The Myth of the Rational Voter: Why Democracies Choose Bad Policies (Princeton University Press, 2007)
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No. 594 May 29, 2007 The Myth of the Rational Voter Why Democracies Choose Bad Policies by Bryan Caplan Executive Summary In theory, democracy is a bulwark against greed and the public interest. I call this anti-mar- socially harmful policies. In practice, however, ket bias. They underestimate the benefits of democracies frequently adopt and maintain poli- interaction with foreigners. I call this anti-foreign cies that are damaging. How can this paradox be bias. They equate prosperity not with produc- explained? tion, but with employment. I call this make-work The influence of special interests and voter bias. Finally, they are overly prone to think that ignorance are two leading explanations. I offer economic conditions are bad and getting worse. an alternative story of how and why democracy I call this pessimistic bias. fails. The central idea is that voters are worse In the minds of many, Winston Churchill’s than ignorant; they are, in a word, irrational—and famous aphorism cuts the conversation short: they vote accordingly. Despite their lack of “Democracy is the worst form of government, knowledge, voters are not humble agnostics; except all those other forms that have been tried instead, they confidently embrace a long list of from time to time.” But this saying overlooks the misconceptions. fact that governments vary in scope as well as Economic policy is the primary activity of the form. In democracies the main alternative to modern state. And if there is one thing that the majority rule is not dictatorship, but markets. A public deeply misunderstands, it is economics. better understanding of voter irrationality advis- People do not grasp the “invisible hand” of the es us to rely less on democracy and more on the market, with its ability to harmonize private market. _____________________________________________________________________________________________________ Bryan Caplan is an associate professor of economics at George Mason University and an adjunct scholar at the Cato Institute. This study is an excerpt from Caplan’s book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (Princeton University Press, 2007). Voters are worse agnostics; instead, they confidently embrace than ignorant; they Introduction: The Paradox a long list of misconceptions. of Democracy When cataloging the failures of democra- are, in a word, cy, one must keep things in perspective. The irrational—and In a dictatorship, government policy is often shortcomings of democracy pale in compari- vote accordingly. appalling but rarely baffling. The building of son with those of totalitarian regimes. the Berlin Wall sparked worldwide outcry, but Democracies do not murder millions of their few wondered, “what are the leaders of East own citizens. Fair enough, but such compar- Germany thinking?” That was obvious: they isons set the bar too low. Now that democra- wanted to continue ruling over their subjects, cy is the most common form of government, who were inconsiderately fleeing en masse. there is little reason to dwell on the truism No wonder democracy is such a popular that it is “better than communism.” It is now political panacea. The history of dictator- more worthwhile to figure out how and why ships creates a strong impression that bad democracy falls short. policies exist because the interests of rulers In the minds of many, one of Winston and ruled diverge. A simple solution is make Churchill’s most famous aphorisms cuts the the rulers and the ruled identical by giving conversation short: “Democracy is the worst “power to the people.” If the people decide to form of government, except all those other delegate decisions to full-time politicians, so forms that have been tried from time to what? Those who pay the piper—or vote to time.”4 But this saying overlooks the fact that pay the piper—call the tune. governments vary in scope as well as form. In This optimistic story is, however, often at democracies the main alternative to majority odds with the facts. Democracies frequently rule is not dictatorship, but markets. adopt and maintain policies harmful for most Economists have an undeserved reputa- people.1 Protectionism is a classic example. tion for “religious faith” in markets. No one Economists across the political spectrum have has done more than economists to dissect pointed out its folly for centuries, but almost the innumerable ways that markets can fail. every democracy restricts imports. Admittedly, After all their investigations, though, econo- this is less appalling than the Berlin Wall, yet it mists typically conclude that the man in the is more baffling. In theory, democracy is a bul- street—and the intellectual without econom- wark against socially harmful policies, but in ic training—underestimates how well mar- practice it gives them a safe harbor. kets work. I maintain that something quite How can this paradox be explained? One different holds for democracy: it is widely answer is that the people’s “representatives” overrated not only by the public but by most have turned the tables on them.2 Elections economists, too. Thus, while the general pub- might be a weaker deterrent to misconduct lic underestimates how well markets work, than they seem on the surface, making it more even economists underestimate markets’ important to please special interests than the virtues relative to the democratic alternative. general public. A second answer, which com- plements the first, is that voters are deeply ignorant about politics.3 They do not know Is the “Miracle of who their representatives are, much less what Aggregation” Just Wishful they do. This tempts politicians to pursue per- Thinking? sonal agendas and sell themselves to donors. I offer an alternative story of how democ- What voters don’t know would fill a uni- racy fails. The central idea is that voters are versity library. In the last few decades, econo- worse than ignorant; they are, in a word, irra- mists who study politics have thrown fuel on tional—and vote accordingly. Despite their the fire by pointing out that—selfishly speak- lack of knowledge, voters are not humble ing—voters are not making a mistake. One 2 vote has so small a probability of affecting the prize? Whoever has the support of a majority of electoral outcomes that a realistic egoist pays the well-informed. no attention to politics; he chooses to be, in This result has been aptly named the “mira- economic jargon, rationally ignorant. cle of aggregation.”8 It reads like an alchemist’s The vast empirical literature on voter recipe: mix 99 parts folly with 1 part wisdom to knowledge bears this out.5 Almost all econo- get a compound as good as unadulterated wis- mists and political scientists now accept that dom. An almost completely ignorant electorate the average citizen’s level of political knowl- makes the same decision as a fully informed edge is extraordinarily low. At the same time, electorate—lead into gold, indeed! however, scholars have also largely come to It is tempting to call this “voodoo poli- believe that this doesn’t really matter, because tics,” or quip, as H. L. Mencken did, that democracy can function well under almost “democracy is a pathetic belief in the collec- any magnitude of voter ignorance.6 tive wisdom of individual ignorance.” But How is this possible? Assume that voters there is nothing magical or pathetic about it. do not make systematic errors. Though they James Surowiecki documents many instances err constantly, their errors are random.7 If where the miracle of aggregation—or some- voters face a blind choice between X and Y, thing akin to it—works as advertised.9 In a knowing nothing about them, they are equal- contest to guess the weight of an ox, the average Almost all ly likely to choose either. of 787 guesses was off by a single pound. On “respectable” With 100 percent voter ignorance, matters Who Wants to Be a Millionaire, the answer most modern economic are predictably grim. One candidate could be popular with studio audiences was correct 91 the Unabomber, plotting to shut down civiliza- percent of the time. Financial markets— theories of politics tion. If voters choose randomly, the Unabomber which aggregate the guesses of large num- begin by assuming wins half the time. True, the assumption of zero bers of people—often predict events better that the typical voter knowledge is overly pessimistic; informed than leading experts. Betting odds are excel- voters are rare, but they do exist. But this seems lent predictors of the outcomes of everything citizen a small consolation. One hundred percent igno- from sporting events to elections. In each understands rance leads to disaster. Can 99 percent ignorance case, the logic enunciated by political scien- be significantly better? tists Benjamin Page and Robert Shapiro economics and Yes. Democracy with 99 percent ignorance applies: votes accordingly. looks a lot more like democracy with full information than democracy with total igno- This is just an example of the law of rance. Why? First, imagine an electorate large numbers. Under the right condi- where 100 percent of all voters are well- tions, individual measurement errors informed. Who wins the election? Trivially, will be independently random and will whoever has the support of a majority of the well- tend to cancel each other out. Errors in informed. Next, switch to the case where only one direction will tend to offset errors 1 percent of voters are well-informed. The in the opposite direction.10 other 99 percent are so thick that they vote at random. Quiz a person waiting to vote, and Judging from research in recent decades, you are almost sure to conclude, with alarm, most economists find this logic compelling. that he has no idea what he is doing.