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August 16, 2004

The Ray C. Fair Presidential Vote Equation

Ray C. Fair is a Professor in the Department of Economics at Yale University and a Fellow of the International Center for Finance at Yale. For more than 25 years he's been studying what he calls "The Presidential Vote Equation", which uses economic events to predict the results of presidential races. The average error of his equation is 2.5% of the vote. As of July 31st, 2004, the Presidential Vote Equation predicts that President Bush will receive 57.48% of the two-party votes.

Some objections were raised to Dr. Fair in an interview with New York Times' Deborah Soloman in yesterday's online paper:

SOLOMAN: In your book ''Predicting Presidential Elections and Other Things,'' you claim that economic growth and inflation are the only variables that matter in a presidential race. Are you saying that the war in Iraq will have no influence on the election?

FAIR: Historically, issues like war haven't swamped the economics. If the equation is correctly specified, then the chances that Bush loses are very small.

SOLOMAN: But the country hasn't been this polarized since the 60's, and voters seem genuinely engaged by social issues like gay marriage and the overall question of a more just society.

Note the political bias in her statement: "...a more just society."
--Jeff

FAIR: We throw all those into what we call the error term. In the past, all that stuff that you think should count averages about 2.5 percent, and that is pretty small.

Given Dr. Fair's track record, that certainly makes me feel better, as I have just been reading another website which tracks the polls of each state to learn which candidate is currently being favored to receive that state's electoral votes, then the number of electoral votes going to each candidate is reported. As of this morning, they were predicting 327 electors to John Kerry and 211 to President George W. Bush. Deborah Soloman also asked Dr. Fair about the descrepancy between his equation's predictions and the polls:

SOLOMAN: The polls are suggesting a much closer race.

FAIR: Polls are notoriously flaky this far ahead of the election, and there is a limit to how much you want to trust polls.

...

SOLOMAN: Are you a Republican?

FAIR: I can't credibly answer that question. Using game theory in economics, you are not going to believe me when I tell you my political affiliation because I know that you know that I could be behaving strategically. If I tell you I am a Kerry supporter, how do you know that I am not lying or behaving strategically to try to put more weight on the predictions and help the Republicans?

SOLOMAN: I don't want to do game theory. I just want to know if you are a Kerry supporter.

FAIR: Backing away from game theory, which is kind of cute, I am a Kerry supporter.

SOLOMAN: I believe you entirely, although I'm a little surprised, because your predictions implicitly lend support to Bush.

WHAT is she saying here? She's surprised that a fellow liberal would report the facts (i.e., tell the truth, be honest, etc.) if those facts would tend to support a non-liberal political agenda?
--Jeff

FAIR: I am not attempting to be an advocate for one party or another. I am attempting to be a social scientist trying to explain voting behavior.

SOLOMAN: But in the process you are shaping opinion. Predictions can be self-confirming, because wishy-washy voters might go with the candidate who is perceived to be more successful.

FAIR: It could work the other way. If Kerry supporters see that I have made this big prediction for Bush, more of them could turn out just to prove an economist wrong.

SOLOMAN: Perhaps you could create an equation that would calculate how important the forecasts of economists are.

FAIR: There are so many polls and predictions, and I am not sure the net effect of any one of them is much.

SOLOMAN: Yes, everyone in America is a forecaster. We all think we know how things will turn out.

FAIR: So in that case, no one has much influence, including me.

The question about the accuracy of polls was especially interesting to me given a conversation that I had yesterday with my father. He said that during a presidential race years ago, there was a very public nationwide campaign to get everyone to lie when asked to take part in a policial poll (every poll, but with special emphasis on exit polling on election day). Given that there are so many people of his generation and that these people were exposed to and many influenced by this admonition, I'm finding within myself a great deal of skepticism when it comes to polls (Howard Dean's first showing in the first primary [this is "pre-scream"] after topping the polls for so very, very long, is also instructive).

The Presidential Vote Equation's lowest prediction in recent times was 56.3% of the two-party vote for President Bush. This prediction took place in April of 2003.

Posted by Jeff at August 16, 2004 11:38 AM

Comments

I heard this interview on the radio today. Pure bias.

Posted by: Sean at August 16, 2004 04:39 PM


Fair is backing off a little, claiming that it's possible economic factors are different now, because in the past economic growth and job growth have gone together and there is some reason now to think that's not happening (depending on whether you believe the payroll or the household numbers). So if it is true that our economic growth is not resulting in new jobs, the model may fail. If it is the case, however, that the payroll numbers are just hiding the fact that so many more people are self-employed than ever before, then the model will probably still hold.

It'll be interesting to see.

Posted by: Dean Esmay at September 1, 2004 12:49 AM


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