This is In Real Terms, a column analyzing the week in economic news. Comments? Criticisms? Ideas for future columns? Email me or drop a note in the comments.
If Donald Trump wins the Republican presidential nomination, it will probably be because of his policies on trade. Or perhaps immigration. Or maybe it’s his get-tough foreign policy that’s really connecting with voters.
The truth is, we aren’t very good at assessing what issues drive voting behavior. Asking people who they are going to vote for is one thing; understanding why is another. Polls and surveys give valuable hints, but they often fail to explain results on Election Day, let alone predict them. Now a group of researchers think that economic theory might point the way toward a better approach.
The existing tools for assessing the public’s opinion on issues are blunt instruments. We can ask voters to rank issues by importance, for example, but that doesn’t reveal how much more a voter cares about one issue than another. If a voter’s top three issues are guns, immigration and abortion, does he consider all three roughly equal in importance? Or is he a single-issue voter who will base his decision almost entirely on a candidate’s views on gun control?
Other approaches have similar challenges. One of the most widely used tools in public-opinion research is the “Likert scale,” which asks people to indicate their position on a scale ranging from “strongly agree” to “strongly disagree.” The problem is that survey respondents tend to choose the most extreme options (if they have any opinion), or else to express no preference at all (if they don’t). As a result, Likert results often take a “W” shape, with responses clustering at the ends and in the middle. That makes it hard to distinguish between strongly and weakly held positions.1
The solution, according to new research being presented this week at the University of Chicago, depends on one of the most basic concepts in economics: scarcity. Because we live in a world of limited resources, humans are forced to make tradeoffs — and the choices that we make reveal our underlying priorities.
The researchers, a mix of academics and private-sector experts from a range of disciplines, theorized that if they imposed artificial scarcity on survey respondents, they could force them to make tradeoffs that would reflect their real-world priorities better than traditional polling. To test that theory, they conducted a survey that asked more than 1,000 Americans their opinion on 10 hot-button issues like abortion, gun control and pay equity for women. But in this survey, respondents were given 100 credits that they could allocate as votes on the different issues. Someone who cared deeply about immigration could spend all 100 credits on that issue, but then she wouldn’t be able to weigh in on any of the other subjects.
There was an added twist: Each additional vote on an issue cost more credits than the one before it. Casting a single vote in favor of abortion rights cost just one credit, but casting four votes cost 16 credits. As a result, it was more expensive to take a more extreme position.
The approach, which the authors call quadratic voting,2 is based on research from economist Glen Weyl, who first developed it as a way to improve group decision making. Weyl has co-founded a company, Collective Decision Engines, to apply the quadratic voting technique to market research, product design and other commercial purposes.
The most important opportunities, though, may be in politics. The initial study suggests that respondents took seriously the task of weighing issues against one another. Instead of the “W” pattern seen in Likert surveys, the quadratic voting results form a bell curve, with most people choosing moderate positions and only a few people on the extremes. That’s more in line with how social scientists would expect opinions to be distributed in the population, and therefore serves as a kind of validation of the approach. The issue-specific results also make intuitive sense. On the Likert scale, for example, both Democrats and Republicans express strong opinions on “Obamacare” — Democrats for, Republicans against. But when they are forced to make tradeoffs in quadratic voting, Democrats are much more willing to budge on Obamacare than Republicans, suggesting the law is a bigger deal for opponents than for supporters. That’s consistent with other evidence, such as how often the presidential candidates of each party mention the issue.
“In two words, the problem it overcomes is cheap talk,” Rory Sutherland, one of the study’s authors, told me. “It’s very easy to say you want something when there’s no cost or scarcity.”
Quadratic voting isn’t likely to bring Democrats and Republicans together on health care or on other divisive issues. But it might help reveal where there is room for compromise. At the very least, it offers a new approach to answering one of this political season’s most vexing questions: What are voters thinking?
Onshore havens
The “Panama papers” scandal — in which an enormous trove of leaked documents revealed the hidden offshore accounts of the rich and powerful from around the world — has so far ensnared relatives of Chinese President Xi Jinping and British Prime Minister David Cameron, associates of Russian President Vladimir Putin and (like you didn’t see this one coming) senior officials in the soccer governing body FIFA. On Tuesday, Iceland’s prime minister, Sigmundur Gunnlaugsson, resigned after revelations that his family had sheltered money offshore.
So far, though, relatively few Americans have been implicated. The list is sure to grow as journalists continue to comb through the data. But it shouldn’t be too surprising if the number of American names remains comparatively small. The term “tax haven” may call to mind images of American executives stashing cash in exotic offshore locales, but these days, the flow is often in the opposite direction. The U.S., as Bloomberg’s Jesse Drucker reported earlier this year, has become one of the world’s biggest tax havens, thanks to laws that make it easy to set up anonymous shell companies.
It isn’t that Americans don’t use overseas accounts; in a 2014 paper, University of California, Berkeley, economist Gabriel Zucman estimated that wealthy Americans were keeping about $1.2 trillion offshore. But it’s getting harder for Americans to keep their wealth hidden due to a 2010 law, the Foreign Account Tax Compliance Act, that cracked down on overseas banks that helped Americans avoid taxes. The U.S. government, however, has refused to help other countries identify their citizens who are keeping money hidden in the U.S.
Number of the week
U.S. employers hired 5.4 million people in February, the most in nearly a decade.
One of the unfortunate hallmarks of the economic recovery has been the slow pace of hiring. Companies are posting lots of jobs, suggesting they see plenty of demand for their products, but they aren’t actually pulling the trigger on filling many of those positions. Economists have posed plenty of theories for the disconnect: uncertainty about the economy, a mismatch between employers’ needs and workers’ skills, the pernicious effect of résumé-filtering software. The problem eased a bit in February, as hires increased and openings fell slightly. But as the chart below shows, over the longer run there has been only a gradual improvement in hiring, while job postings continue to rise.
Elsewhere
For those with a criminal record, finding housing can be hard. Camila Domonoske reports on new guidance from the federal Department of Housing and Urban Development warning landlords that turning down tenants based on their criminal history may be discriminatory.
The media were quick to jump on Bernie Sanders for his supposedly disastrous interview with the New York Daily News. But Mike Konczal said Sanders’s much-criticized answers on bank regulation were perfectly fine.
How rich is hedge-fund billionaire David Tepper? Rich enough that his decision to move to Florida from New Jersey could affect the Garden State’s revenue forecasts, reports Terrence Dopp.
We all think we’re objective, but none of us is (except maybe Tim Harford).