So it will take a few cycles. But in a center-right nation facing an assault by the global left, the demographically rising forces of Islamofascism, the emerging crushing burden of paying off past excesses and the need to revitalize the American economy and business the change must occur.