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Insights 42: 6 November 2020
NZ Herald: Oliver Hartwich on why neither Donald Trump nor Joe Biden are good economic choices
Freely Speaking podcast: What’s going on at the RBNZ?
Stuff: Matt Burgess on the real climate change threat to financial stability

A defeat for Trump, but perhaps not for Trumpism
Eric Crampton | Chief Economist |
A Joe Biden Presidency looks increasingly likely.

But the election was nail-bitingly close. And that narrowness is a substantial concern.

Four years ago, this column was not overly worried about a Donald Trump Presidency. The entire Republican establishment seemed to hate Trump. I expected that political norms that seemed still to hold among more senior Republicans, combined with the normal checks and balances in the American system, would mute the harm of an erratic President.

I was wrong.

The Republican establishment quickly reoriented itself in a populist direction. What support the Republicans had for free markets, less government spending, free trade and rules-based international order evaporated.

The rule of law seemed less important than humiliating adversaries.

Those who did not like the pivot chose to leave the Republican Party. But others were attracted by the Party’s new brand.

And, for many people, preferences over policy matter far less than identification with the Party. Sometimes, their policy preferences change as the Party’s position changes. Other times, they simply assume their Party shares their policy preference: in August, 81% of Trump voters who said masks should be required believed Trump agreed with their position.

So, by mid-October, 31% of Americans identified as Republican, 36% as Independents and 31% as Democrats – numbers that would not have been out of place fifteen years ago. But the constituencies of the two main parties continued to shift. In 1996, 72% of Republicans and 78% of Democrats had less than a college degree. Educational attainment increased over the next two decades. But by 2019, 70% of Republicans and only 59% of Democrats had less than a college degree. A final tallying of the 2020 election demographics remains months away.

The Republican Party deserved, and needed, a substantial defeat this year. It needed to learn that Trump’s style of politics and policy did not find a receptive audience, and that the long-term interest of the Party lay in abandoning the populist turn and its corrosion of democratic norms.

Instead, for substantial periods on election day, it looked like Trump might win. There is a slim chance he might yet do so. And almost half of American voters were prepared to buy what Trump had to sell, if only, for some, because they judged Biden as even worse.

In the short-term, a Biden Presidency and a Republican senate will put the brakes on the silliest excesses of either. But reconstructing the Grand Old Party to recover the support of principled advocates of limited government and of the rule of law will not be a small job.

It might not even be a job the Republicans want. How the Party deals with a Trump loss will matter and hopefully will provide reasons for optimism.

Biden likely has won the election. But if Trumpism has won the soul of the Republican Party, American politics will be toxic for a long time.

In praise of prediction markets
Matt Burgess | Senior Economist |
It can be tough to know what to make of events as they happen on election days.

In New Zealand, the task of working out who is winning is fairly simple. Working out who will form the next Government is a matter of the party vote, one or two electorate results and taking a view on how post-election negotiations play out.

But working out who is ahead in a US Presidential election, on the day, is another matter entirely.

The arcane rules of the Electoral College system differ in each state. In effect, US presidential elections are really 50 state elections run simultaneously. If the race is tight in any of the six “swing states,” knowing who has the advantage at any moment is a headache.

This is where prediction markets help.

Throughout Wednesday afternoon and evening, as CNN’s Wolf Blitzer explained the minutia of county-level votes, live data from UK prediction market Betfair gave up-to-the-second forecasts of who will be President. It was a rollercoaster ride. Early votes favoured Trump, but later votes swung for Biden. At the time of this newsletter, Biden is 93% likely to be the 46th President, according to Betfair.

So how does Betfair work?

Betfair is based on the trading of digital “shares.” Each share pays $1 to its holder if a certain event occurs. For example, shares for Joe Biden pay $1 if he is elected President. If Trump wins, Biden shares pay $0.

The trading of shares between willing buyers and sellers produces a market price. That price is a prediction, the crowd-sourced wisdom of millions of people – not the result of any one person’s judgment. Shares in Biden are trading for 93c, meaning he is 93% likely to win.

Using markets to make forecasts might seem surprising, but the system works. Over time, prediction markets have been more accurate, on average, than polls. In these partisan times, decentralised prediction methods build in valuable protection against the biases that so plainly afflict the talking heads on CNN and Fox.

Manipulation can be a problem, but not in markets with very high liquidity. Turnover on Betfair for Next President shares is in the hundreds of millions of dollars. All that skin in the game helps tie the market to fundamentals.

As the US election process continues over the coming days and weeks, prediction markets like Betfair will continue to be a useful, real-time and down-the-middle guide to what is coming. No bets necessary.

Roll over Beethoven
Dr Oliver Hartwich | Executive Director |
There is something special about Adele, Madonna and Sia. Because these pop divas are only ever referred to by their first names.

If we addressed them properly, they would be Adele Laurie Blue Adkins, Madonna Louise Ciccone and Sia Kate Isobelle Furler.

For most male singers, it is not that simple.

We could not just talk about Paul McCartney, John Denver and Mick Jagger as Paul, John and Mick. It could easily lead to confusions with Paul Simon, John Mayer or Mick Hucknall.

Except no-one would mistake the Rolling Stones for Simply Red.

The explanation of this surname conundrum is simple. Though there is only one Adele, there are so many Pauls, Johns and Micks we always need a bit more detail to identify the artist.

Should you be wondering why such a banality bears explaining these days, you have not followed the latest twist in the religion of wokeness. The activists have just discovered another bastion of male, “white” privilege: the surnames of classical music composers.

Classical music is under general suspicion anyway. It dates to a time when slavery still existed. The paper used for sheet music was not yet sustainably sourced. And the carbon emissions relating to Georg Friederich Händel’s Royal Fireworks Music were not offset, either.

It gets worse. Animal rights activists would not like the bird-catcher Papageno in The Magic Flute. The Abduction from the Seraglio is full of racist references to Arab culture. Meanwhile, Così fan tutte is outrageously sexist. And these are only some of Mozart’s most famous operas.

Woke activists have now detected an even worse crime: only referring to leading classical composers by their surname.

Talk about Bach, Beethoven or Mozart (without the Johann Sebastian, Ludwig van or Wolfgang Amadeus), and you are engaging in thought crime. At least according to Slate’s Chris White (yes, that is his real name!). He recently wrote how this “exacerbates the exclusionary practices that suppressed nonwhite and nonmale composers in the first place.”

The solution: “fullnaming.”

White continues: “Going forward, we need to “fullname” all composers when we write, talk, and teach about music. If mononyms linguistically place composers in a canonical pantheon, fullnaming never places them there to begin with.”

By adding Ludwig van, Beethoven shall appear a little less genial than he was. He is just another composer. At least he is dead.

“Ta ta ta taaaa,” yeah right. Roll over Beethoven, as Chuck said. Berry, that is.

Someone better tell Adele, Madonna and Sia. In the campaign for woke equality, they must be next.
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