One of the the most important things I learned while getting my degree in economics is that economies are driven by psychology. If people expect tomorrow to be better than today, they make investments. If they think things are in decline, they wait it out, and that lack of investment makes things decline further. Psychology rules. Almost everything else is just scenery.
Remember, capitalism is a failure engine. Most businesses eventually fail, but employees get paid while it is happening. You can do a lot of things wrong with your economy and still find a way to fail forward. But the one thing you can’t get wrong is the psychology. That’s a killer.
If you remember your recent history, a global recession started in 2007 and ended in 2009, at least in the United States. See my blog post that accurately predicted the end of the recession in the U.S. in January of 2009, based on psychology alone.
That’s the same sort of filter I’m using to predict Trump’s progress in the presidential election. The filter assumes psychology is the best variable for predicting the election outcome. The best persuader will win. No one cares about facts and policies. We just pretend we do.
If I’m right that psychology is the dominant variable in the economy, it follows that the candidate most trusted to manage the economy would automatically become the best at it, all other things being equal. If you expect your president to make the economy better, you invest. And the more optimistic you are, the more you invest.
At the moment, Trump polls substantially higher than Clinton in terms of how voters expect he would manage the economy. And that optimism gap might be the only variable that really matters to the economy. Psychology drives action.
Similarly, the fight against ISIS will require a weaponized form of psychology to neuter their ideology. Trump is more trusted to fight terrorism, according to polls. And that make sense because we see Trump as better at persuasion and branding.
Regarding the basket of deplorables comment by Clinton, I don’t see it making a huge difference in the race. The people she insulted with the comment weren’t voting for her anyway, and everyone else agrees that deplorable people are deplorable.
Also, “basket of deplorables” is such a cute nickname that the targets of that insult have humorously adopted it as their own label, or so I observe on Twitter. Instead of demonizing the “deplorables,” it made them sound kinda cute. Let’s call them adorable deplorables. I think Clinton’s funny label added humor to the situation and accidentally neutered the “dark” branding she was trying to spray-paint on that same set of Americans for the past month. But in the end, it won’t be the thing that matters most. It might move the polls 1%.
Everyone is talking about my book. I hope we don’t run out of Kindle versions before you get yours.