In the wake of the 2024 U.S. presidential election, University of Chicago Booth School of Business professors Lubos Pastor and Pietro Veronesi observed the torrent of commentary about the poll results and pundits' various explanations for them. Much of this commentary pondered why the incumbent candidate lost when so many economic indicators looked good—and came to a consensus that inflation-fatigued voters didn't think the economy was as strong as the numbers suggested. But Pastor and Veronesi, who had earlier constructed a model to explain the connection between stock returns and presidential election results, found it "hard to believe that Americans elected Trump because they are confused about the economy." Rather, their research predicted Trump's victory—not in spite of the strong economy, but because of it. In this essay, Pastor and Veronesi explain the dynamic at work in their model, and how it has played out over nearly a century of presidential elections. A good economy doesn't necessarily favor incumbents, they explain; rather, it favors Republicans, whose low-tax policies appeal to risk-tolerant voters during boom times. Conversely, economic downturns favor Democrats, whose focus on redistribution and the safety net is popular when the electorate is risk-averse.
From the Judges
A timely (published quickly after the election) and thought-provoking piece of writing. Provocative title with impressive dissemination of the idea. Beautiful online layout. Starts off with storytelling, where you get a sense of the writers perspectives and viewpoints. Kudos for the use of paragraph breaks to help digest the concepts.
