Arnold Kling  

Majority Fools

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I don't know whether it comes across to our readers, but co-blogger Bryan Caplan is an important scholar. His latest book, for which he is still mulling a title, is a major work. I like the title Majority Fools, which could be taken to mean that voters are irrational (as Caplan argues) and also that people who have faith in the wisdom of democratic majorities are also somewhat foolish.

One of Caplan's main points is that people have a much stronger incentive to behave rationally as economic agents than as voters. If I make a bad consumption decision or labor market choice, then I feel the consequences. So I will tend to notice my mistakes, learn from them, and correct them. On the other hand, if I vote unwisely, this is unlikely to affect me, primarily because my vote almost never matters.

Thus, rational political beliefs, such as an appreciation of the benefits of free trade, are a "public good," likely to be in short supply. If people derive any pleasure at all from holding onto irrational beliefs, then there is essentially zero offsetting pain from being mistaken. So irrational beliefs are likely to persist, even though in the aggregate everyone living in a democracy may be worse off as a result.

Another of Caplan's points is that irrational beliefs about economic issues are widespread, particularly among people who are not well educated. He documents this using survey evidence, comparing the beliefs of economists and non-economists.

I think that Caplan would say, and I would agree, that we are lucky that the political process is not more responsive than it is. If politicians really listened to the average voter, we probably would have worse policies than we have today. That is not to say that politicians are wise, only that they may be less foolish than we deserve.

For Caplan, the "wisdom of crowds" only applies in market settings, where people have the incentive to make rational choices. When it comes to voting, we have majority fools.

Conventional wisdom says that democratic choices are good ones. Caplan, correctly in my view, says otherwise.

Conventional wisdom says that when there are market imperfections, government should step in, implicitly assuming that government is carried out by welfare-maximizing omniscient technocrats. Caplan, correctly in my view, suggests that we should worry about government, because ultimately it is driven by irrational voters.

Conventional wisdom says that economists should bend over backwards not to over-state the benefits of markets. Caplan, correctly in my view, says that voters' natural biases against markets are so strong that economists must be clear and forceful in describing the benefits of markets. Trying to be "even-handed" will lead people to say, "Well, economists can't seem to make a clear case that markets are good, so I'll just go on believing that markets are bad."

All that said, I have two major criticisms of Caplan's book, which I will present in subsequent posts.


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CATEGORIES: Political Economy



TRACKBACKS (6 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/437
The author at Economics and Liberty in a related article titled Political Preferences of Economists writes:
    It seems to me that many economists are not very careful these days to keep their positive analyses separated from their normative analyses. The old principle that economists as economists would not recommend the value judgments used to choose altern... [Tracked on January 28, 2006 6:00 PM]
The author at Muck and Mystery in a related article titled Rationally Ignorant writes:
    I read these Arnold Kling posts 1,2,3 about Bryan Caplan's work and forthcoming book. So here's my offer: If I use the title you suggest, I'll take you to lunch at Morton's (Tyson's Corner or Reston, your pick). I meant to develop and apply the ideas ... [Tracked on January 29, 2006 1:01 PM]
COMMENTS (7 to date)
John writes:

I don't know enough about the situation in Palestine to comment intelligently, but it does seem that the landslide victory for Hamas validates the idea that it is foolish to have faith in democracy as the panacea for all Middle Eastern troubles (as most politicians seem to think).

Sam writes:

I agree with Caplan about the irrationality of voters and the imperfections of the democratic process. However, I'm more curious about what remedies Caplan has in mind. How do we make democratic institutions function better?

Randy writes:

John,

I am not so worried over the results of the Palestinian election as most. Hamas is about to discover that firing guns in the air is one thing, but governing is another. Hamas is now responsible to an electorate, and they will soon discover that the electorate wants prosperity, not war.

Matt McIntosh writes:

"I think that Caplan would say, and I would agree, that we are lucky that the political process is not more responsive than it is."

I would quibble with this. I think we should want the system to be more responsive in some aspects, but this responsiveness should be a two-way street: the government should be more responsive to the people, but the people should also be more responsive to the consequences of their own positions. Here's an example: If the constitution were amended tomorrow to include a "Responsible Financing" amendment to the effect that all taxes would be flat and that the tax curve would shift left or right every year according to a set formula based on the size of the budget defecit, people would be made to feel the costs of spending and be disabused of the Free Lunch illusion. The result would probably be lower spending and lower taxes over the long run. It's all about internalizing externalities.

Speaking of which, this post reminded me of this.

Brian McDaniel writes:

Is this anything newer than that old saw (attributable to Churchill I believe) that democracy is the worst form of government, except for all others?

Jason Ruspini writes:

Minor point: the voting is rational but sub-optimal. Since individual influence is infinitesimal and party differences may be small, it would actually be irrational to invest the time to research the optimal vote. At least that's how Downs treated the issue in 1957.

James writes:

Does anyone seriously offer Churchill's old saw as an argument for democracy? It looks like a fallacy of neglected alternatives. Of all of the ways in which some people may make allocative decisions regarding other people's belongings, democracy is the least bad. Well, maybe. But why constrain the comparison to ways in which some people allocate the belongings of others? There remains also the alternative of allowing allocative decisions to be made by the owner of the thing to be allocated.

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