Instead of a page turner, the story of 2016 politics has turned out to be a horror story that has me afraid to turn the next page for fear of what might be next.
These unexpected events scream out for an explanation, and many have been suggested so far.
Rational Explanations
Those explanations I have seen have tried to describe the actions of voters in the UK and US as rational responses to current circumstances. They argue, for example, that voters have finally turned against the immigration and free trade policies that have left many in the working class behind.
Before considering whether immigration and free trade are the causes of these problems, let's first consider whether the claimed problems even exist at all.
Immigration
Immigration is deeply unpopular amongst US and UK conservatives who feel that the gains of immigrants are coming at their expense. While many careful studies have found that immigration raises the wages of native-born workers, let's ignore that question and instead ask "is immigration currently happening?"
One would naturally expect that a backlash against immigration in the current political cycle must be a response to an influx of new immigrants. In fact, over the past 7 years (going back to 2009) net migration from Mexico to the US has actually been negative. That is, more people have been moving from the US to Mexico than vice versa.
It's hard to see how the recent political backlash against immigration could be a rational response when immigration isn't even happening. At present, Donald Trump's wall would not keep Mexicans out but rather keep in those people trying to get into Mexico.
Crime
Trump has claimed that crime is out of control. In fact, despite recent tragedies making news headlines, crime rates are actually reaching historic lows.
Trump has also connected crime to immigration, infamously suggesting that Mexico is "sending us rapists". However, crime statistics show that immigrants are, if anything, less likely to commit violent crimes than native born citizens.
Wages
Talk of "stagnant wages" has been another mainstay of prior explanations of the current political climate. This explanation says that middle class workers are not seeing any of the gains that have accumulated to the rich in recent years. Hence, they are being left behind by a "rigged" system and are turning Donald Trump (and Bernie Sanders) for help.
Again, let's ignore the question of whether the system is rigged and instead focus on whether the described symptom, stagnant wages, really exists.
First, let me point out that the use of "wages" rather than "compensation" in these statistics is already suspicious. After all, we know that a large part of the compensation for many employees comes from employer-provided health insurance. We also know (1) that health insurance costs have continued to increase and (2) that more companies are providing health insurance due to the employer mandate in Obamacare. Hence, even if wages were flat, the above facts would strongly suggest that compensation has actually been increasing — it has simply been coming in the form of increased health insurance payments rather than increased wages.
Let's set that issue aside as well and instead ask whether the problem of stagnant wages actually exists. Here too, the answer appears to be no. At least for prime age (25-55) workers, wages have been steadily increasing throughout the recession. In the last year, wage increases have been on par with levels from before the Great Recession. When you consider the fact that interest rates are much lower at the moment — suggesting inflation is lower than before the Great Recession — these wage increases are even larger than they seem.
Again, it seems hard to argue that the current political climate is the result of stagnant wages, when wages are actually increasing at what was previously considered a solid rate.
Unemployment
Increasing wages are great for those with jobs, but perhaps we have unusually high unemployment? That does not appear to be the case. The current unemployment rate is below 5 percent, which is considered quite good.
Conservatives have instead pointed to the decline in labor force participation and suggested that the "real unemployment rate" is much higher. However, after accounting for an increase in retirees (Baby Boomers) and more people in school, that decline could mean, at the very most, 2.6 million more unemployed. Even that likely overestimate would only bring the unemployment rate up to 6.6 percent, which is comparable to the unemployment rate in the early 1990s and early 2000s. Those were certainly not roaring economies, but they didn't lead to political movements like we are seeing now.
Steel
Trump has complained about US steel companies being unable to compete with China due to (alleged) unfair trade practices. As this article explains, US steel companies are actually quite competitive. Over 70 percent of all steel used in the US is made in the US.
Manufacturing
Another common complaint is about the alleged decline in US manufacturing. However, US manufacturing output is actually near an all-time high. In fact, despite all the talk about China stealing manufacturing job from the US, right now, it's actually China losing manufacturing jobs to us!
Trade
Steel and manufacturing are two examples of industries in which many claim US companies have lost out due to free trade. As we just discussed, in neither case do the facts fit neatly with this story.
In general, economic theory tells us that free trade almost always benefits both parties. However, it also says that some (typically small) groups can be harmed by free trade in the short run. As a result, the US has government programs to redistribute some of the benefit of free trade to those who were harmed by it.
Perhaps those supporting Trump and his anti-trade platform are in the latter groups. The New York Times has done some investigating. In both cases they examined — where cities had fallen on hard times, blamed it on free trade, and are supporting Trump — they found that the declines were not due to trade at all. Businesses had moved to other parts of the US or simply lost out due to changing consumer preferences. In fact, in both cases, they found that those cities were actually being kept afloat partially by freed trade, and they would be in much worse shape without it.
Overall Economy
The evidence suggests that the average American is not oblivious to all of the improvements mentioned above. Consumer sentiment is high as are both the percentage of people expecting to be better off next year and also the percentage that say they are better off than last year. The improvement in the latter measure is as high as it has been since the late 1990s.
Everything is Amazing and Nobody is Happy
The economic expansion since the end of the Great Recession is already the fourth longest since 1850 and it shows no signs of stopping. Wages are increasing at a solid rate. Unemployment is somewhere between great and okay depending on how you measure it. Crime is down. Even race relations have been improving.
Despite all of this, there remains deep unhappiness and anxiety. The same article linked above points out that, while consumer sentiment is high, there continues to be low satisfaction with "where the country is going". The latter trend matches the spirit behind Brexit and Trump, but it doesn't seem to be rationally explainable by most commonly cited causes discussed above. We will have to look elsewhere.
Global Trends
One common thread between Brexit and Trump is the rise of nationalism. Support for both is based on dislike of immigration and includes calls to put the UK/US first.The US and UK economies have gone through similar journeys in recent years, which would seem to support economic explanations for these dramatic political events. However, any explanation for these trends should also need to explain similar events happening around the globe in countries that do not match this pattern.
For example, as Scott Sumner has asked, "Why is nationalism on the rise in China, where real wages... have been soaring at double-digit rates in recent decades?" And "why is right wing populism on the rise in Austrlia, despite the economy performing brilliantly over the past quarter century?"
We will have to look elsewhere for an explanation that fully fits these facts.
The Misattribution Theory
One common problem for all of the claimed causes listed above is that they seek to find explanations that are rational, that describe these political events as a reasonable response to the situation voters find themselves in. However, we know that all humans are irrational (at least partly).
Indeed, as Bryan Caplan has pointed out, it is generally accepted that participants in the stock market, where billions of dollars are on the line, often act in a clearly irrational manner, so why would we expect voters to behave in a way that is fully rational?
Instead, we will look for an explanation amongst the long list of experimentally demonstrated cognitive biases. For me, the most compelling explanation of recent political events comes from the psychological concept called "misattribution".
Misattribution
In 1974, Dutton and Arons performed the following experiment. A female interviewer would ask questions of men who had just walked across a long suspensions bridge. Afterward, she would give them her phone number in case they had further questions. The experimenters anticipated that those men who found the interviewer physically attractive would be more likely to call back.
The experiment considered two different groups of men. For those in the first group, the interview took place immediately after they crossed the bridge, while their hearts were still beating rapidly from the excitement / fear of being a long way above the ground and their breating was still rapid from the exercise. For those in the second group, the interview took place after the men had a chance to rest.
The experimenters hypothesized that, since rapid heart rate and breathing are signs of physical arousal, the men who were interviewed immediately might confuse those bodily signals for evidence that they were aroused by the female interviewer. As predicted, more of the men interviewed immediately choose to call the interviewer afterward.
In short, the idea of misattribution is that our feelings can influence us in ways of which we are unaware.
A Theory of 2016 Politics
My hypothesis is that recent political trends are the result of misattribution of the feelings of anxiety caused by rapid change in the world in which we live:
- Economic Change: The rise of automation is making many jobs obsolete. In fact, for both of the examples cited above, steel and manufacturing, the higher-than-ever output of these industries achieved with lower-than-ever employment is the result of automation. China has not been stealing manufacturing jobs (at least not more than temporarily), rather these jobs are being automated away.
- Technological Change: The aforementioned automation is technological change, but it is far from the only example. The rise of AI is likely to affect the jobs of those in industries beyond manufacturing and materials. Self-driving cars and trucks, while saving many lives, also raise the specter of job losses in transportation.
- Social Change: While gay marriage has been a political issue for over a decade, the move toward acceptance of transgender citizens is a recent change. Likewise, the recent videos of police shootings of African-americans are causing acceptance among many of the long claimed bias of police against them.
Change is not the only cause of anxiety, however. The threat of terrorism is also a cause. Indeed, the very goal of terrorism is to cause such feelings. Despite the fact that the average person is still more likely to accidentally drown in a pool than be killed in a terrorist attack, the threat of such attacks is ever present in many of our minds.
All of these causes lead to deep feelings of anxiety about our jobs, our society, and our very lives. This response is entirely rational.
I suspect, however, that many are feeling this anxiety and, like the men being interviewed after walking across the bridge, misattributing its cause to explanations in front of them. If we believe (or are told) that China is stealing our manufacturing jobs, these anxious feelings are bodily signals confirming that we are right to be concerned about China. If we believe (or are told) that immigrants are coming to America and causing crime, the anxious feelings from our bodies tell our minds that those fears are real and reasonable.
The evidence above demonstrated, however, that these fears are not reasonable. Wages are not stagnant. Unemployment is not high. Crime is not increasing. Hence, if Americans have a bad feeling about "where the country is heading", then we have to question the true source of that feeling.
Unlike the economic explanations, the misattribution theory fits with examples beyond the US and UK. The types of change described above are not occuring only in the US and UK but all across the world. For example, while the economies in China and Australia have performed very well in recent decades, they are experiencing the effects of automation and changing technology. Thus, the misattribution theory offers an explanation for the rise of nationalism in places around the globe.
Unlike the economic explanations, the misattribution theory fits with examples beyond the US and UK. The types of change described above are not occuring only in the US and UK but all across the world. For example, while the economies in China and Australia have performed very well in recent decades, they are experiencing the effects of automation and changing technology. Thus, the misattribution theory offers an explanation for the rise of nationalism in places around the globe.
Conclusion
While most analyses of the visible trends in 2016 politics take voters stated beliefs at face value, it is reasonable to be suspicious when voters blame their problems on their usual bogeymen. On the right, they blame foreigners, whether residing in the US (immigrants) or in their native countries, as well as those of different religious and ethnic backgrounds (e.g., Muslims). On the left, they blame corporations, so much so that a candidate simply willing to accept a no-strings-attached donation to their campaign is then viewed as untrustworthy.
While others may claim that these are recent trends, in response to the current social and economic conditions, that is simply not the case. Survey data shows that the median voter has, for a long time, been both a nationalist (in line with fears on the right) and a socialist (in line with fears on the left).
Distrust of foreigners and/or corporations has been a consistent tradition in the US (and I suspect in the UK as well), making it fruitless to try to view them as responses to recent changes in economic and social conditions.
It is certainly possible that recent changes have caused an increase in enthusiasm for these views, but as I said above, we should be naturally suspicious when voters respond to changes by blaming the usual bogeymen, even if they do so with increased enthusiasm. The median voter has demonstrated a consistent tendency to blame problems on these entities, making their claims that "this time it's really true" hard to accept.
This is not to say that we should be skeptical of the median voter's testimony all together. Each voter is, of course, the primary expert on their own condition, so we should take seriously their claims about the state of their own finances, for example. However, while there are certainly parts of the country that remain in bad economic and social condition, we saw above that the average voter admits that their own economic condition has improved more in the last year than at any time since the 1990s.
It seems to me that misattribution is a much better fit to these data. The median voter is anxious about a great many changes taking place in society today. I feel these same anxieties myself. But the tendency to explain these anxieties as a rational response to worsening conditions is at odds with the facts, and the claims that these (nonexistent) worsening conditions are the fault of the usual bogeymen should be viewed with deep suspicion.
The world is in fact getting better in ways that few would have imagined only decades ago. The world is now safer, richer, and healthier than ever before in human history. I agree with Mark Perry that the drop in world poverty to below 5% worldwide represents the greatest human achievement in our history. Free trade and globalization have lifted over 1 billion people out of poverty in the last few decades — an achievement that cannot be understated.
While the rapid economic, technological, and social change is a cause of anxiety for many, we must fight against our natural inclination to turn anxiety into fear and anger toward those we distrust. As the facts above demonstrate, the vast majority of all the change we have seen has been for the better. The future ahead is safer still, with self-driving cars; healthier still, with continued progress in the fight against cancer and heart disease; and richer still, with rise of AI making legitimate the prospect that many will have no need to work at all. The only thing that can derail that progress is giving in to our fears and turning on each other.
