“Peak-End Rule”: Voter Perceptions are Skewed by Recency

I try very hard not to bore readers with too many of the dozens of articles that I, as a master’s student, should read each week. Nevertheless, I feel obliged to share some insights from a 2014 article by Andrew Healy and Gabriel Lenz (“Substituting the End for the Whole: Why Voters Respond Primarily to the Election- Year Economy”) because it is highly relevant, especially as we approach key election in 2024 in the UK and USA.  In this impressive analysis, informed in part by the work of Nobel Prize winning economist/psychologist Daniel Kahneman, the authors demonstrate convincingly that US voters consistently overweight economic performance in the fourth year of a presidential term when deciding on how to vote for an incumbent President.

What is especially interesting is that when voters are asked how they wish to assess a President they consistently claim that they would like to do so based upon the cumulative results of the full four year Presidential term. However, when it comes to voting, they historically and significantly overweight economic performance of the fourth year.  In part, this reflects faulty memories and the fact that going back and assessing the full term’s results requires intellectual work, which many voters seem unwilling to do. Instead, voters appear to unintentionally deploy a heuristic; how the economy feels as they are voting at the end of the term. The unfortunate result of this is that Presidents who may be competent economic managers over their full terms are less favoured than are clever politicians who figure out how to successfully manipulate the economy to suit the electoral calendar. This can mean that longer term national economic prospects are damaged in pursuit of a false economic uplift to suit an incumbent president (or Prime Minister, for that matter).

A good example is how voters perceived Presidents Carter and Clinton.  US GDP growth was stronger over Carter’s full term, but weak in year 4, and he was booted out of office (although there were other factors).  Cumulative GDP growth under Clinton was weaker, but his strong performance in the fourth year helped to give him a second term, the research suggests.

Apparently such a phenomena is observable in many other aspects of life. The article refers to examples of experiments undertaken in the area of gambling, vacations, TV advertisements, and colonoscopies, among other areas.  The authors specifically cited an example where individuals are asked to stick their hands in 14 degrees centigrade water for 15 seconds, and then do the same for 90 seconds.  Without letting them know they gradually raised the temperature in the final 15 seconds from 14 to 15 degrees. When they were asked afterwards which ordeal they would like to repeat, a disproportionate number wished to have the second experiment, even though they will have to endured 30 seconds of 14 degree water as opposed to 15 in the first example, and three times as much cold water overall. However, the milder temperature right at the end biases their decision-making process. Theorists like Kahneman and others call this the “Peak-End Rule”, where the feeling at the end of an experience dominates the individual’s overall impression.

This is all great stuff and highly amusing but is really a serious issue for our democracy. The results are so significant that it means that there is an extraordinary incentive for politicians to jeopardise the long term interests of the country in order to get the right economic result as an election approaches. I suspect this will be true for Joe Biden in 2024 and my hunch is that Rishi Sunak, the Prime Minister of  the United Kingdom, will have a hard time resisting the temptation to announce a raft of vote winning measures (my bet is for tax cuts) at the end of his term in 2024. Healy and Lenz suggest that the best way to address this is for governments to make sure that people are fully informed about the cumulative impact of their regimes and that this will ensure voters take the full term of their governments into account. This is an extraordinarily naive suggestion and I place the probability of this UK Government doing that at precisely 0%–same for the Democrats in the USA.

If the UK Labour opposition has any sense, and sometimes I doubt that they do, they will start to bang the drums now about the unaffordable electoral bribes which are surely coming down the pipe.  We have seen the first instalment of these in the budget just announced which lavished upon the top 1% of earners significant and generous pension benefits—this at a time when the bottom 80% are struggling to make ends meet.  I doubt the Tories will adhere to the “fiscal discipline” they normally shout about, and which is one of the justifications for paltry public sector wage growth.   

If oppositions do not point out this is an issue to voters, and do so early enough to prepare them for the bribery that will undoubtedly follow, they only have themselves to blame.  But it is not only they who lose, but all of us who suffer from the damaging long term consequences of the Peak-End Rule and the perverse incentives it creates for politicians.

London, UK—17 March 2023

I started my career in mainstream finance and shifted into impact investing before returning to my lifelong passion of politics in early 2021. This blog reflects that return and is my way of sharing the impressions of someone journeying from “proper jobs” in the investment world back into education to study politics after four decades. For those interested in why I started this blog click here, and to read my declaration of known biases, click here. I welcome any comments

On the Need for Consistency and the Avoidance of “U-Turns” in British Politics

In recent weeks I have devoted several blog posts to my disappointments in studying for a master’s degree at UCL in London. I now fear that I am presenting a misleadingly negative picture of an experience which has been relatively positive, whether if it is despite or because of the university. There are some real joys in my learning experience—allow me to share just one.

We had been learning about what causes European citizens to vote for far-right parties—obviously, a matter of topical interest.  One aspect of the analysis engaged in by theorists is to discern whether cultural views or perceived economic predicament were a better explanatory factor in judging the likelihood of individuals to vote this way. I had read a piece by Thomas Kurer and Briitta van Staalduinen (“Disappointed Expectations: Downward Mobility and Electoral Change.” American Political Science Review, 2022).  The authors described a concept called “status discordance”, which took into account a person’s reasonable life expectations based upon their original family situation and compared it to the reality of their economic achievement. For many decades in the West it had been taken for granted that each new generation will be better off than that of their parents.  This presumption has been severely undermined by economic realities.  Kurer and van Staalduinen contend that the greater the extent of this status discordance, the more aggrieved people will feel due to the economic gap in the realities of their lives and the more likely they are to vote for right wing parties (or, one might think, any extreme or non-mainstream party).  The statistical analysis they undertook seemed a bit complex to me, but in the end I became utterly convinced by their argument.

This certainty lasted about 20 minutes, when I followed it up by reading a piece by Yotam Margalit, who made precisely the opposite claim (“Economic Insecurity and Causes of Populism, Reconsidered.” Journal of European Perspectives, 2019). He critiqued (not Kurer and van Staalduinen individually), but their point of view that economic factors were dominant in the decision to support right wing parties.  For Margalit, this concentration on economic factors missed the importance of cultural ones, which he believed were ultimately the true causal factors, which are sometimes hidden due to the research methods used.

His piece was too long to describe at length, but he cited several studies which showed relatively weak relationships to economic factors once cultural factors were isolated.  Margalit argued that, “People may also view economics-based arguments against immigration as more socially acceptable than ones couched in cultural terms and thus may overreport the former as the justification for their stance.”  He gave an example from a 2010 study by Alexander Janus which tried to separate these factors by dividing a sample randomly into two groups.  He asked one group to read three pretty neutral statements and then asked if they agreed with the total number of statements (but without having to agree/disagree with each).  He then added a fourth statement (“Cutting off immigration to the United States”) and asked the second randomly chosen group if they agreed with all four.  The percentage agreeing dropped from 61% to 42%.  By hiding a statement which might be socially undesirable to object to amidst three others, Janus was able to identify the percentage likely to be opposed to immigration in a way that would pose no “social risks” to the respondent.  This is just one example of many used to by Margalit to make his point.  Although I began the article feeling very sceptical, by the end I was convinced, and my opinion had changed by 180 degrees!

Which position is factually correct is irrelevant to the point I wish to make. Instead, what I have learned is the utter joy of changing ones view on a dime when presented with countervailing evidence one finds compelling. At its best, academia provides pathways and methods to seek “the truth” and the freedom to shift about in pursuit of it.

I used to believe that philosophical consistency was of great value. What I have learned during the course of my study and in the example I have shared above is that there is something special about an environment that ought to and does permit this ideological wandering. At a much earlier point in my life I argued passionately concerning the intrinsic value of intellectual consistency. I was chided by a woman who quoted Emerson to me.  She said, “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.”  She was right and I laughed out loud—and never forgot that line!  I have thoroughly enjoyed the intellectual knockabout and the constant shifting of views that my educational experience affords.  Long may it continue.

However, I was listening to the radio over the weekend, hearing about the sad saga of Tory ex-Health Secretary Matt Hancock, whose private WhatsApp messages have now been publicly disclosed. So much of this story is pathetic, humorous, disturbing, engrossing, or worrying, depending upon your point of view.  For readers who are not from the UK and have not been watching this story, I am pretty sure it’s not worth going into the gory details. Suffice it to say that a minister acted badly and got caught out—nothing new, really—a bit of sex, arrogance and wide-ranging incompetence.  The radio commentator had made one important point that UK government ministers seem to find it incredibly difficult to reverse a policy once it has been decided upon, even in the face of new information which suggests the policy may have been wrong. This is especially troubling during a pandemic when lives can be saved or lost based on policy responses to accurate evidence. 

But something in the UK make U-Turns particularly challenging manoeuvres.  Maybe it’s the influence of the press, or the enormous egos of some of our appalling leaders who have been “Peter Principled” right into the Cabinet.  I suggest Matt Hancock would have been far better off getting a masters degree than jetting off to participate in “I’m a Celebrity….Get me out of Here!”  But that would make for poor TV.

Rodney Schwartz

London, UK—5 March 2023

I started my career in mainstream finance and shifted into impact investing before returning to my lifelong passion of politics in early 2021. This blog reflects that return and is my way of sharing the impressions of someone journeying from “proper jobs” in the investment world back into education to study politics after four decades. For those interested in why I started this blog click here, and to read my declaration of known biases, click here. I welcome any comments