The Myth of the Rational Voter: Why Democracies Choose Bad Policies (2007)

Weaves a number of things together in coming up with an interesting theory for why people don't vote rationally. Education/Ignorance, low cost of voting the wrong way, emotion-driven biases against sound economic policies like free trade/markets, labor saving, etc. are the main culprits. Argument well-supported in my view ( )

The freakonomics of democratic choice

My acquaintance Arnold is a successful independent treasury consultant with an income to match. Arnold even thinks he makes money too easily, and sometimes votes for the Socialist Party, a fringe party with old-fashioned ideas about taking money from “the rich” to distribute it among “the common men”. Still, Arnold uses every trick available to reduce his income tax bill.

The coming national elections here in the Netherlands are all going to be about the latest economic crisis and the sustainability of the welfare state. The event seemed good enough a reason for an upgrade of my knowledge of political economy, and this book delivers. It answers questions about voters’ understanding of economics, how it affects their choices in the voting booth, and how politicians deal with the outcome.

Starting point of the book is that people with PhD’s in economics know best what works for macro-economic management. This seems like a rather bold statement given the current state of the economy, which followed the adoption of classical policies by institutions like the Federal Reserve. Mr. Caplan sees this in broad terms however. He takes efficiency as the sole basis for choice, and then looks at certain biases like an anti-market bias, a pessimistic bias, an anti-foreign bias, and an overvaluation of hard work by the American public (somewhat unfortunately, Mr. Caplan’s book mainly uses examples from the United States, making his book less applicable to the other 94% of us on the globe). Most of these issues are indeed generally accepted and covered in most under-graduate courses in economics. The book also quotes research that people who are generally better informed about society think more like these PhD’s, as are highly educated people, people with high income growth or job security, and males.

Mr. Caplan then uses classical micro-economic reasoning to explain that not only ignorance but also irrationality about what is best for the economy are perfectly rational approaches for voters. The reason is simple: given how little importance an individual vote has in the outcome of elections, the choices of people like Arnold go without costs. Empirical studies have found that people do not vote with their wallet in mind. Voters choose parties that they think have the best policies for the nation. They may also vote for emotional reasons, or to belong to a certain group. There is little need to adjust the mental security blanket offered by an ineffective world view in this matter. People can be irrational as long as the consequences are limited.

The author also looks on how this affects the supply side of policy. Although most issues of public policy have a strong economic component, economists only play a secondary role in determining government politics:

to get ahead in politics, leaders need a blend of naïve populism and realistic cynicism. No wonder the modal politician has a law degree. (…) The electoral process selects people who are professionally trained to plead cases persuasively and sincerely regardless of merit.

And even if a politician knows “the best policy”, they will have to strike a balance between the irrational preferences of the masses and his own ideas. He cannot however fully ignore efficient policies, as the electorate can vote him out of office in the next elections. Vague solutions, with the tough part delegated to agencies can be a solution in this case. ( )

Essential reading, especially for Democrats. Shows that people do not vote on the basis of their own self-interest, but on the basis of emotion. This is not particularly encouraging for the prospects of democratic (small D) government, but might help Democrats shave losses to the crazies. ( )

The uneducated voter has an anti-market bias inasmuch as he is less pro market than the educated and the economists are (even when discounting those rabidly pro-market fellows over at the Mises Institute!); this the author can prove with facts and figures and lots of diagrams, covering all possible exits. What to do about it? Well, the author has to ask the reader whether Britain, who until the Representation of the People Act of 1948 let people affiliated with universities vote double, was not a democracy? He has to ask, but he leaves it to the perhaps more freely elitist reader to answer, and somewhat timidly only suggests as redress to the empty-skulled anti-market bias that professors of economics when lecturing should leave the details until later, so at least the economically educated gets the basics right.

The first half of the book is interesting, detailing as it does just what the irrationality of the unread produces of strange economic ideas, this largely with the help of a 1996 Harvard University Survey Project, but it sort of peters out after that, and I cannot help thinking that this is a bit due to cowardice. I did all the way to the last page expect the author to step forward with some workable reworking of the election process, but he never did. And one fact that is well known should have been given some consideration in the context of the book I think, namely that not only the uneducated have a clear anti-market bias, so does typically the average English literature professor. (We could get rid of those with a market oriented school system!) ( )

This is an interesting take on the problems with democracy from an economists point of view. Perhaps I have a bit of "democratic fundamentalism" myself, that I'm not sure I agree with some of the fixes to democracy, but I do agree with many of the errors cited. The idea that people rationally choose to be irrational about politics make sense to me. I'm just uncertain that the suggestions by the author will help improve government. ( )