Editor’s Note: This column, published as “Who’s Kidding Whom?,” won a 2014 Excellence in Financial Journalism Award from the New York State Society of Certified Public Accountants (NYSSCPA).
Bubbles can be dangerous in both finance and politics. In markets, the bubble metaphor typically refers to overblown enthusiasm for a particular asset class or sector.
Examples range from 21st-century real estate and Internet bubbles back to long-ago episodes such as the South Sea Bubble that capsized investors in a British trading company in 1720.
Bubble terminology can signify much the same thing in politics as well—excessive confidence in a candidate, idea or institution.
The rapid rises and falls of contenders in the 2012 Republican presidential primaries had such an effervescent quality. ABC journalist Matthew Jaffe defined a “Bubble Primary” as “a race in which candidates’ values become artificially high before inevitably deflating back to their intrinsic values.”
Discussing European integration in a speech last year, George Soros said “the European Union itself is like a bubble,” something that once enjoyed a “boom phase” that was “unreal but immensely attractive,” but which now faced instability amid the euro-zone crisis.
In politics, though, the bubble metaphor often has a different wrinkle, referring to being insulated from feedback and evidence. Presidents, for example, are sometimes said to live in a “White House bubble” in which they are surrounded by deferential aides and lose touch with the concerns of ordinary Americans.
Both types of bubble metaphor—the bubble as inflating unsustainably, and the bubble as thick or opaque—have an underlying similarity in that they involve perceptions being distorted; moreover, in both cases, a rude awakening occurs when, sooner or later, the bubble bursts.
Since the November election, there has been increased discussion of a “conservative bubble,” whereby pundits and activists on the right rely excessively on shared ideology and shared information sources. (This criticism sometimes uses other metaphors, such as “cocoon” and “echo chamber,” but these convey essentially the same point.)
Such a bubble seems to have shaped expectations among some conservatives that Mitt Romney was going to win—and even win in a landslide—despite polls indicating he was likely to lose. A conservative following grew around UnskewedPolls.com, a site that purported to uncover polling bias. “All the vibrations are right,” Wall Street Journal columnist Peggy Noonan wrote just before the election, predicting a Romney win.
At this point, I should make some disclosures. First, I too predicted that Romney would win, back in the August issue of Research, taking a position contrary to that indicated by polls and prediction markets at the time. My reasoning, that the October debates would give Romney a decisive boost, later seemed prescient, but not for long.
Second disclosure: In retrospect, some wishful thinking surely was involved in my prediction, as I am a longtime Republican who voted for Romney.
Third disclosure: During the Obama presidency, I have been one of those internal GOP critics—sometimes derided as RINOs or Republicans In Name Only—who argue for the party to move more toward the political center. A prominent proponent of such a stance is CNN and Newsweek commentator David Frum, with whom I’ve collaborated in blogging ventures.