"Democracy," Winston Churchill declared, "is the worst form of government except for all those other forms that have been tried from time to time." But how bad is it? Looking at public opinion right now, it's hard to escape the impression that it's very bad indeed.
In principle, voters should judge politicians by their actions; they should support politicians who pursue policies that help them, oppose politicians whose policies would hurt them. To do this, however, voters should have a reasonably good idea of what policy is doing.
Unfortunately, when it comes to economic policy -- which should be the easiest kind of policy to evaluate, since its effects are visible in everyone's daily life -- there are few reasons to be optimistic about the relationship between policy and public opinion.
In a sensible world, voters would have both a reasonably accurate picture of what's happening in the economy and a basic understanding of what aspects of the economy are under politicians' control. In the world we live in, neither of these things is true.
Start with the state of the economy. You might be tempted to assume that in a world in which getting and spending occupies a large part of everyone's life, people would have a pretty good sense of how the economy is doing, even if they aren't familiar with national income accounting. In reality, however, economic perceptions are largely shaped by media coverage -- and, increasingly, by partisanship.
Indeed, the role of partisan skew has gotten so large recently that the Michigan Survey of Consumers, probably the most influential gauge of economic perceptions, highlighted it in its most recent data release; you might say that the Michigan Survey has warned us not to trust the Michigan Survey. Here's how consumer sentiment has changed among self-identified Democrats and Republicans since 2019:
So when the White House changed hands, Democrats began offering a somewhat more positive assessment of the economy, while Republicans became vastly more negative. In fact, Republicans now have a more negative assessment of economic conditions than they had in March 2009, the depths of the financial crisis, when the unemployment rate was 8.7 percent and the economy was losing 800,000 jobs a month.
You might be tempted to say that this divergence in part reflects differences in the kind of people who vote for the two parties: Small-business owners, who are strongly Republican, are suffering from labor shortages, while low-paid workers, who tend to vote for Democrats, are experiencing above-average wage gains.
But other data show a huge divergence between what people say about the state of the economy, which is quite negative on average, and what they say about their own personal finances, which is fairly positive. Here are survey results from Langer Research Associates:
This divergence suggests that people's views on the economy reflect what they're seeing on often partisan news media and what their politics say should be happening, rather than what they themselves are experiencing.
So many voters seem to have skewed perceptions of economic reality. Furthermore, to the extent that they see genuine problems, they may not be clear about which problems politicians can solve and which they can't.
Take the price of gasoline, which has risen about $1.50 a gallon from its pandemic lows:
Higher gas prices represent a real hardship for many Americans -- and historically voters have seemed to blame the president when gas prices go up. Yet presidents have very little influence on prices at the pump.
In the current episode, what's driving gas prices is a surge in the global price of crude oil. Here's the price of Brent crude, that is, the price in European markets (which generally moves in tandem with prices everywhere, because oil is a globalized commodity):
Crude is up more than $60 a barrel. And since there are 42 gallons in a barrel, this means that the price of the crude oil used to make a gallon of gasoline has risen by $1.50 -- basically accounting for all of the rise in the price to consumers. That is, developments outside the control of any president are driving a price rise that is surely one factor in President Biden's approval ratings.
So we're living in a nation with many voters who seem to have both a distorted view of the state of the economy and false beliefs about what aspects of the economy politicians can affect. How is democracy supposed to function well under these conditions?
Just to be clear, I'm not condemning voters for not being economic experts. People have children to raise, jobs to do, lives to live. Expecting them to be sophisticated policy analysts is unreasonable.
But the fact remains that public perceptions have become extremely disconnected from reality -- economics is just one example. It's a real conundrum. And if you're waiting for me to propose solutions, well, not today.
Quick Hits
People are angry about inflation.
Bottlenecks and the bullwhip effect.
The case for patience on inflation.
