Tuesday, March 11, 2008

Irrational Voters = Irrational Policies?

In his book, The Myth of the Rational Voter, Bryan Caplan contends that democracies, while undeniably better than totalitarian governments, are also undeniably inferior to free markets. You can see a 28-page paper that is an abbreviated version of the arguments in the book here.

Caplan contests the validity of the “miracle of aggregation” theory of democratic voting. The theory works like this. The votes of ignorant voters, regardless of their number, end up statistically cancelling each other out. So only the votes of informed voters actually count. Thus, the only truly important thing is how the majority of informed voters vote.

While acknowledging the reality of this theory, Caplan argues that it only works if voters make only random errors but no systemic errors. In democracies, contends Caplan, evidence proves that voters consistently vote irrationally rather than just ignorantly. Thus, systemic errors skew the results so that voters regularly choose policies of which the majority approves, but which are not in the best interest of society.

Caplan uses a broad array of research to demonstrate at least four biases among voters that he asserts are irrational, since they are not factually supported.

—Anti-market bias. Voters have a basic distrust of free markets and tend to favor protectionism, regulation, and forms of planning; although, these are proven to cause far more problems than they solve.

—Anti-foreign bias. Voters distrust and dislike anything (and anyone) foreign, so they favor protectionism, which actually imposes net penalties on their own country.

—Make-work bias. Voters believe that jobs are the source of prosperity, when in actuality productivity is the source of prosperity. Individuals can prosper if they only have a job, says Caplan. But societies only prosper if individuals do jobs that create goods and services that others willingly purchase.

—Pessimistic bias. Voters continually believe that the economy is much worse than it actually is. Thus they favor policies intended to improve the economy, but that often make matters worse.

Caplan does not argue that markets are perfect. He says that economists like him know better than anyone the flaws inherent in markets. However, he does claim that free markets are usually (but not always) superior to any kind of government intervention, even that which is accomplished by the will of the voters.

Daniel Casse penned this critical review of Caplan’s book. I agree with many of Casse’s criticisms. He writes, “As an analysis of how far voters are out of step with settled economic thinking, Mr. Caplan's argument seems irrefutable. Yet as a work of political theory it is pretty dismal.”

Casse is particularly non-plussed by Caplan’s suggestion that it would be better for independent experts to shape policy than to suffer policy at the hands of irrational voters. Hmmm… that sounds an awful lot like the way they used to run things in communist countries and in Nazi Germany.

At any rate, Casse says that Caplan lumps all democratic systems into a single basket and fails to consider “the special character of American democracy.” Casse points out that our Founders intentionally established a political system that is inefficient and is riddled with checks and balances not present in many other democratic systems.

As a demonstration of the silliness of Caplan’s arguments, Casse suggests that, while the biases stated by Caplan have certainly fueled a lot of debate, little of this has materialized into actual policy. In other words, all of the strong arguments mounted by Caplan, says Casse, amount to nothing of consequence.

Caplan’s thesis might make economists “feel better about themselves,” writes Casse, but “it should not make ordinary Americans feel any worse about their democracy.”

It concerns me that Casse so cavalierly tosses aside Caplan’s criticisms of democratic systems. The biases noted by Caplan certainly do seem to exist. Americans seem overly willing to submit to freedom-limiting government activities.

Is it true, however, that few of these kinds of things actually become policy? Maybe that’s so when it comes to international trade. But what about domestic policy? What about state and local policy? How many irrational policies does the average American suffer under?


Cliff said...

I think the reason you like this fascist so much is because you over look the basically corrupt thesis of the book, "democracies, while undeniably better than totalitarian governments, are also undeniably inferior to free markets."

You can't compare a political system with an economic one. Kinda like apples and oranges.

This crap is nothing more than Milton Friedman regurgitated.

Milton Freidman, as you know, turned out to be dead wrong, criminally wrong in fact.

There is no social good in an unrestrained free market. ("trickle down doesn't work either").

Isn't it ironic that on the very same page in which you say you want to be like Jesus, you are advocating for disavowing any social responsibility.

Reach Upward said...

Cliff, I appreciate your comments. I'm sorry if I implied that I thought Caplan was right. I said that I pretty much agreed with Casse, who said that Caplan's dismal political commentary should give us no concerns with respect to American democracy.

I do think, however, that there is at least a grain of truth in some of Caplan's criticisms of democracy. Although I think the U.S. has the finest system on the face of the earth, I doubt any informed person would say that it is perfect. I'm merely questioning whether there is anything that can be learned from Caplan's criticisms. Are there ways we can improve?

You imply that markets and government are not interchangeable. I agree that this is the case in some things. But in other things they are interchangeable. Heck, I work in an industry where this occurs all of the time.

I always laugh when people use the argument that to follow Jesus we must approve of big government social programs. How unlike anything the Savior taught! Everyone ought to take care of their social responsibility. But 'compassion' via government fiat gives little to recommend it.