What Fun!

In my post last Sunday I emphasized three margins to help you assess presidential election strategies. The turnout margin for Republicans turned out to be decisive, making the other margins irrelevant nationwide. It sure is fun to be right!
Even though the other margins are irrelevant nationwide, the Democrat’s fraud margin is getting interesting play here in New Mexico. Our politically ambitious governor has a huge stake in turning our state blue. How many of the 19,500 “provisional ballots” will be valid? Who decides on whether or not a ballot is valid; and how much individual discretion can the deciders exercise? What percentage of the “valid” ballots will go for Bush? Is the percentage of these ballots for Bush statistically possible? We may not be so dumb that we cannot answer these questions precisely. And if the result turns out to be out of the range of statistical possibility, what will that do to our governor’s reputation? You yourself can watch as the results are tallied. This is fun. Stay tuned.

Assessing Election Strategies

Thankfully the election will be over in two days. The presidential election appears to be quite close. However it turns out, the economic way of thinking may help you assess the success or failure of each party’s strategies.
Economists think at the margin. Margins are net changes from an existing situation. Taking the existing situation as the 2000 presidential election, what strategies may make a difference at the “margin?”
Get out the vote: Post 2000 election analyses suggested that the Democrats were far more effective at getting out the vote. If that is the case, then Republicans likely have more to gain at the margin than do Democrats. Advantage Republicans
Engaging in Fraud: It looks like Democrats are taking political entrepreneurship to new heights! Republicans may be engaging in fraud, too; but so far they have not been caught. How many extra votes will the Democrats get from the “living dead,” dogs, or those “voting early and often?” We will probably be able to tell by examining election results where fraud is suspected. Advantage Democrats.
Legal Challenges: Armies of lawyers from both parties are poised to challenge results in battleground states. One new tactic being tried by Democrats is to challenge results based on voters being “disenfranchised.” “Provisional ballot” rules are somewhat vague and could lead to high-stakes political war. If you want more detail on what is going on check here or here. Advantage: unknown. If the Republicans were sitting on their hands, there would be a large Democrat advantage. The net marginal effect will probably depend on how well each side is able to persuade the public of the righteousness of their arguments. This should be quite interesting if the election is close.

The Nobels

Today, the Royal Swedish Academy of Sciences announced that it will award the 2004 Nobel Memorial Prize in Economics to Finn E. Kydland and Edward C. Prescott. Kydland and Prescott have made some fascinating and important contributions to macroeconomics over the past quarter century. They are often referred to as founding fathers of the Real Business Cycle school of macroeconomics. Earlier schools of thought had held that the economy grows at some underlying steady rate and that it was the macroeconomist’s job to make sense of fluctuations around this rate. Real Business Cycle theorists, however, reject the “underlying rate of growth” argument and instead claim that it is impossible to separate economic growth from economic fluctuations. In 1986, Prescott wrote: “The policy implication of this research is that costly efforts at stabilization are likely to be counter-productive. Economic fluctuations are optimal responses to uncertainty in the rate of technological progress.” In other words, policy makers should leave the economy alone and resist the temptation to “manage” economic growth. When politicians tinker with the economy, they create more problems than they solve. In an election season rife with rhetoric about stimulating the economy, it would be nice if someone paid attention to these insights.
Without question, Kydland (age 60) and Prescott (63) deserve their prizes. Still, as the Nobel cannot be awarded posthumously, it is disappointing to see that the Academy passed over some older and equally deserving scholars such as Armen Alchian (90), Thomas Schelling (83) and Gordon Tullock (82).
On a personal note, as an Arizona State alum, I am particularly proud that my school attracted Edward Prescott (though not before I graduated). Furthermore, I should disclose that as a current graduate student at George Mason, I am taking a class from Professor Tullock. (I have little reason to think the octogenarian will be surfing the web, so rest assured, I do not lavish praise in hopes of a higher grade!)