I was recently asked by the convener of this blog, Sukrit Sabhlok, to write a piece on a 2007 book by George Mason University economist, Bryan Caplan, entitled The Myth of the Rational Voter: Why Democracies Choose Bad Policies (MRV). This book has been discussed at length amongst the economics profession (including on my own blogsite), and it is my great pleasure to revisit my thoughts on this landmark book – including, on this occasion, to explore some implications for libertarian thinkers and activists.
A summary of Caplan’s arguments
Many readers of this blog will be aware of a standard proposition of public choice theory known as voter ‘rational ignorance’. According to this concept, when the cost, to a voter, of acquiring information about political issues is greater than the benefits to be derived from the information, and where the impact of an individual vote on a general election outcome is infinitesimal, it is rational for that voter to remain ignorant of the election issues at stake.
This assumption of voter behaviour, in effect, drives many of the key messages of public choice theory that libertarians largely accept today. For example, as Caplan describes it, ‘while voters sleep, special interests fine-tune their lobbying strategy’ (MRV, p. 97) to obtain subsidies (and other benefits) at the expense of the ‘sleeping’, rationally ignorant voting community.
Bryan Caplan challenges this rational ignorance hypothesis by arguing that voters tend to hold systematically biased, irrational beliefs about economic phenomena. In general, these beliefs are of low information content and tend to be defended in a dogmatic fashion when challenged (… go on, try and challenge the views of Average Joe/Joan on free trade and labour market deregulation, for starters, and see how they react!). In Caplan’s view, ‘democracy fails because it does what voters want. … An irrational voter does not hurt only himself. He also hurts everyone who is, as a result of his irrationality, more likely to live under misguided policies’ (MRV, p. 3).
Based on his reading of the historical and contemporary literature on economic beliefs, Caplan derives four general categories of biased economic sentiments held by the general population:
- Antimarket bias: The tendency to underestimate the benefits of the market mechanism. Where an economic luminary such as F. A. Hayek would see the marvels of the extended order of the market everywhere, the typical voter sees such marvels nowhere – and, in many cases, equates market phenomena such as profitability and interest as examples of unbridled monetary confiscations by ‘greedy’ businesses.
- Antiforeign bias: The tendency to underestimate the economic benefits of interaction with foreigners. Communal antagonism towards such trends as outsourcing certain employment functions overseas, or selling raw materials to faraway traders, is reminiscent of the eighteenth-century doctrine of mercantilism that Adam Smith so brilliantly demolished in an intellectual sense, but still lives on today in the hearts of the citizenry.
- Make work bias: The tendency to underestimate the economic benefits from conserving labour. Those who look to the visible face of job losses resulting from structural change today often overlook the job gains (often by those who lost their jobs) to be made tomorrow in emerging industries.
- Pessimistic bias: The tendency to overestimate the severity of economic problems, and to underestimate the recent past, present and future performance of the economy. Despite the good news spread by Julian Simon and, more recently, Johan Norberg, many average voters seem to feel that Malthus was correct in diagnosing the allegedly poor prospects for the market economy.
Caplan then reveals the results of interesting empirical work that tests the extent to which the general public (in the United States) subscribe to these economic biases. Drawing upon a 1996 survey of ‘Americans and Economists on the Economy’, he finds that economists and the general populace hold radically different beliefs about the economy. As stated in a summary paper on the Cato Unbound blog, ‘compared to the experts, laymen are much more sceptical of markets, especially international and labor markets, and much more pessimistic about the past, present, and future of the economy. When laymen see business conspiracies, economists see supply-and-demand. When laymen see ruinous competition from foreigners, economists see the wonder of comparative advantage. When laymen see dangerous downsizing, economists see wealth-enhancing reallocation of labor. When laymen see decline, economists see progress’ (Cato Unbound blog, November 2006).
Caplan argues that the key to ameliorating the effects of economic biases on the body politic is to increase the costs of subscribing to irrational beliefs. A number of suggestions are put forward in MRV:
- Restrict the franchise to, in effect, raise the competence threshold associated with voting. This would, in turn, increase the level of economic intelligence attributable to the median voter. An alternative reform would be to adopt a form of ‘plural voting’, whereby extra votes are accorded to those individuals with greater economic literacy (such as people with tertiary qualifications).
- Reduce, or eliminate, efforts to increase voter turnout at elections. It is expected that such a strategy would discourage economically damaging vote-buying conduct by politicians that seek the electoral affections of the economically biased. This proposal is largely inapplicable to Australia’s system of compulsory voting, however I do note that changes to electoral laws that, say, limit the ‘window’ of time available for voters to register (or register a change of address) on the electoral roll might have (at least vaguely) similar effects.
- Increase the amount of economic education received by the voting population, as a means of rooting out the biases that voters arrive with at the ballot box on election day.
- Allowing economically literate individuals with policy leverage (for example, bureaucrats) to exercise opportunities to improve policy. Caplan quotes Ronald Coase, who once stated that ‘An economist who, by his efforts, is able to postpone by a week a government program which wastes $100 million a year … has, by his action, earned his salary for the whole of his life’ (MRV, p. 199).
Libertarians would all tend to approve of Caplan’s additional idea that ‘it is a good idea to rely more on private choice and the free market’ (MRV, p. 197). To put it in another way, a reduction in the size and scope of government economic intervention should, other things being equal, ensure that voters have fewer issues to be biased about when registering their democratic choice on election day. While it often feels that we classical liberals and libertarians are swimming against the tide of ever-increasing government activity, I am sure that we can at least agree with the sentiment enunciated by Caplan about the capacity of the market as a substitute for collective action.
Some questions and queries from the blogosphere
As would be expected for a work that conveys a host of fresh ideas on public choice theory, MRV has led to numerous debates across economics and political science blogsites (as well as in newspapers, magazines and journals). Whilst I don’t intend to provide an exhaustive summary of these debates, it is appropriate to draw attention to a sample of interesting comments and perspectives drawn from the blog debates.
MRV was the subject of a month-long debate on the Cato Unbound website in late 2006. In addition to a nice summary of the work by Caplan himself, the blog drew in some ‘heavy hitters’ from political science and philosophy such as David Estlund, Loren Lomasky and Jeffrey Friedman.
Lomasky, for example, suggests that Caplan effectively invokes the age-old Platonic concept of the ‘philosopher king’ (which, as an aside, was critiqued by Karl Popper some six decades ago) in the suggestion to transfer economic policy determinations away from voters and towards bureaucracies. According to Lomasky, ‘It is not obvious … that the resultant efflorescence of regulatory commissions and bureaucratic technocracies constitutes a triumph of political wisdom or liberty. Plato, I think, was too enamored of philosophers. Because he was one, he should have known better. Caplan is partial to the policy judgments of economists. Because he himself is one, he should know better’. Friedman and Estlund express similar points of view.
Jeffrey Friedman goes on the offensive regarding the source of voters’ economic irrationality, by asking if it would be ‘more plausible to allow that most people have never even heard the economists’ arguments; and that these arguments are, in any event, counterintuitive – which is why we need Adam Smith, and Peter Bauer, and so forth, to produce them in the first place? … Voters who don’t understand economics because they haven’t been exposed to it, or because they’ve been exposed to it but have found it tough going, aren’t irrational, they’re just ignorant‘.
Over at Volokh Conspiracy, Ilya Somin commends MRV as ‘the most important work on political ignorance in at least a decade, and possibly longer’. However, like Lomasky, Friedman and Estlund, Somin is sceptical of Caplan’s proposition that ‘transferring more political power to knowledgeable experts is a good solution to the ignorance of the rational voter. … I have serious doubts about Bryan’s … paean to expertise’ of so-called apolitical expert bureaucrats.
At Marginal Revolution, a debate over MRV centred on a fourteen-page critical review manuscript written by George Mason University economist, Daniel B. Klein. The Klein manuscript provided various suggestions for improvement of any future edition of MRV, including the need to clarify some terms (such as beliefs and biases), acknowledging the existence of cultural norms that might contribute to reflexive demands for economic interventions by government, and to ‘place the work within liberalism through the ages, including especially Hayek and Public Choice’.
Closer to home, Carlton’s sole classical liberal, Andrew Norton expressed a view that, in practice, Australian democracy has a reasonable record in managing the potential policy consequences of voter economic bias. On the other hand, there are occasions when desirable policy outcomes may be hampered by ‘elite failures’ – such as those currently evident at the State government level.
On my own blogsite, I raise two separate issues concerning MRV. First, I take up Klein’s suggestion that MRV pick up on some of Hayek’s work on misguided economic beliefs by the general population. Second, I give a critical assessment of the key measures advocated by Caplan to reduce the influence of economic irrationality on collective decision-making.
MRV might be regarded as an instant classic in public choice theory, but is there anything more that libertarians can take out of it?
It is clear that most public choice theorists agree that Caplan’s work holds a rightful place in the genealogy of the ‘economics of voting’ literature – alongside Duncan Black, Anthony Downs, James M. Buchanan and Gordon Tullock, Geoffrey Brennan and Loren Lomasky, and Donald Wittman. I concur with this assessment. In essence, Caplan transcends the rational ignorance proposition of standard public choice theory by introducing an alternative voter behavioural foundation of outright irrationality. This intellectual innovation promises to spawn a new generation of work in the field, and it is also likely that the ideas expressed within the blog debates will lead to useful extensions of MRV (including in my pet area of the history of thought on voter irrationality).
I can go even further by suggesting that Caplan’s ideas have potentially significant implications for the ongoing endeavours of classical liberals and libertarians to expound the virtues of free markets and limited government to the general public.
First, given the persistence of economic sophistry amongst the population, it is necessary for free marketeers to continue to explain – in a patient manner – the basics of economic phenomena (as Hayek described it, at the level of ‘explanations of the principle’ or ‘pattern predictions’), and the economic risks posed by government interventionism, to the average person.
As noted by some expert commentators, there is certainly a long way to go in terms of convincing the populace of the merits of some potential economic reform measures. By the same token, I would think that the dedication and persistence shown by bodies such as The Centre for Independent Studies and Institute for Public Affairs, and individuals such as Bert Kelly, John Hyde, Wolfgang Kasper, Des Moore, and so many others, must have had some positive effect in fostering an environment conducive to economic reforms in Australia during the 1980s and 1990s.
Consistent with this, I think that there is a very good argument for classical liberals and libertarians involved in political debates to skilfully use the tools of rhetorical language as a means of persuading the ‘everyman’ to accept the basis for economic reform.
In my view, nobody has expressed this argument better in recent times than the Grand Master of Public Choice Theory, James M. Buchanan. In a classic paper, ‘The Soul of Classical Liberalism’, he called upon the classical liberal/libertarian community to invoke what he variously described as the language of the ‘animating principle’, the ‘vision thing’, the ‘moving spirit’, the ‘soul’ that can make the foundations of free markets and limited government an attractive proposition for the public at large. Buchanan glowingly referred to the rhetoric of Ronald Reagan, with his imagery of the ‘shining city [of liberty] on a hill’, as a good example of the political rhetoric of freedom at its best.
In MRV, Caplan similarly calls for a certain degree of creativity to be used when making arguments in favour of economic liberty. Caplan nominates the Libertarian Great Claude Frederic Bastiat as the prime example of a freedom-fighter who combined a rigorous account of economic liberalism with humour and panache (think of his candlemaker’s petition, for example). Indeed, Bastiat continues to be read and admired to this day, so there must be something of value in Caplan’s suggested strategy, too.
So, in closing, I think Caplan’s book will be regarded as a public choice classic that will be on university course reading lists for decades to come. Caplan provides the ground for a research agenda that can build on his particular conceptualisation of voter behaviour, and his suggestions for institutional improvement in mature democracies. I think there a lot in this book that classical liberals and libertarians would like, and be able to reflect upon. By all means, do yourself a favour and get it!
Finally, I once again thank Sukrit for giving me some ‘forum space’ on the Thoughts on Freedom blog, and I look forward to your comments and feedback. For example, what do you think of Caplan’s notion of voter irrationality and his ideas for improving our democratic system? Is Caplan on the mark with his identification of the four economic biases (are there any that he missed, or other relevant biases from other social sciences, that you are aware of)? What are your suggested remedies for ameliorating economic bias amongst our fellow citizens; is Caplan off the mark with his ideas? Finally, do you think that, with a greater emphasis on rhetoric and communicative flair, we can make greater strides for the cause of freedom?
Over to you…