Make Money Off '08 Race: Know Your Electorate

Since the average voter is not reading this, we do not need to pull any punches. The American voter has a discouragingly low level of information. This lack of knowledge is so basic that one wonders how any intelligent decision could be reached. The voter is much more interested in popular culture than information about government. Consider the results from a recent national survey:

When asked to name the Three Stooges, 74% of respondents answered correctly. Only 42% could name the three branches of government.

More people -- 57% -- could name the fictional boy wizard from England than could name the prime minister of England -- 50% -- (The poll was conducted while Tony Blair was in office).

Of the seven dwarves, 85% could name two, but only 37% could name two of the nine Supreme Court justices.

Half of the people could not name their representative in Congress or their two U.S. Senators. Many do not know that they have two Senators.

More than 30% do not know the name of the Vice President or their state's governor.

Over 60% do not know the President of Russia or whether the Chief Justice of the Supreme Court is conservative.

The knowledge level is actually lower than it was 20 years ago.

How Can Our Democracy Work?

Since nearly everyone in the U.S. thinks we have the best form of government, how can it work with an uninformed citizenry?

Political scientists have different theories about how the process works. Let us put these in three general groups: the cue-takers, the swing voters and the "potential for reaction."

The first theory suggests voters do not need direct information. It is enough to have strong signals from trusted sources. The cues may come from party identification. Most RealMoney readers would seriously underestimate the percentage of voters who come from families where party identification has persisted for generations. It is an enduring cue based upon social status and employment. Other voters may look to a trusted friend or co-worker who has more information and expresses opinions generously.

The second idea relates to swing voters. Many readers will see a link to recent work about markets, including James Surowecki's The Wisdom of Crowds. The basic idea is that much of the electorate is split. The attentive and thoughtful voter controls the swing votes, and therefore the final outcome.

The third theory is that voters always have the potential to react if there is something really negative. Under this scenario, the voter need not have any special information, just a reaction to anything that is a real threat. Issues meeting this test often involve either wars that lead to the loss of American lives or serious economic calamities. In the absence of anything really bad, these voters stay home.

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At the time of publication, Miller had no positions in the stocks mentioned, although positions may change at any time. Jeffrey Miller is president and CEO of NewArc Investments, a registered investment advisor, and Capital Markets Research. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Miller appreciates your feedback; click here to send him an email.