[Insight & Opinion]Voters Do Not Always Vote Solely Based on Economic Motives

Predicting Elections by the Misery Index Alone Is Unrealistic
Reflecting the Diverse Aspects of Society as a Whole
Do Not Trust in the Goodwill of Politicians; Doubt and Verify

Elections and the economy influence each other. While economic conditions naturally affect election outcomes, elections also impact the economy.

Looking at past cases, in South Korea, the years when elections were held generally saw an increase in the money supply and rising prices. The stock market did not perform well. There were not many years when the stock index rose during presidential or general election years. The reality is that many people worry about side effects such as investment contraction, increased financial market volatility, and deterioration of government fiscal soundness when elections occur.

The most important economic factor influencing elections is the voters' perceived economic conditions. For voters to feel the economy is good, real income must increase amid price stability. Conversely, income does not increase while prices rise. Unemployment rate and inflation rate are the primary variables.

The Misery Index, devised by American economist Arthur Okun, is the sum of the unemployment rate and the inflation rate measured by the consumer price index. Recently, economic growth rate is sometimes subtracted, and loan interest rates are sometimes added. Naturally, a high growth rate improves the ruling party's evaluation, while high unemployment or inflation worsens it.

However, predicting election results solely by the Misery Index is unrealistic. While a high Misery Index certainly worsens evaluations of the ruling party or government, it is difficult to specify the exact level at which it decisively affects elections. The Misery Index itself is not a fully rational indicator. The shocks unemployment and inflation impose on people are not equal. A significant price increase makes life difficult, but losing a job is a disaster of a different magnitude.

It is also true that voters do not always decide their votes solely based on economic motives. Just as market consumers do not always act rationally, voters do not always make economically rational choices. Sometimes, people accept losses or disadvantages for their own reasons. Election results reflect various aspects of a society comprehensively in any country.

In the United States, economist Ray Fair explained U.S. presidential election results since 1916 by setting six key variables, including economic indicators like growth rate and unemployment rate, as well as political and social variables such as presidential approval ratings, demographic characteristics, campaign strategies, and international situations. In fact, economics generally does not place special expectations on politicians or leaders. It views market participants as not acting for public purposes.

Public choice theory, which applies economic analytical methods to political phenomena, regards politics as the result of calculating interests and benefits among stakeholders. From this perspective, it is foolish for voters to listen to politicians and harbor hopes in any form. Politicians pursue their own independent interests, different from those of voters. Unfortunately, expecting politicians to realize so-called public good is unrealistic. If winning elections is possible, they can change their stance anytime.

Joseph Schumpeter stated that political decision-making is carried out by individuals who gain decision-making authority through competition to win votes, rather than by the will of the people. Politicians say what the public wants to hear during elections. However, the purpose of voting by the public and the goals of the politicians they elect differ. Therefore, for democracy to be more than just a procedure or method, an alert electorate is essential. Democracy is a system that does not trust the goodwill of those in power. There is no other way. Do not trust; doubt and continuously verify.

Kim Sangcheol, Economic Commentator

This content was produced with the assistance of AI translation services.