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The Myth of the Rational Voter

Why Democracies Choose Bad Policies

by Bryan Caplan

Princeton University Press © 2007

280 pages

• Voters often know little about what they vote for, but they vote anyway.

• Voter ignorance of basic economics is surprisingly widespread.

• This ignorance leads to a number of pervasive biases.

• Voters underestimate the benefi ts of markets.

• Voters mistrust foreigners.

• Voters support make-work over effi ciency.

• Voters are irrationally pessimistic about the economy.

• Voters choose ideology over fact.

• Educated voters are less susceptible to these biases.

• Economic education may lead to more enlightened economic policies.

Rating (10 is best)

Overall Importance Innovation Style

9 7 9 9

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“In theory,

democracy is a

bulwark against

socially harmful

policies, but

in practice it

gives them a

safe harbor.”

The reason why

I emphasize

economics is that

it is at the heart

of most modern

policy disputes.”

Relevance

What You Will Learn

In this Abstract, you will learn: 1) How little the voting public knows about basic

economics; 2) Why this is a problem for democracy; and 3) What to do about it.

Recommendation

Economists on the right and the left agree on a surprisingly large number of policy

issues. They believe free trade is good, the U.S. budget defi cit is not a problem and most

human beings are better off now than in the past. Yet the democratic public doesn’t agree.

It fears trade and foreigners, thinks the budget defi cit is a big problem and is pessimistic

about the economy even during periods of record economic growth. But the worst part,

says economics professor Bryan Caplan, is that the public votes. Drawing on empirical

research about voter attitudes, Caplan describes how voters are mistaken about many

policy issues and – more importantly – why they are wrong. His account is frighteningly

plausible, but so is his solution: more economic education. getAbstract recommends

this pithy volume to anyone concerned about voters’ ostensibly self-defeating behavior.

Democracy may be better than the alternatives, but no one said it was easy.

Abstract

The Enlightened Public

If the average American is any indication, voters are shockingly ignorant. For instance,

each state in the United States has two senators. Europeans can be forgiven for not

knowing this elementary fact about U.S. politics, but you would think most Americans

would know it. Nope. Small wonder, then, that fewer than 40% of U.S. voters can name

both their senators. Fewer still know their senators’ party affi liations, even though a

random guess gives them a 50% chance of being correct. And only about a quarter of

voters know how long senators serve (six years).

Perhaps worse, voters seem to be shockingly knowledgeable about political trivia. Take

the 1992 campaign for the U.S. presidency. Fewer than 20% of voters knew Bill Clinton’s

environmental record. But almost 90% knew that vice presidential candidate Dan Quayle

picked a fi ght by criticizing a television character. Quayle, the candidate who couldn’t

spell “potato” and stressed the importance of “bondage between mother and child,” lit

into Candice Bergen’s character, Murphy Brown, over the “immorality” of being a

single mother. Only 15% of voters knew the candidates’ positions on the death penalty.

Thankfully for the health of the American republic, though, 86% of voters could name

the incumbent president’s dog.

It’s the Economy, Stupid

Voters consider the economy the “most important problem” in almost every election.

(Recall Bill Clinton’s 1992 campaign mantra: “It’s the economy, stupid.”) But do

voters understand the economy? In 1996, the Harvard University Survey Project, the

Washington Post newspaper and the Kaiser Family Foundation decided to fi nd out. Their

“Survey of Americans and Economists on the Economy” asked 1,510 randomly chosen

Americans and 250 people who held doctorates in economics a list of 37 questions

about the economy, and then compared the results. They found that voters’ grasp of

The Myth of the Rational Voter © Copyright 2007 getAbstract 2 of 5


“Economic policy

is the primary

activity of the

modern state,

making voter

beliefs about

economics

among the most

– if not the most

– politically

relevant beliefs.”

“Voters are worse

than ignorant; they

are, in a word,

irrational – and

vote accordingly.”

“An irrational voter

does not only hurt

himself. He

also hurts

everyone who

is, as a result of

his irrationality,

more likely to live

under misguided

policies.”

The people

ultimately in

charge – the

voters – are doing

brain surgery

while unable

to pass basic

anatomy.”

basic economics – supply and demand, gains from trade, the benefi ts of increased labor

productivity – was, at best, impressionistic. At worst, it was frightening.

The survey asked respondents for likely reasons why the American economy was not

doing better. Respondents were given a number of possible explanations and asked whether

each was “a major reason,” “a minor reason” or “no reason at all” for weak economic

performance. For instance, foreign aid: Is it a brake on the U.S. economy? The public

overwhelmingly said yes. Is it? No. Foreign aid is a tiny percentage of the U.S. economy

– less than 1% of GDP. Accordingly, economists almost unanimously considered it “no

reason at all” for poor economic performance. What about people on welfare? Are those

“welfare queens” hurting economic performance? The public thinks so. In fact, the public is

even more worried about people on welfare than about foreign aid. Economists, in contrast,

don‘t worry about welfare, which is a small bit of the U.S. budget.

Who else does the public blame for a misfi ring economy? It blames those nefarious

immigrants, of course. But economists have a different answer: The putative “surplus”

of immigrants has almost no effect on the economy. What about taxes? The public thinks

high taxes in the U.S. are hurting the economy. Economists say, generally, no, although

they do have some effect. In fact, though they are seen as “conservative,” economists

generally don’t share the public’s support for tax cuts. The public also blames “women

and minorities” who “get too many advantages under affi rmative action.” What say the

economists? Affi rmative action has essentially no deleterious effect on economic health.

Are these Ph.D.’s really apostles of what Carlyle called the “dismal science”? Their

outlook hardly seems grim.

The survey also asked about specifi c issues, such as gas prices. Is gas too expensive in the

U.S.? Most economists think it’s not expensive enough. The public feels differently. When

it comes to the explanation behind these “too high” prices, economists cite normal supply

and demand. The public prefers to blame oil companies for “gouging” the customer. When

asked about unemployment, the public blames technology, downsizing and “sending jobs

overseas.” Economists do not oppose downsizing that keeps a fi rm alive and saves other

jobs, though “everyone reviles a profi table fi rm that downsizes…to be more profi table.”

Economists don’t necessarily oppose off-shoring, because “there are more remunerative

ways to use domestic labor.” And they don’t think technology is destroying good jobs.

They thank technology not just for iPods, HDTVs and new medicines, but also for

increasing workplace effi ciency – and thus improving human welfare.

Who Are You Calling Biased?

Survey respondents who are not economists demonstrate four well-entrenched, systematic

biases that cloud their thinking on economic (and most likely other) policy issues: an

“antimarket bias,” an “antiforeign bias,” a “make-work bias” and a “pessimistic bias.”

• Greed is bad – Most voters don’t consciously appreciate the benefi ts of markets. They

voice many variations on this antimarket theme. Some people focus on the “base”

motives of business people. Others think that if a business has high profi ts, it must

be “gouging” customers or it must have a monopoly – another popular idea of why

markets must be evil. But, at least since Adam Smith, and probably before, writers on

economics have described, in detail, how irrelevant motives are in a market. They also

have described again and again how the corporate desire for profi t benefi ts consumers.

Yes, monopolies sometimes arise, but they are far less common than supposed and

collusion to keep prices high is much more diffi cult (and rare) than it seems.

The Myth of the Rational Voter © Copyright 2007 getAbstract 3 of 5


“Most voters

never take a

single course

in economics...

No wonder

protectionism,

price controls

and other foolish

policies so

often prevail.”

“Political/economic

ideology is

the religion of

modernity. Like

the adherents of

traditional religion,

many people fi nd

comfort in their

political worldview,

and greet critical

questions with

pious hostility.”

“In real-world

political settings,

the price of

ideological loyalty

is close to zero.

So we should

expect people

to ‘satiate’ their

demand for

political delusion,

to believe

whatever makes

them feel best.”

Economists

have created

and popularized

many of the most

socially benefi cial

ideas in human

history, and

combated many of

the most virulent.”

• Foreign devils – Around the world, people blame foreigners for all sorts of ills. This

is unfortunate, because interactions with foreigners can deliver huge benefi ts to all

sides. Trade is not warfare, though many enjoy conceiving of it as a battle. Even if

one country (say, Germany) can make every product more effi ciently than another

(say, Greece), trading is still in both countries’ interests. Nor is immigration so bad.

Economists often argue over trade and immigration policies, but few in the very

wide mainstream of economics, right or left, deny that foreign interactions are, on

balance, good for everyone.

• Creating things vs. adding value – In the view of most voters, Sisyphus was lucky. Sure,

his task of pushing a boulder up a hill every day wasn’t particularly productive, and

it must have been frustrating to watch it roll down again after manhandling it to the

summit. But at least he had work. This is the make-work bias – the idea that having a job

is more important than creating value effi ciently. When asked about higher productivity

in the abstract, voters are generally supportive. When asked about policies that “create

jobs,” however, voter concerns about productivity go out the window. Economists, on

the other hand, have known for a long time that productivity is good, even if it leads

to (temporary) unemployment. Technology, which is the main engine of productivity,

also creates jobs – different ones. In 1800, nearly 95 of every 100 Americans worked to

provide food for the country. Today, only three out of every 100 labor to produce food.

What are those other 97 Americans doing? Other jobs.

The glass is half-empty – When it comes to economic problems and overall economic

performance, voters are pessimists. They look back – far back – with nostalgia. They

see symptoms of “decline” everywhere and fear the future. By any measure, most

human beings today are better off than people have ever been. Yet, the pessimistic

bias remains. Could things be better? Absolutely. But the gap between perceptions of

well-being and actual well-being seems to be increasing. Even when economists get

“pessimistic” about, say, GDP growth, such pessimism is usually about relative growth

rates – say, from 3% growth to 2% growth. This hardly means the end is nigh.

Tu Quoque? (You, too?)

Maybe it’s not the public who is biased. To borrow a phrase from Ludwig von Mises,

maybe economists are, “Sycophantic apologists of the unfair class interests of the

bourgeois exploiters.” The tendency of economists to extol the virtues of markets, trade

and effi ciency, and to see a rosy economic future may be the result of at least two biases:

an “ideological bias” and a “self-serving bias.” After all, most Ph.D. economists have

cushy tenured jobs that protect them from the market forces they laud in journals and on

the editorial pages of The Wall Street Journal. And, economists can hardly be expected

to renounce the conclusions of their own profession.

Neither of these objections hits the mark for a couple of reasons. First, the data from the

“Survey of Americans and Economists on the Economy” allows analysis of a subset of

the public: Educated people. When attributes like gender, income and age are controlled,

education narrows the gap between the public and the trained economists. The so-called

“enlightened public” generally agrees with the economists. Easy to explain, you say:

“Educated” people have been indoctrinated at the university. Perhaps, but consider the

second response: Could a whole fi eld be so wrong about the very subject it exists to study?

Certainly experts can be mistaken. But is an entire fi eld more likely to be wrong than

nonexperts? Compare: Who is more likely to be right about plate tectonics – geologists or

the layman? The economists’ consensus, then, seems more likely to be correct than not.

And remember, economists across the political spectrum generally agree with each other.

The Myth of the Rational Voter © Copyright 2007 getAbstract 4 of 5


“I see neither

well-functioning

democracies nor

democracies

hijacked by

special interests.

Instead, I see

democracies that

fall short because

voters get what

they want.”

“Democracy lets

the individual

enjoy the

psychological

benefi ts of

irrational beliefs

at no cost

to himself.”

Supply and Demand

Even if economists can be trusted to know about their fi eld of study, the fact that the public

gets things so wrong is certainly strange. What could explain it? Supply and demand,

believe it or not. People have preferences about their preferences. They want to believe

some things and disbelieve others for a number of reasons: to preserve their self-images, to

go along with the crowd and to remain consistent, to mention three. These are the benefi ts

of ignoring evidence. What about the cost? If you move into a new neighborhood where

you are the only liberal (or conservative or moderate), you may be less likely to maintain

your beliefs. You may be hectored or ostracized for going against the grain.

Now suppose that the people in your new neighborhood don’t care about your political

beliefs. You have opposing values, but they don’t think that is a big deal. This brings

the cost of your “strange” beliefs down toward zero, while maintaining the benefi t to

you (consistency). Now you have little reason to change. It’s a little like pollution. If you

produce toxic waste and can dump it in a nearby river without cost, you might do so.

Economists call this an “externality”: a cost that is not born by the person who benefi ts.

Political beliefs are, likewise, a kind of externality because – in a democracy – people

can indulge in them without much, if any, cost.

Why? Because in a democracy, one vote is unlikely to decide an election. As the size

of the electorate increases, the effect of your individual vote decreases almost to zero.

So you have little reason not to “vote your conscience” or to go along with your friends.

Consider rich movie stars who consistently vote for candidates who promote higher

income taxes. Sure, if their candidate wins, they’ll pay more – probably a lot more. But

their vote most likely makes little difference in the election, so why not vote based on

ideology? That way, these stars can fl aunt their ideological credentials without limit.

They get the benefi ts without the costs.

The Miracle of Aggregation

Is the democratic ship of state, then, being piloted by a drunk? Traditionally, political

scientists and theorists of “public choice” say no. The “miracle of aggregation” saves

ignorant voters from themselves. This is the “wisdom of crowds” applied to democracy

rather than being used, say, to guess how many jelly beans are in a jar. Given enough

voters, the “errors” cancel each other. If a whole segment of the electorate randomly

votes “yeah” or “nay,” the miracle of aggregation holds that all the ignorant voters offset

each other, leaving the enlightened few in command.

One problem, though: systematic bias undermines the “wisdom of crowds.” Independence

is a condition for wise crowds. If the crowd is systematically biased (and crowds generally

are), then the “wisdom of crowds” becomes “the folly of herds.” What can be done about

that? The solution is hidden in the data from the survey: Education. The more educated

the democratic electorate is, the less biased it will be. A long tradition of economic

thinkers, from Adam Smith to New York Times columnist Paul Krugman, have tirelessly

tried to communicate the basic facts of economics to the public. Like Sisyphus, these

economic educators need not worry about running out of work.

About The Author

Bryan Caplan is Associate Professor of Economics at George Mason University and coeditor

of EconLog, an economics blog.

The Myth of the Rational Voter © Copyright 2007 getAbstract 5 of 5

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