How Behavioral Economics Explains Politics Today
The classical view of politics and voting emphasized the notion of a rational voter. This person had a particular set of positions, and they ascribed various levels of importance to each. When searching for candidates to support, voters would identify those who aligned closest with their policy preferences.
This led to the idea of the median voter as being pivotal in elections because if voters are trying to find candidates closest to their position, each candidate should appeal to the median voter to maximize their election prospects and capture the most votes.
This traditional view of voting powered the majority of political analysis and understanding of voting behavior. We assumed voters had legitimate policy positions and elected candidates who promised to carry out those policies, voting them out if they failed to do so.
Much research (and indeed it seems recent examples from US politics) has called this into question. Democracy for Realists, by two political scientists Christopher Achens and Larry Bartels, does a good job of summarizing a lot of the empirical research showing that this idea of the rational voter is a fallacy (even if the headline study around shark attacks seems questionable).
The question becomes what is a better model for voting and political behavior?
Similar to how economics has gone through a revolution under behavioral economics that appears to match experimental results of individuals better than the standard model relying on rationality, political science has improved upon its understanding of how people vote by turning to behavioral insights.
There are a few key principles from behavioral economics that are relevant to political science and voting, which can shed insight on today’s political landscape.
These principles have to do with how people make decisions. In the traditional model of voting described above, voters do not suffer from these biases/limitations.
Reference point adaptation
A common problem today is the deluge of news topics that differ from week to week. It seems that each news cycle produces a new thing to be outraged about while people move on completely from the previous week’s topic. There is little consistency or focus over time.
How do we make sense of voter behavior in this climate?
A rational voter would be able to sort through the information and identify the singular issue that is most important, focusing their outrage on it, but an irrational voter would not, suggesting voters in this context do not behave rationally.
The way we can understand this behavior is through reference point adaptation. The idea is that voters have a reference point against which they evaluate news events and this reference point is constantly adapting to current events as the news cycle evolves.
When an outrageous thing happens, it upsets voters because it is different than their reference point, but after it happens and the reference point adapts to that event, old news can no longer outrage because it is not sufficiently different from the reference point.
Under this model we can understand why consistent outrage is hard. People become accustomed to previous events, requiring new things to create outrage or draw attention. In effect voters become numb to events that are similar to things that occurred in the past.
It works well for understanding the news cycle under this presidency and for understanding the incentives of news organizations who cannot acquire viewers by presenting the same story again and again. They need to move on to new topics after a sufficient period of time.
Loss Aversion
Rationality requires people to treat gains and losses the same; however, there is a large literature showing that people exhibit the phenomenon of loss aversion where by losses hurt much more than gains make them happy.
If we view politics through a tribalistic context whereby voters that are part of a political party see it as a contest between their side and the other, it is easy to see how partisan politics arises with loss aversion.
Voters want their team to win, so they will be willing to vote for candidates of their side regardless of their policy positions and qualifications.
This helps explain why many Republican voters elected Trump despite his low favorability amid a desire to not lose the election, and it also explains the rise in straight ticket voting as voters increasingly just choose candidates who are members of their political party above any other concerns.
A question is why is this loss aversion increasingly important now with the rise in tribalistic politics?
There is no clear answer, but a lot of empirical evidence shows the two parties drifting apart ideologically and sorting themselves into groups with little overlap (along race, gender, age, education, etc), highlighting the differences between them and forcing voters to choose sides.
Myopia
Rational voters are time consistent. They are able to appropriately weight decisions over time in terms of balancing short term and long term costs and benefits. What matters is the net present value of a policy, and voters will choose the best policy to maximize this.
Myopic voters are those who overly discount the future relative to the present and are in effect short sighted. They might make suboptimal decisions in the long run to maximize value today.
This phenomenon can help explain why elected officials are not punished for passing policy that is bad for the long term and why they are punished for and disincentivized from enacting laws that are only beneficial in the long run.
Bounded Rationality & Heuristics
It is no secret that politics requires the tackling of complex issues. What is the right anti-poverty policy? What are the merits of taxing capital gains? How should we structure financial regulation to avoid another Great Recession?
Typical models of rationality assume voters are capable of analyzing information to make sense of these complex problems, which often require many rounds of calculations and a sophisticated understanding of particular domains.
Bounded rationality recognizes that voters are not always capable (nor do they have the time) to fully dig into the research and data when making policy choices. Often they turn to heuristics or signals for policy positions that they should support.
These signals often times comes from the political parties they themselves support. If you are a registered Democrat and agree with the Democrats on certain policy positions who adopt a particular stance on another issue you know less about, it seems reasonable to assume you would support that position too if you knew more about it.
Hence voters often adopt policy positions of the party or candidates that they support as opposed to forming them through any rigorous discovery process.
Putting It All Together
Behavioral economics is able to model specific phenomenon that we see in voter behavior much better than the standard, rational model is. It provides insights into how people actually behave and provides a better description of reality.
To understand the political climate today, we need to change our understanding of politics, adopting the behavioral model and using that to inform political analysis and commentary.
Indeed, the behavioral model strongly suggests that the underlying currency of voters is not policy positions because they often select candidates based on the side they are on and take policy cues from elected officials they support, meaning that the entire framework of voters holding elected officials accountable and identifying candidates based on their positions is unrealistic. This calls into question the entire notion of the rational voter.
What then drives support of candidates? There is no clear answer, but a promising approach that captures behavioral principles is symbolic politics.
It emphasizes that voters support candidates who symbolize big themes or ideas that they believe in. Voters could support the Democratic Party because they strongly believe in racial equality, helping the poor, or protecting minority rights while voters could support the Republican Party if they believe in fiscal responsibility, small government, national security, or an aggressive foreign policy. To the average person these are all characteristics that each party is stereotypically thought to represent.
In this framework, voters self select into parties on the basis of these identities and which party better appeals to them, forming positions from elected officials in those parties and information sources aligning with their tribe because of heuristics and bounded rationality.
Then during elections, voters animated by loss aversion select candidates from their party, regardless of policy consistency, adapting their view points over time as candidates change or news events pass, overweighting the short term impact of these policies over what might be better in the abstract long term.
At a high level this seems to capture the current political climate quite nicely.
