Irrational as they may be: bosses, spouses and voters are always right
The Economist’s Lexington has a very good article on Bryan Caplan’s “The Myth of the Rational Voter: Why Democracies Choose Bad Policies”
…voters systematically favour irrational policies. In a democracy, rational politicians give them what they (irrationally) want.
Many political scientists think this does not matter because of a phenomenon called the â€œmiracle of aggregationâ€ or, more poetically, the â€œwisdom of crowdsâ€. If ignorant voters vote randomly, the candidate who wins a majority of well-informed voters will win. The principle yields good results in other fields. On â€œWho Wants to Be a Millionaire?â€, another quiz show, the answer most popular with the studio audience is correct 91% of the time. Financial markets, too, show how a huge number of guesses, aggregated, can value a stock or bond more accurately than any individual expert could. But Mr Caplan says that politics is different because ignorant voters do not vote randomly.
Instead, he identifies four biases that prompt voters systematically to demand policies that make them worse off. First, people do not understand how the pursuit of private profits often yields public benefits: they have an anti-market bias. Second, they underestimate the benefits of interactions with foreigners: they have an anti-foreign bias. Third, they equate prosperity with employment rather than production: Mr Caplan calls this the â€œmake-work biasâ€. Finally, they tend to think economic conditions are worse than they are, a bias towards pessimism. [The Economist]
So how do we get out of the tricky situation?
To curb the majority’s tendency to impose its economic ignorance on everyone else, he suggests we rely less on government and more on private choice. Industries do better when deregulated. Religions thrive when disestablished. Market failures should be tackled, of course, but always with an eye for the unintended consequences of regulation. [The Economist]
(For those who tuned in late, Caplan and his GMU colleague Arnold Kling have an excellent blog. For those inclined to get into the deep end, here’s his paper on systematically biased beliefs about economics)
12 thoughts on “Dear voters, your biases are harming you”
Very good post. In order to rely more on private choice, the legislators themselves have to initiate that change. In the context of India’s political scene its difficult if not impossible.
The best chance for an endogenous change is, paradoxically, when there is a crisis that constrains available options.
Sir, visited your blog after a while and am delighted to find that the quality of your posts has increased a lot. There seems to be a new sparkle.Bravo. (link)
Or is it that your taste has grown more refined? In any case most of the words in this post are Lexington’s, and the ideas Bryan Caplan’s. The sparkle is due to no fault of mine. 🙂
Your premise is wrong
Ever so cryptic. Which one?
“…voters systematically favour irrational policies”
This is classic economist argument. If only they can follow my theory, the people would be so much better off. Never mind that most societies don’t live theoretically. And most economic theories are non-complex (even the mathematically complex ones) that explain little of our true world. Economic policies, just like any other policies, are created from competitive politics (especially in a democracy). Ultimately, ie in the long run, it’s a better system.
That a choice by rational voter will result in optimum for society
That’s not my premise at all.
I will rephrase the question in a slightly different way. Why do representative democracies choose bad policies? A much simpler explanation than the one offered by Brian will be: representatives choose policies that serve their interest, and not the voters’. What is good for the politicians need not necessarily be good, and is often bad, for the public. It’s good old agency theory applied to democracy and politics.
I liked Bill Clinton’s presidency a lot, because he mostly kept his fingers off the cookie jar. Perhaps, because they were busy with more personally rewarding things 😉
I completely agree. But the best way to avoid that crisis is to let the fuse out when the pressure is too much. Just a little bit, so that everyone is assuaged for the time being. Our problem is that we do not remain angry for a long time and are easily satisfied. As long as that exists, the choices or options will not be exhausted.
First as an American I want to say that the Rational Fool isn’t Rational, and calling this poster a Fool is being kind.
Hirok, there is a parable that I often think of about “the Frog in a Pot of Water”. I don’t know if the science of this is correct or not, but it is said that if you put a frog in a pot of boiling water the frog will immediately jump out of the pot. But if you put a frog in a pot of warm water and turn up the heat ever so gradually the frog will just sit there and just let itself be boiled alive without ever making an attempt to jump out of the pot.
That is precisely what you are getting at isn’t it.
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