Review of Bryan Caplan's Myth of the
Rational Voter
Among social scientists, economists hold a relatively high
opinion of man's capacities. They believe him to be resourceful,
efficient, and clear-sighted. He is thought to be prudent, and
his judgments reasonable. So, what are economists to make of a situation
where most people, as voters, seemingly reject the most highly reasoned
recommendations that their profession has produced?
George Mason University economist Bryan Caplan attempts
to answer this question in his discussion of The Myth of the Rational
Voter . In particular, he attempts to explain: Why do
voters seek to obstruct the import of cheaper goods from abroad? Why
do they disfavor corporate downsizing that increases economic productivity? And
why does the electorate treasure costly entitlement programs while fretting
about the negligible fiscal consequences of foreign aid?
In line with Nietzsche's claim that "he who has a why
to live can endure any how," Caplan views man's appetite for
arbitrary absolutes as congenital, asserting that "worldviews are more a
mental security blanket than a serious effort to understand the world." Although,
as a good economist, Caplan grants that such beliefs are susceptible
to incentives, he argues that such incentives are negligible in the political
realm, since individuals have little chance of directly determining the outcome
of elections in an electorate of millions. A vote does not
guarantee a political outcome the way an individual purchase of an economic
good does. As a result, voters have little reason to sufficiently
inform themselves of the true consequences from proposed policies, and are
therefore free to hold mistaken worldviews, regardless of the costs these may
inflict on society.
Using survey data that compares voters' policy opinions with
their knowledge of objective political facts, Caplan finds that most
voters are poorly-informed and hold systematically skewed beliefs. Voters,
he claims, have failed to incorporate Adam Smith's central economic teaching:
that man, "by pursuing his own interest… frequently promotes that of the
society more effectually than when he really intends to promote it." Caplan argues
that this is "because Smith's thesis was counterintuitive to his
contemporaries, and remains counterintuitive today." As a
result, policy is subject to four fundamental flaws, which he labels
anti-market bias, anti-foreign bias, make-work bias, and pessimistic bias – all
of which stand stubbornly against the forces of reason, and at every step serve
to obstruct the rational organization of economic resources.
Yet, given that democratic economies significantly outperform
those of non-democracies, Caplan's argument is rather unconvincing. In
reality, the economic virtues of democracy (that the costs and benefits of
public policies are accounted for within the political process, regardless of
who bears them) counteract the vices that Caplan diagnoses. While
there is little evidence in the behavioral economics literature for the
systematic cognitive skews he alleges, pervasive self-serving bias is
well-documented. This merely strengthens the alternative
hypothesis – that voters are best motivated to identify their own pressing
needs, that their votes are valuable to political leaders who compete to supply
the savviest defense of their interests in return, and that legislative
institutions allow representatives to trade support for whatever policies allow
for the most efficient overall allocation of resources. Yet, before
exploring this counter-argument, it is important to consider whether the
cognitive biases that Caplan identifies are to blame for voter
irrationality, or whether he has merely misinterpreted voter interests.
The widespread public opposition to the policy of free-trade,
which economists overwhelmingly endorse, is Exhibit A in Caplan's
argument. Using survey evidence suggesting that the public
blames economic woes on fears that "companies are sending jobs
overseas", he attributes this to the chauvinistic pride that people enjoy
from "the belief that foreign products are overpriced junk," which
survives correction through lack of responsibility for the consequences. This
is indeed a good example of how specific cultures allow biases to persist
without scrutiny, but not one which affords Mr Caplan's profession any
reason to sneer at the general public. Indeed, it is quite
astonishing that none of the dozens of economists acknowledged in the
introduction to the book pointed out the obvious concentration of protectionist
sentiment in areas of the country that face the threat of plant closures from foreign
competition. Given regional negative multiplier effects, this
is clearly the result of an entirely rational concern for the prosperity of
one's own local community. When a relatively high-wage country
removes trade barriers with poorer nations, unskilled labor often becomes a
more abundant factor of production, which can reduce the wages of such workers
in the relatively prosperous country. This may create net
wealth for a nation as a whole, and effected workers are certainly free to
upgrade their skills, but economists should not be surprised when those at risk
vote on the basis of trade issues, whereas the rest of the population – who
save $5 on a pair of shoes – do not.
But it is not just the creative destruction wrought by foreign
entrepreneurs that is subject to popular suspicion. Caplan argues
that the public tends "to overestimate the severity of economic problems
and underestimate the (recent) past, present, and future performance of the
economy." Compared with economists, the general public feels
that the cost of living has risen faster than wages, thinks that more jobs are
being lost than created, and believes that things will likely only get worse. Although
public perceptions may be skewed by the fact that bad news is always bigger
news, this itself is an indication that the economic costs that matter to the
public are not always those measured by economists. While
academics measure a dollar of economic expansion and one of economic
contraction equally, the burden of downsizing to individuals is much greater,
since it often forces people to replace employment-specific (physical or human)
capital investments that have been rendered obsolete. As a result, where
foreign competition or new technology threatens to lead to the loss of employment,
those at risk are often quick to seek political protection.
Furthermore, the policy preference biases that Caplan proposes
are clearly not universal, and are poor predictors of public opinion. Where
the public depends on government programs, such as Social Security or Medicare,
and has invested in the existing system and arranged their lives in
anticipation of a stream of benefits, it is quick to defend them. Yet,
as Hillary Clinton found with healthcare in 1994, where the public relies on
private institutions for services, it is loathe to accept higher charges and
jealously guards whatever freedoms it enjoys. While moments of
extraordinary politics where the status quo no longer functions (for instance,
during the Great Depression or after Britain's 1979 Winter of Discontent) may
provide an opening for radical reform, the public cares more about defending
its existing prerogatives, than entertaining the promises of abstract and
unproven schemes for improvement.
As the Athenian argued in Plato's Laws, "most
people only ask their legislator to enact the kind of laws that the population
in general will accept without obligation. But just imagine
asking your trainer or doctor to give you pleasure when he trains or cures your
body!" While, contrary to Caplan's assertions, such
aversion to painful reform may be quite rational, opposition to the elimination
of inefficient production arrangements can profoundly impede economic growth. So,
an important question remains: How is a democratic society to escape this
'tyranny of the status quo'?
The answer lies with economic and political entrepreneurs. Just
as market imperfections such as patents allow firms to hold longer
time-horizons and capture the gains of innovation in economic markets, so
secure terms of office offer politicians incentives to encourage and permit
reforms that benefit public and private sectors alike. Conversely,
in fragmented political systems, where coalition governments allow little scope
for autonomous leadership, the constant threat of dissolution for failing to
satisfy any of a multitude of governing partners (each of which possess an
effective veto) ensures that there is often very little scope for the state to
allow the status of any established interests to wane.
Since voters are each limited to a maximum of one vote every
four years for presidential elections, a ballot is a very scarce and valuable
commodity to anyone whose life may be affected by political alternatives. (In
this sense, the incentive to consider options seriously and spend wisely is
much greater than it is in economic markets, where if you dislike the DVD you
have bought, you can easily and quickly buy another.) As a result, a
particular reason for casting a vote comes with high opportunity costs, since
voters are forced to trade-off the value that they derive from preferences
across different issues. Working class voters, for example,
must often weigh the benefits of higher expenditure on prisons and police
pledged by one candidate against the expansion in Medicaid spending which
another proposes.
Political scientists have long noted how the alignment of
electoral divisions can shift from one set of issues to another, and it is
often argued (against evidence of broad stability) that politicians can tack
between issue dimensions at will, to evade electoral scrutiny. Yet,
since most votes are swayed by the primary issues of taxes, entitlements,
public services, and crime, which have the most pressing effects on voters'
lives, and since policies drawn from public purse are often interlinked and
impose deadweight losses that burden the economy as a whole, electoral
preferences tend to hold a certain consistency.
But, Caplan would argue, since a single vote is so
insignificant relative to the aggregate electoral outcome, why should
individual voters expend the necessary efforts to properly anticipate the
consequences of their vote and hold the correct people accountable?
While it may be irrational for many people who are not
particularly passionate about politics to vote, the fact that those whose
livelihoods depend on political outcomes are limited to only one ballot gives
them very strong incentives to do whatever they can to persuade and entice
others to turn out. Indeed, it is imperative for interest
groups (whose power is directly tied to how many people they can get to vote),
political parties, and candidates to provide strong reasons for people to vote,
to construct their policy positions accordingly, and to develop social networks
that generate peer pressure and cultural expectations to ensure that people get
to the polls. Given the network externalities associated with
voting, voters have the motivation to provide critical information that might
persuade non-voters to turn out, since this can strengthen the position of the
candidate who promises to benefit them. As E.E.
Schattschneider once noted, "everything about public affairs [is] vastly
more newsworthy than business affairs," and bringing an issue into the
political realm significantly increases the incentive for all and sundry to
disclose and publicize the relevant information that may influence its
resolution. Should some voters fail to support the candidate
that best advances their interests, other candidates have good reason to invest
substantial amounts to target them. At the same time, while
voters can be expected to accurately respond to significant threats to their
own wellbeing, few voters have reason to spend much effort informing themselves
of the negligible fiscal consequences of foreign aid, given that this matter
does not serve to sway their vote.
Yet, "if voters do not know term limits," Caplan argues,
"incumbent politicians will be punished for the sins of their predecessor,
and share credit for their achievements with their successor." In
such situations, however, political entrepreneurs can serve to aggregate,
organize, and certify the critical information needed for the electorate to
render its verdict. Union leaders are not easily fooled to
misperceive their interests, and their members are willing to trust their
expertise when they stand to gain. Similarly, organizations such as
the AARP and associated publications can help voters separate sincere from
insincere politicians that claim to defend particular interests – even when the
issues involved are as abstruse as the proposed progressive indexing of Social
Security. That the cost of organizing concentrates power in
the hands of a few privileged interest groups, is an argument to lower the
costs of democratic participation and to increase the opportunities for
political organization, not one for reducing its scope.
As Gary Becker has observed, because "the total amount
raised from taxes, including hidden taxes like inflation equals the total
amount available for subsidies, including the hidden subsidies like
restrictions on entry into an industry… policies that raise efficiency are
likely to win out in the competition for influence because they produce gains
rather than deadweight loss." In the case of free-trade,
since the costs of economic protectionism are greater in aggregate than the
stresses from foreign competition that are felt acutely, there is much cause
for politicians to accept free trade, and provide compensation to those
disadvantaged by the change. Indeed, this is precisely the
basis for the Trade Adjustment Assistance program, and such measures regularly
form part of the legislative deals that secure Congressional assent for trade
liberalization. As a result, the United States is able to
enjoy benefits from substantial free trade policies.
Similarly, to the extent that the burden of taxation is
concentrated on marginal activities undertaken by a minority, adverse
incentives on such production are similarly concentrated. As a
result, such taxes generate little revenue relative to the cost they impose by
diverting high-skilled labor away from the activities where it produces the
most value for society. Since the incidence of taxation is not
isolated to the faction on which it is seemingly imposed, and such
disincentives to production threatens to lower all boats, the popular
parasitism that Tocqueville and Madison feared from "majority
tyranny" has not materialized. Indeed, as Gordon Tullock
once observed, supposedly majoritarian political systems in reality encompass a
broader range of interests, since politicians "must continually be seen to
be engaging with non-members of the coalition, in order to keep the members in
line."
In a society where the majority of voters have significantly
more to lose than their chains, government spending that offers "Something
for Nothing" often engenders corruption and concentrates gains among those
placed to most ruthlessly exploit the system. This,
unsurprisingly, tends to prove unpopular with a majority that must work hard
for its income. Yet, public opinion often insists that people who
are afflicted through no fault of their own should not fall victim to
theoretically dogmatic and practically asymmetric laissez-faire, and that the
imperfections of existing institutions should not be used as excuses for total
neglect. As Amartya Sen has noted, democracies have never
blithely tolerated famines, and similarly have incentives to make up for market
imperfections that may lead human potential to go to waste, by investing in the
education of those who could not afford to do so themselves.
This does not mean that democracy will necessarily resolve all
structural problems. For example, when the majority is not afflicted
by the consequences of entrenched institutional failures and dysfunctional
cultures (such as those stymieing the accumulation of human and social capital
by the poor), it often possesses incentives to isolate itself and throw money
at such problems, rather than to insist on reform, if the costs of doing so are
lower. Yet, while democratic representatives are capable of
delegating authority to civil service experts or allowing markets to resolve
social problems, democracy clearly constrains the capacity for social elites to
neglect and actively impose burdens on other sections of society, whether by
factional interest, misguided intentions, or the imposition of skewed
priorities that are blind to the facts on the ground.
Caplan warns of fanatical political movements, foisting
their nostrums on the public. Yet, these gain sway far easier when
ambitions for social reform are not tempered by the need to convince a
multitude of voters with differing priorities and often contradictory motives,
preoccupied with mundane concerns, and under the sway of hard-won experience,
habit, and tradition. In a winner-takes-all electoral system,
such as that for most political offices in the United States, it is hard to
explain why so very few people choose to vote for ideologically pure third
party no-hopers without concluding that most people are pragmatic in their
attempts to advance their preferred policies.
V.O. Key was therefore right when he famously concluded that
"voters are not fools", and that "in the large the electorate
behaves about as rationally and reasonably as we should expect." Indeed,
there is good reason to believe that, at least in the case of economic policy
(which is a positive-sum game), greater constraints on political elites,
resulting from a freer and more competitive market for the dissemination of
information and for organization in the public political process would lead to
more rational outcomes. Although one might reasonably question
the time-horizons offered to legislators in the form of term lengths and other
institutional rigidities, the desirability of the ultimate sovereignty of the
voter and a multiplicity of inlets for public scrutiny and discipline on
economic policy is hard to doubt.
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