The Elections and the Economy

As every lay analyst of U.S. national elections knows, the first law of electoral economics is that good economic news favors the party in power and bad economic news hurts its chances. This is not to say that economic conditions are necessarily determining; only that they are influential and not easily offset by other factors in an election. This law, however, is not quite so easy to apply. The problem is a familiar one to economists: how do we determine how good or how bad economic conditions really are, when there are so many different indicators to choose from? Low unemployment and low inflation are both clearly desirable, but they rarely go together. Summing the rates of unemployment and inflation to form a “misery index”...