GEE, 18 MONTHS OF BOTH PARTIES DENIGRATING AMERICA HAS AN EFFECT?

US elections trigger recessions? (T C A Srinivasa-Raghavan, February 09, 2008, Rediff)

[S]ince 1945 a US presidential election has very often been accompanied by a recession. But let me make it clear: this does not mean that an election is a necessary condition for a recession. Far from it. Indeed, it is not even a sufficient condition. But somehow it seems to happen with unfailing regularity.

So even if presidential elections alone do not cause a recession, they do seem to trigger them. To see how, study the accompanying table and judge for yourself how "robust" the evidence is. (See? I have learnt the jargon also.)

The table shows a total of 11 recessions. Of these, only one lasted only six months and four lasted eight months. The remaining six were for 10 months or more. There is nothing to be said one way or another about which party causes, so to speak, longer recessions. The duration clearly depends on economic factors.

It is also clear that the number of recessions since 1980 has come down. Between 1945 and 1980 there were as many as nine. Since 1980, there have been only two! This is amazing. Economists have sought to apportion the credit for this reduction to either monetary policy or fiscal policy. But that suggests a sudden dawning of wisdom after 1980. In all likelihood, though, it is probably not a feat of economic management at all but just pure blind chance.

What is not chance, however, is the propensity of the US economy to go into a recession around the time of a presidential election, either before or after. I have absolutely no idea why this happens but happen it does. This, incidentally, confirms my belief that economic inflexion points can't be explained by economic factors alone and you need to look at political factors as well.

There's no such thing as homo economicus.

Posted by Orrin Judd at February 9, 2008 7:59 AM