Monday, 25 June 2007

An economist's view of the irrational electorate

The first post in my Ideas about Democracy series, "A voter intelligence test", dealt with the uneducated voter and how best to fix what can best be described as the stupidity of the masses. Mind you I am a bit cynical about the voting public's ability to make good decisions, but after seeing what has happened historically — and even recently: see the reelection of George W. Bush in 2004 — I think I have a right to be that way.

A fairly new book, "The Myth of the Rational Voter: Why Democracies Choose Bad Policies", written by economics professor Bryan Caplan, analyses the ignorance of the electorate and puts forward some interesting solutions from an economic perspective. I learned about this book from a recent issue of The Economist, and it's now at the top of my Wish List. The Economist article brought up some interesting points of its own.

The world is a complex place. Most people are inevitably ignorant about most things, which is why shows like “Are You Smarter than a 5th Grader?” are funny. Politics is no exception. Only 15% of Americans know who Harry Reid (the Senate majority leader) is, for example. True, more than 90% can identify Arnold Schwarzenegger. But that has a lot to do with the governor of California's previous job pretending to be a killer robot.

Many political scientists think this does not matter because of a phenomenon called the “miracle of aggregation” or, more poetically, the “wisdom of crowds”. 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 “Who Wants to Be a Millionaire?”, 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 “make-work bias”. Finally, they tend to think economic conditions are worse than they are, a bias towards pessimism.

Mr Caplan gives a sense of how strong these biases are by comparing the general public's views on economic questions with those of economists and with those of highly educated non-economists. For example, asked why petrol prices have risen, the public mostly blames the greed of oil firms. Economists nearly all blame the law of supply and demand. ... But since everyone's vote counts equally, politicians merrily denounce ExxonMobil and pass laws against “price-gouging”.
The public's anti-foreign bias is equally pronounced. Most Americans think the economy is seriously damaged by companies sending jobs overseas. Few economists do. ... Hence the reluctance of Democratic presidential candidates to defend free trade, even when they know it will make most voters better off, and the reluctance of their Republican counterparts to defend George Bush's liberal line on immigration.

The make-work bias is best illustrated by a story, perhaps apocryphal, of an economist who visits China under Mao Zedong. He sees hundreds of workers building a dam with shovels. He asks: “Why don't they use a mechanical digger?” “That would put people out of work,” replies the foreman. “Oh,” says the economist, “I thought you were making a dam. If it's jobs you want, take away their shovels and give them spoons.” ... Economists, recalling that before the industrial revolution 95% of Americans were farmers, worry far less about downsizing than ordinary people do. Politicians, however, follow the lead of ordinary people. Hence, to take a more frivolous example, Oregon's ban on self-service petrol stations.

Finally, the public's pessimism is evident in its belief that most new jobs tend to be low-paying, that our children will be worse off than we are and that society is going to hell in a variety of ways. Economists, despite their dismal reputation, tend to be cheerier. Politicians have to strike a balance. They often find it useful to inflame public fears, but they have to sound confident that things will get better if they are elected.

We all know the American electorate, though not alone in its ignorance, is, quite frankly, very stupid when it comes to more important issues. Americans care and know more about pointless pop culture than important politics that affect their lives and the lives of those around them. The people are partly to blame, as is the education system and the celebrity- and sensation-obsessed media.

Negative buzzwords and phrases like "cut and run", "support our troops", "freedom isn't free", "tax", "amnesty", and "terrorism" shape US politics more than what the words actually mean. The debate is limited to which side can make the other look worse. Politicians are more elected on their personality than politics. There has been more media-prompted discussion on faith within the 2008 presidential candidates than most other topics politically-relevant to the office one of the candidates will likely hold in a year and a half.

The "liberals" are pro-choice, godless, anti-corporation, Hollywood-saturated, anti-war traitors; the "conservatives" are wealthy, neocon, ultra-religious, blind, war-mongering fascists. That is how each side is labeled, regardless of how they actually act. The apathy of the average Joe and Jane mixed with the fanatical sound-bytes of the irrational political extremes makes for the dangerous state of American democracy. And scaring the electorate after 9/11 into a 'war' mindset sure hasn't killed the apathy like Pearl Harbor and the ensuing entrance into World War II did.

Angelina Jolie is more revered for being a caring celebrity god than the real international heroes — the diplomats, the peacekeepers, the people trying to make things right who don't get the eye of the public. This is partly because Americans know more about Jolie than Ban Ki-moon or even Zalmay Khalilzad. Celebrity activists, often knowing almost nothing about their causes, are hailed as the selfless heroes our planet needs more of. And they get plenty of news coverage too.

Marginal Revolution also took a look at the book and pokes some holes in Caplan's argument, such as
I'm amazed that the public is as rational and smart as it is. Few people demand that our leaders resort, say, to the tools of superstition, even though many people believe in astrology. Our political irrationality is highly selective and self-serving in a "feel good about ourselves" way, rather than indiscriminate. I don't understand what, in Bryan's theory, prevents voters from satiating in irrationality, with truly dire social consequences.
Voters are less irrational in many northern European countries. ... What accounts for such a difference?

I believe this is one of those facinating, relevant books that doesn't fade into scholarly abscurity but also doesn't make it into the general public's eye. However, it is — at the time of this post's writing — ranked 390 in books on Amazon.

You can read the introduction of "The Myth of the Rational Voter" also.

This book develops an alternative story of how democracy fails. The central idea is that voters are worse than ignorant; they are, in a word, irrational—and vote accordingly. Economists and cognitive psychologists usually presume that everyone “processes information” to the best of his ability.6 Yet common sense tells us that emotion and ideology—not just the facts or their “processing”—powerfully sway human judgment. Protectionist thinking is hard to uproot because it feels good. When people vote under the influence of false beliefs that feel good, democracy persistently delivers bad policies. As an old computer programming slogan goes, GIGO—Garbage in, garbage out.
This book has three conjoined themes. The first: Doubts about the rationality of voters are empirically justified. The second: Voter irrationality is precisely what economic theory implies once we adopt introspectively plausible assumptions about human motivation. The third: Voter irrationality is the key to a realistic picture of democracy.
In democracies the main alternative to majority rule is not dictatorship, but markets.

...while the general public underestimates how well markets work, even economists underestimate markets’ virtues relative to the democratic alternative.

So is populism one of the ultimate enemies to democracy? Populists cave into what the people want — but isn't that what elected officials are supposed to do? The perplexity of the government of the people calls into question much of the conventional wisdom on democracy. The forces of populist democracy and good governance often collide, raising a number of conundrums.

Elected officials should work towards the greater good, as well as doing what is best for their electorate even if that means not caving into some of their irrational political ways. But that may hurt come election time. Are good politicians more populist, doing what makes them look best to their electorate; or is a good politician someone who will listen but dare to act against the public's wishes? Human rights are often taken for granted by the masses. Touchy issues requiring expertise in various areas should be left to the politicians the electorate elect, not to the electorate except via referendum. Indirectly, the people vote on issues during election time, and that's democratic enough. Officials and voters both pick their issues, and I doubt a politician would lose an election over the issue of the death penalty.

Lastly, how does the market fit into an irrational public and the conflict between populism and what makes sense? Hopefully when I get my hands on this book I'll find out, at least a bit, how market philosophy can be applied to the democracy.

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