Book Review: The Myth of the Rational Voter

The Myth of the Rational Voter: Why Democracies Choose Bad Policies by Bryan Caplan

Given that most voters aren’t well informed on complicated matters like international trade or health economics, why isn’t democracy a total disaster? One answer is that as long as you have some well-informed voters, all is well. The non-informed voters will all vote randomly and cancel each other out leaving only the well-informed votes to influence policy.

Not so fast, says Caplan: non-informed voters don’t just vote randomly, but have a number of intrinsic biases that make them vote for socially harmful policies. These biases include:

  • Anti-market bias or the “tendency to underestimate the benefits of the market mechanism.” Non-informed think of trade as a zero-sum game, whereas non-coercive exchanges are mutually beneficial. Exports aren’t more desirable than imports, but rather are the costs we pay in order to get imports.
  • Anti-foreign bias or the “tendency to underestimate the economic benefits of interaction with foreigners.” Non-informed voters think that, for example, what’s good for China must be bad for America. The only way for “us” to benefit is for “them” to suffer (neo-mercantilism?). But trade between countries is no different in principle from trade between two citizens: it’s a positive-sum game.
  • Make-work bias or the “tendency to underestimate the economic benefits from conserving labor.” Non-informed voters think the goal of the economy is to provide everybody with a stable job, but if that were true we’d all still be farmers. In order to have a world with software engineers and astronauts and web designers, in the past farmers had to be laid off (either directly or indirectly with former farm laborers seeking better prospects).
  • Pessimistic bias or the “tendency to overestimate the severity of economic problems and underestimate the (recent) past, present, and future performance of the economy.” Non-informed voters think that things are bad and only are going to get worst. Our best days are behind us. That’s simply not true.

Caplan introduces the idea of “rational irrationality” to account for why economic theory expects people to be more-or-less rational in the market but not in the political sphere. In market transactions, there are costs and benefits that nudge people towards more desirous end states (if I spent all my money on books I’d starve to death so I balance out my desire for knowledge with my need for sustenance; books are not zero cost). But when voting people know that their single vote is essentially worthless, so they vote rationally for irrational policies that make them feel good; that satisfy their worldview. Caplan uses the amusing analogy of Stalin favoring Marxist Lysenkoism over bourgeois Darwinist genetics since that satisfied his worldview (and he obviously didn’t care when millions of peasants starved to death subsequently), but when it came to physics the Marxist-Leninist materialist rejection of relativity and quantum mechanics would have meant no Soviet atomic bomb. In this case, Stalin favored “bourgeois horse sense”.

Why then do democracies seem to do basically alright, especially compared to the historical alternative? One proposal Caplan raises is that the median voter is not like the median citizen; voters tend to be more educated than non-voters and increased education correlates with a greater likelihood of employing “the economic way of thinking”. Another idea is one that was also raised in The Dictator’s Handbook (which I recently reviewed): if politicians instituted all the populist measures that the electorate called for, it would wreck the economy and they would be blamed for it and tossed out of office. So the shrewd (and thus enduring) politician must weigh satisfying the electorates’ thirst for populist measures with actually good policy. Another possibility is that democracy mostly functions as a floor on how awful the leaders can be; if they are too terrible they get voted out whereas autocrats can be stunningly bad for decades.

To be clear, Caplan is in no way favoring something like autocracy or feudalism when he investigates systemic problems with democracy. Democracy is demonstrably better than the alternatives, so even with its problems we could clearly just get by. His preferences however lie in a greater devolution of decision-making to markets where the cost-benefit tug of war will enforce better overall policy. That is we’d keep democratically-elected leaders, but simply reduce the space of things that government impinges on such that rationally irrational voting preferences can’t do too much damage.

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