Election, politics and economics

Nowadays, I start to think the most significant, influential political events are black swan events. The majority of the political events including elections, referendums is not black swan events and has clear probabilities and has limited influence on the markets as well as the economies. Usually, when the unlikely states of such events take place, they may cause immediate shocks in the markets and the economies in the short term; however, in a relatively long term, such impacts are relatively less significant. This is because of several reasons. Firstly, when there are several parties in politics, the best strategy for any of them to win the political power is to target the middle voters, this will make their political actions more and more similar and the expected policy changes due to politics become less significant. Secondly, politics has been partially serving the economics. Many governments have found that to gain political power and influence and provide political stability, they have to build strong economies to make their people become wealthier. When they design political decisions based on economic factors, the people in the markets and the economies are gaining more information and even directing the political actions, so they have the better estimation of future political changes and their impacts on the markets and the economies. Thirdly, globalisation and other communications and cooperation across sectors have made one individual change be much more difficult to cause significant impacts on the whole.

However, there are some rare events which seem impossible taking place. These events are out of control and hard to be predicted; moreover, the majority of the population ignores their existences before they take place or believe they will never occur. Under such circumstance, these events occur and cause significant impacts on our economies and markets.These events do have the same characteristics that black swan events have, as the majority of the population ignore their existence and are betting against them. The reason that makes them have such characteristics is not about their causes or probabilities, it is because their probabilities are too small and the majority of the population choose to bet against their existence and such irrationality is the black swan factor in these cases.