Economists with republican inclinations tend to predict greater economic growth when a Republican is president, unlike the Democrats, and due to this partisan optimism, their forecasts are less precise.
I am an economist, and my colleagues and I discovered this by analyzing almost 40 years of responses to the Economic forecast survey of The Wall Street Journal. Unlike most of these surveys, the Journal publishes the name of each forecast, which allows us to link their predictions with their political affiliations.
The respondents were professional economists of important banks, consultants and universities, whose forecasts help guide financial markets and business decisions. Of the more than 300 economists in our sample, we were able to identify the political affiliations of 122. We did it by analyzing the records of political donations, the voter registration data and the work records of the forecasting with partisan groups.
The employer was surprising: Republican analysts systematically predicted a greater growth of the gross domestic product when their party controlled the presidency, which represents approximately 10 and 15% of average growth rates during our study period.
When examining the accuracy of the forecasts using real -time GDP data, Republican analysts made greater mistakes when their favorite party held the position. This suggests that partisan optimism harms your professional judgment.
What makes this finding particularly notable is its asymmetry. The partisan gap arose specifically during republican presidencies.
Under the Democratic presidents Bill Clinton, Barack Obama and Joe Biden, the Republican and Democratic analysts made practically identical predictions. This was not the case when George W. Bush, and later Donald Trump, occupied the White House.
Interestingly, this bias only appears in the GDP forecasts. When analyzing inflation, unemployment and interest rates predictions, we find no systematic differences between Republican and Democratic analysts.
This makes sense, since GDP forecasts are inherently more uncertain than other economic predictions. Professional analysts tend to disagree more already make more mistakes by predicting GDP compared to inflation or unemployment rates. This creates opportunities for partisan ideologies.
We determine the bias based on the different perspectives on the effectiveness of fiscal policies. Using Google Trends data to measure when tax reductions were news, we discovered that Republican analysts become systematically more optimistic precisely when discussions on fiscal policy intensify.
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Why is political bias important
Previous research revealed that most people have a strong partisan bias when making economic predictions. Our work is the first to demonstrate that professional economists can also succumb to these influences, despite their training and market incentives to be precise.
Your mistakes can have a high price. Financial markets, political leaders and companies depend on economists’ forecasts to make important decisions. When the Federal Reserve sets interest rates, when companies plan investments and when investors allocate portfolios, they often consult these professional consensus forecasts.
Our research challenges a common assumption in economics: that the aggregation of various expert forecasts eliminates individual biases and improves precision.
This does not mean that professional forecasts are incompetent or dishonest. These are highly trained economists with strong financial incentives for precision. Rather, our findings reveal how even experts with the best intentions can be unconsciously influenced by their own ideological beliefs, especially when dealing with inherently uncertain data.
What is still unknown
Several important questions still have no response. It is not clear how this bias could be reduced. Does the fact that forecasting are more aware of their political inclinations would help reduce the effect? Or the development of new prognosis methods that the predictions pondered based on historical precision during different political regimes would improve consensus forecasts?
We are also interested in knowing if institutional factors influence. Could the forecasts of institutions with explicit policies of political diversity show less bias? How do you compare the vision of international forecasts on the US economy with that of nationals?
Finally, our research focuses on US forecasts during a period of growing political polarization. If similar patterns arise in other countries with different political systems or during periods of lower polarization, it remains an unknown.
*Aeimit Lakdawala He is an associate professor of Economics, Wake Forest University
This text was originally published in The Conversation
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