John Sides and Noam Scheiber got in a bit of a twitter fight yesterday about election prediction models, political science, and the 2012 election. John wrote a good piece summarizing his position here; I recommend it highly.
I have two additional points, but it gets lengthy so I'm going to break it up into two posts. This one is about what we mean when we separate "fundamentals" from "campaigns."
John gets to this in comments, but not in the main post: what's generally thought of as the "fundamentals" -- as opposed to the campaign -- should definitely not be thought of as purely economic performance. I think that's especially true on a theoretical level. It's useful for many reasons to separate the campaign from everything else. That "everything else" is going to include political context (is the incumbent running? How long has the incumbent party been in the White House? Is there unified or divided government?) on the one hand, and everything that would go in the category of retrospective voting on the other -- that is, things that would go into a voter's impression of how the president has done. Of that final bit, the economy empirically seems to be the dominant factor, strong enough that you can get fairly close to a useful prediction if you toss out campaign factors and the political context and the rest of the "how are things going" stuff. But then again: you can do better, both in prediction and explanation, if you don't throw that stuff out. Thus we have Hibbs, including casualties from wars; thus we have Abramowitz, including both political context and a presidential approval pre-campaign variable that presumably captures "how are things going" that goes beyond the economy.
I should note, by the way, that for an incumbent president any model that includes approval is going to capture not only how events affected approval, but also how the president's perceived personality and anything else that makes people like or dislikes him affect approval. Given a permanent campaign, one could certainly quibble that these are a type of campaign effect; indeed, even without a permanent campaign, things such as "personality" may wind up created by the incumbent's original campaign. That's all fine, however; what we're trying to separate out are the effects of the (current) campaign, and we're treating how people feel about the president at the beginning of that campaign as separate, even if it was produced by the exact same process. Note too that this means that an incumbent president's personality, then, is part of "fundamentals" while the challenger's personality is part of "campaign," as are all of their other relevant characteristics. Again, you may find that goofy, but there's a logic to it.
(Okay, that's not completely true; if there's something about a president that would affect approval differently than it affects vote choice, maybe it winds up in the "campaign" pot. I think.)
So, again: there are campaign effects and fundamentals. Campaign effects themselves include various things -- issue positions, ads, the candidates, GOTV and other mobilization efforts, and more. Fundamentals include political context stuff and performance stuff, of which the economy has turned out to date to be by far the biggest. The overall finding has been that fundamentals matter more than campaign effects, but that campaign effects are real -- but given that overall campaign effects are of limited (but real!) importance, it's going to be very hard for any specific campaign action, an ad or a debate quip or an issue, to do all that much.