Economics — not just the economy, but theory — best explains President Trump’s 2020 advantage. While presidents seeking re-election have a compelling track record of victory, this president would appear likely to challenge it.
But where simple incumbency’s explanatory power falls short, a cross-disciplinary tool — behavioral economics’ “endowment effect” — argues there is more to President Trump’s 2020 White House chances than him simply residing there.
Elected presidents have done remarkably well winning re-election. Usually having survived a severe winnowing to get there, once there only three in the last century have lost. And of the eight winners, only Obama failed to increase his popular vote percentage in his second race. Finally, the three elected vice presidents who succeeded a dead president and sought a term — a de facto second one — all won too.
Re-election may have become commonplace, but it has never been easy. Congress’ comparative incumbency cocoon does not extend to the White House.
Presidents have won re-election despite the opposition controlling Congress when they ran and after they won. They have won despite going from the lofty promises of initially seeking office to the hard realities of occupying it. They have won despite becoming old news after four years of microscopic coverage. And they have done it not simply surviving, but with winners increasing their popular vote by a staggering average of 5.7%.
Behavioral Economics And Trump
If any president appeared destined to confound this trend and join Hoover, Carter, and Bush I as elected presidents who lost re-election, it is President Trump. He won office but lost the popular vote, having a far lower popular vote percentage than any of the three who lost. His popularity continues to hover just below 50% — despite enjoying the robust economy that eluded those three presidents. He also remains polarizing, not unlike those three at their worst. And he is more unconventional than any of them.
What then besides incumbency argues for President Trump’s re-election? Politics offers little explanation, but economics does.
The American economist Richard Thaler won the 2017 Nobel Prize for his work in behavioral economics. This branch of economics, in which he was a trailblazer, deals with those quirks that do not appear to follow the classical path of rational individual behavior. This is the study of economic anomalies, and as Thaler writes: “It is in the nature of economic anomalies that they violate standard theory.”
President Trump is a political anomaly who violates “standard theory.” The explanation of an economic anomaly has startling application to why Trump’s re-election prospects are better than many believe.
Thaler writes: “(T)he fact that people often demand much more to give up an object than they would be willing to pay to acquire it — is called the endowment effect.” This irrational preference is also known as a “status quo bias.” Both are forms of “loss aversion” — “the disutility of giving up an object is greater than the utility associated with acquiring it.”
Are You A Buyer Or A Seller?
Thaler and other behavioral economists have noted for decades the seemingly strange occurrence in which people place different values on the same object, depending on their relationship to it: Seller or buyer.
This differentiation applies remarkably well to the difference voters feel about presidents between their first election and re-election. The routine increase in winning presidents’ popular vote percentages argues that even initially rejecting voters come to not simply accept him, but prefer him.
This occurs despite the presidency’s travails that argue for the opposite outcome — and which routinely manifest themselves when voters reject the same party holding the White House for more than two consecutive terms (occurring only twice in 100 years: FDR-Truman and Reagan-Bush).
Behavioral economics through its study of anomalies reveals irrationality in the rational world of classical economics. In the case of the endowment effect, it serves to bring a rational explanation to the seemingly irrational world of American politics. Presidential incumbency advantage seemingly should not exist, yet it resoundingly has.
However, attributing outcomes for America’s most important office on the basis of incumbency alone lacks an explanatory dimension. Behavioral economics supplies that. As Thaler writes: “One implication of loss aversion is that individuals have a strong tendency to remain at the status quo, because the disadvantages of leaving it loom larger than the advantages.”
This helps supply the cause why voters become more attached to presidents once in office — despite obstacles such as president’s and voter’s party affiliation — than they were when they first considered them. It also argues that President Trump, even with questions about his support, is likely to be far harder to un-elect than re-elect.
- Young served under President George W. Bush as the director of communications in the Office of Management and Budget and as deputy assistant secretary in legislative affairs for tax and budget at the Treasury Department. He served as a congressional staffer from 1987-2000.
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Author: TERRY JONES