Government and Politics
The Myth of the Rational Voter: Why Democracies Choose Bad Policies
by J.R. Leonard | September 19, 2008
By Bryan Caplan. Princeton University Press; 276 pages
Review by J.R. Leonard
Orthodox theories of individual behavior in politics or economics tend to fall somewhere on a one-dimensional continuum between absolute rationality and total ignorance. That is to say, social scientists generally presume that people are either informed and know what is best for them, or are ignorant and unable to make correct choices. This approach mitigates against the criticism that democracy will invariably lead down the slippery slope towards demagoguery. It goes something like this: Yes, it is entirely possible that some portion of a given population will be voting on policies of which they have little or no knowledge, but their votes will be randomly dispersed on either side of the issue; that leaves the informed voter with the power to determine the outcome of any given election. This phenomenon is referred to as the miracle of aggregation.
Pick out any person at random and quiz her on the merits of an upcoming referendum and she may well prove to have little or no knowledge as to whether the matter is beneficial or harmful to her. If she votes, however, she has a fifty-fifty chance of voting the way that benefits her. Most of the uninformed votes should cancel each other out; leaving the matter to be decided by those who have well-formed opinions.
This is how economic researchers normally approach the world. A viewpoint that Bryan Caplan finds at odds with what Econ 101 professors see every time they face a new class of students not previously trained in economics. According to Caplan, Economics professors spend a great deal of time and energy trying to get their students to unlearn all the shoddy economic knowledge they have picked up “on the streets”. This apparent contradiction is the motor that powers Caplan’s book The Myth of the Rational Voter: Why Democracies Choose Bad Policies. He addresses this contradiction by going after the main assumption behind the miracle of aggregation: the idea that uninformed voters make random errors.
Caplan contends that people actually make a number of systematic economic errors that influence their beliefs, and therefore their votes. He groups these errors into four categories. The first is the antimarket basis. People tend to distrust that markets will operate efficiently, and tend to view the workings of markets suspiciously. The second is the antiforeign bias; the fact that many people tend to view economic transactions with foreigners in a negative light. Next is what Caplan calls the make-work bias, or the “tendency to underestimate the economic benefits of conserving labor”. Lastly, is the pessimistic bias. Noneconomists usually overestimate the severity of economic problems.
There is a chapter in The Myth of the Rational Voter dedicated to checking these categories against empirical data. The Survey of Americans and Economists on the Economy (SAEE) is a study which compares the answers of PhD economists and laymen on a series of questions regarding the state of the economy. On almost every question, the answers of noneconomists differ from economists in a way that can be characterized by one of Caplan’s four categories.
The immediate objection to this theory is to point out the subjective nature of Caplan’s claims. Just because economists, comfortably sequestered in their ivory towers, tend to favor free trade, does not mean that the average person is irrational to be worried about losing her job to foreign competition. That objection, however, would not explain the systematic deviation that Caplan finds in the SAEE. If noneconomist views were routinely rational and self-interested, then the opinion of the worker in a television manufacturing plant would be countered by the opinions of all those who do not work in television manufacturing plants and enjoy the availability of lower priced imported TVs. And if noneconomists were motivated by “higher” rational and moral principles, then how to account for the fact that in the 1980s, at the height of anti-Japanese backlash, both Canada and Great Britain had a significantly higher amount of direct investment in the United States. Clearly, there is something to Caplan’s theory. The average American worries much more about financial interactions with foreigners, who look and speak differently, than the average Washingtonian worries about competition from Virginia or Maryland.
Much of the book delves into with how we can best deal with an electorate that exhibits what Caplan calls “rational irrationality”, or the tendency to let pre-existing ideological beliefs trump empirical evidence when it comes to making political decisions. One of Caplan’s strongest points is to show that the “cost” of voting is very little, and the cost of voting incorrectly is even less. A person who incorrectly opposes a policy that would make her better off has only a slim chance of being the deciding vote. This remarkably different than, say, the man who realizes too late that he paid too much for a lemon at a used car lot.
When people make decisions that directly affect their own well-being, they tend to move closer to the rationally motivated actors that economists base their models on. This leads Caplan to argue in favor of less Democracy and more markets. In other words, we would be better off spending less time arguing over how best to make collective decisions and just make fewer of them. This would lead to more private decisions and, therefore, more rational ones. This is not a conclusion that everyone will agree with. As the book points out, many of us are predisposed to distrust market forces. However, it would be a mistake for anyone to dismiss this work without giving it fair consideration.
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Email J.R. Leonard at jrl62@georgetown.edu
