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Monday
Jan022012

The Myth of The Rational Voter - Why Democracies Choose Bad Policies

 

... now that democracy is the typical form of government, there is little reason to dwell on the truisms that it is "better than Communism," or "beats life during the Middle Ages". Such comparisons set the bar too low. It is more worthwhile to figure out how and why democracy disappoints. In the minds of many, one of Winston Churchill's most famous aphorisms cuts the conversation short: "Democracy is the worst form of government, except all those other forms that have been tried from time to time." But this saying overlooks the fact that governments vary in scope as well as form. In democracies the main alternative to majority rule is not dictatorship, but markets. Democracy enthusiasts repeatedly acknowledge this. When they lament the "weakening of democracy", their main evidence is that markets face little government oversight, or even usurp traditional functions of government. They often close with a "wake-up call" for voters to shrug off their apathy and make their voice heard. The heretical thought that rarely surfaces is that weakening democracy in favor of markets could be a good thing. No matter what you believe about how well markets work in absolute terms, if democracy starts to look worse, markets start to look better by comparison.  

 

Bryan Caplan's book is a lucid and powerful economic analysis of democracy. Caplan draws on results from economics, history, (evolutionary) psychology, philosophy and political science to make a compelling case for his thesis. Economic issues are at the top of the political agenda and Caplan provides strong empirical evidence that voters have systematically biased beliefs about economics. The beliefs of the median voter manifest the following biases:

 

  • "Anti-market bias" (a tendency to underestimate the economic benefits of the market mechanism)
  • "Anti-foreign bias" (a tendency to underestimate the economic benefits of interaction with foreigners)
  • "Make-work bias" (a tendency to underestimate the economic benefits of conserving labor) and
  • "Pessimistic bias" (a tendency to overestimate the severity of economic problems and underestimate the (recent) past, present, and future performance of the economy)

 

As a result, voters chose bad policies. And contrary to common opinion, voters mostly get what they ask for, Caplan argues. The common analyses of the failures of democracy usually blame self-interested voters, powerful special interest groups and/or the media. But the empirical evidence tells us that voters qua voters are not self-interested. They generally vote for what they perceive as the common good, but they are deeply deluded about which policies would bring about the desired outcome. Special interest groups do have some influence, but only at the margins of public opinion. If politicians disregarded the voters in favour of special interest groups to a significant degree, they would soon be voted out of office. The media is also not in the driver's seat, it merely tells the people what they want to hear. Any news media that did otherwise would soon go out of business. The upshot is that democracy does not fail because it somehow fails to give the voters what they want - it fails precisely because it gives the voters what they want. The painful realization, for many, is that what voters want is often not very sensible!

 

However, politicians and bureaucrats have some "wiggle room" at the margins of public opinion which they can use to defuse the worst effects of the biases of the voters. If public policy was even more closely matched with what the voting public wants than it actually is, economic policy would be worse, not better. This can explain why, in the face of the fundamental flaws of democracy, economic policy is not as bad as it could be. If everyone voted, policy would be a disaster (as the median non-voter is even more biased than the median voter)! Thus, despite the wishful thinking of what Caplan calls the "democratic fundamentalists", the problems of democracy cannot be "fixed" by more democracy. Indeed, what we need is less, not more, democracy. The obsession with voter turnout and campaigns to encourage people to vote are misguided and even dangerous.  

 

Caplan argues that people have preferences over beliefs and that giving up our cherished ideological beliefs involves a certain kind of psychological pain. Given the extremely remote possibility that any one vote affects the outcome of an election, it is much less costly for the individual to indulge in ideology than to think rationally about politics. Thus, otherwise rational individuals can be irrational when it comes to politics. And the social cost is substantial. There is much more to Caplan's analysis which deserves careful attention.

 

The four biases listed above probably have an innate basis, as Caplan acknowledges. Humans are natural pessimists despite rational reasons for optimism; humans are naturally sceptical about foreigners despite overwhelming evidence that international trade and immigration benefits all. A large part of the explanation can be that we evolved in a zero-sum world with little or no possibilities for mutually beneficial trade. As pointed out in an excellent podcast from EconTalk (in which Caplan talks about The Myth of the Rational Voter) the front cover of the book (representing voters as a bunch of sheep) is misleadingly optimistic: "Sheep could converge on a good idea, but around the world and over time, there is a persistent tendency to select economically bad policies. Over time and across countries, stories seem very similar." It is thus not true that people are easily led in general. They are easily led only in certain directions and much harder to lead in other directions because of innate predispositions. People are not blank slates equally open to economic enlightenment as they are to economic fallacies. Rather, they come pre-equipped with various biases that must somehow be unlearned. Economic insights can be learned, of course, but they don't come naturally to people.

 

Also in the podcast, Caplan stresses that democracy is an ideology, a secular religion. He says that "politics is the religion of modernity". The analogy between politics and religion is apt and can be part of the explanation for why there is so much dogmatism in politics and why people so easily become offended when their favoured views are challenged. 

 

The Myth of the Rational Voter is a deeply insightful and profoundly important book. Caplan has provided a sobering and much needed analysis of the political system whose virtues have been naively taken for granted for too long - even by those who should know better.  

 

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