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In theory, democracy is a bulwark againstsocially harmful policies. In practice, however,democracies frequently adopt and maintain poli-cies that are damaging. How can this paradox beexplained?
The influence of special interests and voterignorance are two leading explanations. I offeran alternative story of how and why democracyfails. The central idea is that voters are worsethan ignorant; they are, in a word, irrationalandthey vote accordingly. Despite their lack ofknowledge, voters are not humble agnostics;instead, they confidently embrace a long list ofmisconceptions.
Economic policy is the primary activity of themodern state. And if there is one thing that thepublic deeply misunderstands, it is economics.People do not grasp the invisible hand of themarket, with its ability to harmonize private
greed and the public interest. I call this anti-mar-ket bias. They underestimate the benefits ofinteraction with foreigners. I call this anti-foreignbias. They equate prosperity not with produc-tion, but with employment. I call this make-workbias. Finally, they are overly prone to think thateconomic conditions are bad and getting worse.I call this pessimistic bias.
In the minds of many, Winston Churchillsfamous aphorism cuts the conversation short:Democracy is the worst form of government,except all those other forms that have been triedfrom time to time. But this saying overlooks thefact that governments vary in scope as well asform. In democracies the main alternative tomajority rule is not dictatorship, but markets. Abetter understanding of voter irrationality advis-es us to rely less on democracy and more on themarket.
The Myth of the Rational VoterWhy Democracies Choose Bad Policies
by Bryan Caplan
Bryan Caplan is an associate professor of economics at George Mason University and an adjunct scholar at the CatoInstitute. This study is an excerpt from Caplans book, The Myth of the Rational Voter: Why DemocraciesChoose Bad Policies (Princeton University Press, 2007).
No. 594 May 29, 2007
Introduction: The Paradoxof Democracy
In a dictatorship, government policy is oftenappalling but rarely baffling. The building ofthe Berlin Wall sparked worldwide outcry, butfew wondered, what are the leaders of EastGermany thinking? That was obvious: theywanted to continue ruling over their subjects,who were inconsiderately fleeing en masse.
No wonder democracy is such a popularpolitical panacea. The history of dictator-ships creates a strong impression that badpolicies exist because the interests of rulersand ruled diverge. A simple solution is makethe rulers and the ruled identical by givingpower to the people. If the people decide todelegate decisions to full-time politicians, sowhat? Those who pay the piperor vote topay the pipercall the tune.
This optimistic story is, however, often atodds with the facts. Democracies frequentlyadopt and maintain policies harmful for mostpeople.1 Protectionism is a classic example.Economists across the political spectrum havepointed out its folly for centuries, but almostevery democracy restricts imports. Admittedly,this is less appalling than the Berlin Wall, yet itis more baffling. In theory, democracy is a bul-wark against socially harmful policies, but inpractice it gives them a safe harbor.
How can this paradox be explained? Oneanswer is that the peoples representativeshave turned the tables on them.2 Electionsmight be a weaker deterrent to misconductthan they seem on the surface, making it moreimportant to please special interests than thegeneral public. A second answer, which com-plements the first, is that voters are deeplyignorant about politics.3 They do not knowwho their representatives are, much less whatthey do. This tempts politicians to pursue per-sonal agendas and sell themselves to donors.
I offer an alternative story of how democ-racy fails. The central idea is that voters areworse than ignorant; they are, in a word, irra-tionaland vote accordingly. Despite theirlack of knowledge, voters are not humble
agnostics; instead, they confidently embracea long list of misconceptions.
When cataloging the failures of democra-cy, one must keep things in perspective. Theshortcomings of democracy pale in compari-son with those of totalitarian regimes.Democracies do not murder millions of theirown citizens. Fair enough, but such compar-isons set the bar too low. Now that democra-cy is the most common form of government,there is little reason to dwell on the truismthat it is better than communism. It is nowmore worthwhile to figure out how and whydemocracy falls short.
In the minds of many, one of WinstonChurchills most famous aphorisms cuts theconversation short: Democracy is the worstform of government, except all those otherforms that have been tried from time totime.4 But this saying overlooks the fact thatgovernments vary in scope as well as form. Indemocracies the main alternative to majorityrule is not dictatorship, but markets.
Economists have an undeserved reputa-tion for religious faith in markets. No onehas done more than economists to dissectthe innumerable ways that markets can fail.After all their investigations, though, econo-mists typically conclude that the man in thestreetand the intellectual without econom-ic trainingunderestimates how well mar-kets work. I maintain that something quitedifferent holds for democracy: it is widelyoverrated not only by the public but by mosteconomists, too. Thus, while the general pub-lic underestimates how well markets work,even economists underestimate marketsvirtues relative to the democratic alternative.
Is the Miracle of Aggregation Just Wishful
Thinking?What voters dont know would fill a uni-
versity library. In the last few decades, econo-mists who study politics have thrown fuel onthe fire by pointing out thatselfishly speak-ingvoters are not making a mistake. One
Voters are worsethan ignorant; they
are, in a word, irrationaland
vote has so small a probability of affectingelectoral outcomes that a realistic egoist paysno attention to politics; he chooses to be, ineconomic jargon, rationally ignorant.
The vast empirical literature on voterknowledge bears this out.5 Almost all econo-mists and political scientists now accept thatthe average citizens level of political knowl-edge is extraordinarily low. At the same time,however, scholars have also largely come tobelieve that this doesnt really matter, becausedemocracy can function well under almostany magnitude of voter ignorance.6
How is this possible? Assume that votersdo not make systematic errors. Though theyerr constantly, their errors are random.7 Ifvoters face a blind choice between X and Y,knowing nothing about them, they are equal-ly likely to choose either.
With 100 percent voter ignorance, mattersare predictably grim. One candidate could bethe Unabomber, plotting to shut down civiliza-tion. If voters choose randomly, the Unabomberwins half the time. True, the assumption of zerovoter knowledge is overly pessimistic; informedvoters are rare, but they do exist. But this seemsa small consolation. One hundred percent igno-rance leads to disaster. Can 99 percent ignorancebe significantly better?
Yes. Democracy with 99 percent ignorancelooks a lot more like democracy with fullinformation than democracy with total igno-rance. Why? First, imagine an electoratewhere 100 percent of all voters are well-informed. Who wins the election? Trivially,whoever has the support of a majority of the well-informed. Next, switch to the case where only1 percent of voters are well-informed. Theother 99 percent are so thick that they vote atrandom. Quiz a person waiting to vote, andyou are almost sure to conclude, with alarm,that he has no idea what he is doing.Nevertheless, it is basic statistics thatin alarge electorateeach candidate gets abouthalf of the random votes. Both candidatescan bank on roughly a 49.5 percent share. Yetthat is not enough to win. For that, theymust focus all their energies on the one well-informed person in a hundred. Who takes
the prize? Whoever has the support of a majority ofthe well-informed.
This result has been aptly named the mira-cle of aggregation.8 It reads like an alchemistsrecipe: mix 99 parts folly with 1 part wisdom toget a compound as good as unadulterated wis-dom. An almost completely ignorant electoratemakes the same decision as a fully informedelectoratelead into gold, indeed!
It is tempting to call this voodoo poli-tics, or quip, as H. L. Mencken did, thatdemocracy is a pathetic belief in the collec-tive wisdom of individual ignorance. Butthere is nothing magical or pathetic about it.James Surowiecki documents many instanceswhere the miracle of aggregationor some-thing akin to itworks as advertised.9 In acontest to guess the weight of an ox, the averageof 787 guesses was off by a single pound. OnWho Wants to Be a Millionaire, the answer mostpopular with studio audiences was correct 91percent of the time. Financial marketswhich aggregate the guesses of large num-bers of peopleoften predict events betterthan leading experts. Betting odds are excel-lent predictors of the outcomes of everythingfrom sporting events to elections. In eachcase, the logic enunciated by political scien-tists Benjamin Page and Robert Shapiroapplies:
This is just an example of the law oflarge numbers. Under the right condi-tions, individual measurement errorswill be independently random and willtend to cancel each other out. Errors inone direction will tend to offset errorsin the opposite direction.10
Judging from research in recent decades,most economists find this logic compelling.Almost all r