Tim Worstall

Timmy Elsewhere

Aha: Last week’s review in The Telegraph of Bryan Caplan’s "The Myth of the Rational Voter" is now up.

It’s rare to find a book of popular economics that is
simple enough to follow and yet answers one of the important questions
about the world. Bryan Caplan, a professor at George Mason University,
has managed both feats with The Myth of the Rational Voter, the question answered being: why do we get such lousy economic policies from politicians?

The
consensus among economists is strong on certain subjects: protectionist
trade rules and tariffs make us poorer, rent control destroys the
rental housing market, minimum wages are harmful; yet these are exactly
the policies that pop up time after time, as proposed solutions from
our politicians.

Why is this so? Perhaps politicians are irrational.
Yet, as Caplan points out, to stay in power, politicians have to do a
minimum of what we want them to. Perhaps they are being rational and
giving us what we think we want.

So it is us, the
voters, irrationally pushing for policies that economists state are
against our interests. And yet almost the first precept of economics is
that we are rational. We respond to the incentives before us, which is
why markets work as they do.

Caplan has to show
that we are rational when facing the normal incentives of life, but
irrational when acting on the larger political stage as voters. This he
does very well.

At the heart of the book is one of
his academic papers, in which he looks at what economists think about
economics and political policies, and what the general public think
about them.

One complaint about economists is that
nearly all are rich white men in comfortable jobs facing little risk of
unemployment – of course their views support a system that is good to
rich white guys in secure jobs.

But using survey
evidence Caplan allows for these factors and show us what would be the
views of everyone, rich and poor, if they had studied economics to PhD
level. We underestimate the power of markets to "harmonise private
greed and the public interest", we have an anti-foreign bias, we
confuse employment with production and we’re too pessimistic. While
this explains the poverty of the policies we vote for, how can we
function in markets at all if we are so irrational?

When
we act in a market we are directly affected and thus have strong
incentives to get the right answer. But one vote counts for so little
that the cost of being altruistic is tiny: we vote not for what will
benefit us, but for what will benefit everyone. It’s precisely because
people don’t vote with their wallets that the confused economic views
of the average voter lead to such confused economic policies.

There
are number of possible solutions: restrict the franchise, restrict
democracy, but one of Caplan’s proposals would solve most of problems:
move decisions from the political realm, where we are irrational, to
the market one, where we are rational.

In

6 responses

  1. Matthew Avatar
    Matthew

    Well done – I’m pretty sure I saw it in last Saturday’s though?
    Tim adds: Yes indeed. Takes them a week to get it up on the web.

    Reply
  2. Matthew Avatar
    Matthew

    Well done – I’m pretty sure I saw it in last Saturday’s though?

    Reply
  3. gene berman Avatar
    gene berman

    “Words mean things.”–Rush Limbaugh.
    A significant part of the problem is simply the idea that the policies of one’s political opponents (or opponents in any dispute as to methods) are “irrational.”
    Failure to understand (or to understand but yet persist in misimputation) is one of the chief barriers to the achievement of greater political harmony (and economic effectiveness); such unsatisfactory states are unneccesarily aggravated and prolonged by the commmon tendency to label one’s opponents with a term which implies–actually means–something akin to “deranged,” “crazy,” etc. It is a form of ad hominem argument–frequently collectively applied–all the more deleterious to its expositor to the extent that he himself is persuaded of his own good faith in making it. It removes the basic dispute from the arena of discusssion and consideration to one of condemnation, of coercion, and even forms of “therapy” deemed “persuasive.” (What’s the difference between North Vietnamese “re-education” camps and legally-mandated “sensitivity training” in the US and UK?)
    And, while Tim sees the “economists” as being on the same team as the angels, the true situation is quite different–and revealing. There is hardly any political dispute with an economic basis that cannot trot out a cadre of supportive economists. Indeed, the chiefest employment of such is in justifying the policies–in effect or proposed–of their paymasters (at least in part by tinkering with “data” to support their position du jour).
    Marx taught that men reasoned differently–according to their “class” and reached conclusions which, while in and of themselves vicious, were yet beneficial to their class “interests.” Hitler insisted that the differences in thinking were not those of class but of race. Today, we hear leaders consign yet other groups–such as “the Right” or “the Left” or “the Muslims”–to a category beyond the reach of reason (and therefore to be treated in a different fashion).

    Reply
  4. Bruce G Charlton Avatar
    Bruce G Charlton

    I’m glad you picked out the message about transferring economic decisions from politics to the market – this has been the trend for the past few hundred years (there was no real autonomous market in the middle ages) and it is what we want more of in the future.

    Reply
  5. Jim Avatar
    Jim

    The implication of Capalan’s argument seems to be that politicians are honest public servants unfortunately compelled by our perfectly functioning democratic system to implement the deluded wishes of the public. Whatever happened to public choice economics? And I find the assertion that the public “don’t vote with their wallets” somewhat bizarre – don’t people care about tax policies that will directly affect them, then?
    Tim adds: In the first part….to an extent, yes. His argument is more subtle (he had a whole book, I had 600 words) in that they must do a “minimum” of the things we want while living high off the fat of the system. Someone who regularly lunches with Grodon Tullock, Don Boudreaux and Tyler Cowen is«n going to refute public choice: indeed, the opening sentence of the intro mentions that it all started at the Public Choice Outreach Seminar….
    As to the wallets, that is his point. People vote altruistically, not in their direct self interest. As their view of what does in fact benefit everyone is so wrong, this leads to policies which do not in fact benefit everyeone: thus the title of the book.

    Reply
  6. beatroot Avatar
    beatroot

    But one vote counts for so little that the cost of being altruistic is tiny: we vote not for what will benefit us, but for what will benefit everyone.
    But politics is about what benifits everyone…how is that not rational?
    Tim adds: Because we have very strange (read, incorrect) beliefs about what does benefit everyone.

    Reply

Leave a Reply

Discover more from Tim Worstall

Subscribe now to keep reading and get access to the full archive.

Continue reading