The Myth of the Rational Voter

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The Myth of the Rational Voter
Author Bryan Caplan
Country United States
Language English
Genre(s) Nonfiction
Publisher Princeton University Press
Publication date 2007
Media type Print (Hardback)
Pages 276 (2007 edition)
ISBN ISBN-13: 978-0-691-12942-6 (2007 edition, hbk)

The Myth of the Rational Voter: Why Democracies Choose Bad Policies is a 2007 book written by Bryan Caplan challenging the notion that voters are reasonable people that society can trust to make laws. Indeed, voters are irrational in the political sphere and have systematically bad ideas concerning economics.

Contents

[edit] Overview

Throughout the book, Caplan focuses on voters’ opinion of economics since so many political decisions revolve around economic issues (immigration, trade, welfare, economic growth, and so forth). Using data from the Survey of Americans and Economists on the Economy, Caplan categorizes the roots of economic errors into four biases: make-work, anti-foreign, pessimistic, and anti-market.

[edit] Make-work Bias

Caplan refers to the make-work bias as a “tendency to underestimate the economic benefits from conserving labor.” (p40) People tend to equate economic growth with job creation, even if those jobs are wasteful or outright detrimental to growth. Economists argue that this is precisely wrong: growth comes from increases from the productivity of labor. The resulting increase in productivity, ceteris paribus, causes people to be fired and allows them to accomplish other things. Caplan makes special emphasis of the movement away from farming over the past two hundred years—from 95% of Americans as farmers to just 3%—as an illustrative example. Those millions who are no longer farming can be employed to make iPods, maintain communication networks, and run restaurants.

[edit] Anti-foreign Bias

Caplan refers to the anti-foreign bias as a “tendency to underestimate the economic benefits of interaction with foreigners.” (p36) People systematically see their country of origin as in competition with other nations and are thus averse to free trade with them. They are the “enemy” even if the two governments are at a lasting peace. Elementary economics argues two countries can benefit a great deal from trade. The degree of benefit is rarely equal, but it is always positive. Caplan notes how the anti-foreign bias is rooted in pseudo-racist attitudes: trading with Japan and Mexico is much more controversial than trading with Canada and England, the latter of whom speak our language and look like white Americans.

[edit] Pessimistic Bias

Caplan refers to the pessimistic bias as a “tendency to overestimate the severity of economic problems and underestimate the (recent) past, present, and future performance of the economy.” (p44) The public generally perceives economic conditions as declining, often with little or no evidence to back up their claims. Among challengers Caplan cites is Julian Lincoln Simon and his book, The Ultimate Resource, which argues society continues to progress despite claims of environmental degradation and an increasing use of natural resources.

[edit] Anti-Market Bias

Caplan refers to the anti-market bias as a “tendency to underestimate the benefits of the market mechanism.” (p30) The populace tends to view themselves as victims of the market, rather than participants of it. Corporations, and even small-scale suppliers, are greedy monopolists that prey on the consumer. Economists argue that all trade is a two-way street. A company will only sell someone a product if that person buys it from them. Cheating people is bad for business and the existence of multiple firms offering similar products demonstrates there is competition, not monopoly power.

[edit] Survey of Americans and Economists on the Economy

The author pays special attention to the 1996 Survey of Americans and Economists on the Economy (SAEE), created by the Washington Post, the Kaiser Family Foundation, and Harvard University Survey Project. The SAEE asked 1,510 random members of the American public and 250 people with PhDs in economics the same questions concerning the economy. In addition to its 37 topical questions, the SAEE also inquired about the participants income, income growth, education, and other demographic information.

The answers to the questions are often different: the public often blames technology, outsourcing, high corporate profits, and downsizing as reasons for why growth isn’t as high as it could be. Economists, on the other hand, barely pay any heed to such arguments. Some 74% of the public blame greedy oil companies for high gas prices while only 11% of economists do. The public tends to believe real incomes are decreasing while economists take the opposite stance.

Caplan makes note that some argue the chasm between economists and the public might be due to bias on the expert’s part. Self-serving bias (economists are rich and so they believe whatever benefits them) and ideological bias (economists are a bunch of right-wing ideologues) are two challenges the author addresses. On page 54, Caplan writes:

“

Both the self-serving bias and the ideological bias are, in principle, empirically testable. Economists’ views are the product of their affluence? Then rich economists and rich noneconomists should agree. Economists are blinded by conservative ideology? Then conservative economists and conservative noneconomists should agree. [Original Emphasis]

 ”

Using data from the SAEE (which includes measures for ideology, income, job sercurity, and other measures), Caplan simulates what people would believe if they had the same circumstances as economists—a technique often used in political science called “enlightened preferences.” If the ideological and self-serving biases are true, most of the difference between the “enlightened public” and economists should remain. If, however, the enlightened public is much closer to economists, then something else is going on. Caplan believes that that something else is the biases he enumerated earlier. The data tends to favor Caplan’s argument, with most (but not all) of the enlightened public closer to economists than to the public.

[edit] Rational Irrationality

In standard neoclassical economics, people are assumed to be rational; the notion of systematic bias is considered to be a sloppy assumption. In many ways, Caplan agrees with this: most people are rational when it comes to choosing a job, buying milk, hiring employees, and selecting a business strategy. They can be wrong, of course, but a systematic bias rarely—if ever—occurs.

But the author argues they are only rational because it is costly to be wrong. A racist will still hire a qualified African American because going to the second best option will be expensive to the company. A protectionist will still outsource because he has to achieve as many advantages over his competitors as he can to stay in business. A woman who thinks a discount store is haunted will seriously question her conclusions when she finds her budget to be tight.

Sometimes, however, it is virtually costless for the individual person to hold on to their preconceived beliefs, and people like those beliefs. Rational irrationality simply states that when it is cheap to believe something (even when it is wrong) it is rational to believe it. They refuse to retrace their logic and seriously ask themselves if what they believe is true. For some people, thinking hurts and they’ll avoid it if they can. This often appears in politics. From page 132,

“

Since delusional political beliefs are free, the voter consumes until he reaches his “satiation point,” believing whatever makes him feel best. When a person puts on his voting hat, he does not have to give up practical efficacy in exchange for self-image, because he has no practical efficacy to give up in the first place. [Original Emphasis]

 ”

[edit] Public Choice

The book is notable in use of irrationality, a rare assumption in economics. Yet the work is also a challenge to conventional public choice, where voters are rationally ignorant. Conventional public choice either emphasizes the efficiency of democracy (as in the case of Donald Wittman) or, more commonly, democratic failure due to self-interested politicians, bureaucrats, and other rent seekers (as in the work of Gordon Tullock, James M. Buchanan, and many others). Caplan, however, emphasizes that (a) democratic failure does exist and (b) it’s the public’s fault. He makes special emphasis that politicians are often between a rock and a hard place: thanks to advisors, they know what causes economic growth but they also know those policies are not what people want. Thus they are balancing good economic policy (so they don’t get voted out of office thanks to slow growth) and bad economic policy (so they don’t get voted out of office thanks to unpopular policies).

[edit] See also

[edit] Sources

  • Caplan, Bryan. The Myth of the Rational Voter: Why Democracies Choose Bad Policies. (2007).

[edit] External links