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Economics and voter irrationality: my review of The Myth of the Rational Voter

I recently reviewed Bryan Caplan’s book, The Myth of the Rational Voter, for the journal Political Psychology. I wish I thought this book was all wrong, because then I could’ve titled my review, “The Myth of the Myth of the Rational Voter.” But, no, I saw a lot of truth in Caplan’s arguments. Here’s what i wrote:

Bryan Caplan’s The Myth of the Rational Voter was originally titled “The logic of collective belief: the political economy of voter irrationality,” and its basic argument goes as follows:

(1) It is rational for people to vote and to make their preferences based on their views of what is best for the country as a whole, not necessarily what they think will be best for themselves individually.

(2) The feedback between voting, policy, and economic outcomes is weak enough that there is no reason to suppose that voters will be motivated to have “correct” views on the economy (in the sense of agreeing with the economics profession).

(3) As a result, democracy can lead to suboptimal outcomes–foolish policies resulting from foolish preferences of voters.

(4) In comparison, people have more motivation to be rational in their conomic decisions (when acting as consumers, producers, employers, etc). Thus it would be better to reduce the role of democracy and increase the role of the market in economic decision-making.

Caplan says a lot of things that make sense and puts them together in an interesting way. Poorly informed voters are a big problem in democracy, and Caplan makes the compelling argument that this is not necessarily a problem that can be easily fixed–it may be fundamental to the system. His argument differs from that of Samuel Huntington and others who claimed in the 1970s that democracy was failing because there was too much political participation. As I recall, the “too much democracy” theorists of the 1970s saw a problem with expectations: basically, there is just no way for “City Hall” to be accountable to everyone, thus they preferred limiting things to a more manageable population of elites. Caplan thinks that voting itself (not just more elaborate demands for governmental attention) is the problem.

Bounding the arguments

I have a bunch of specific comments on the book but first want to bound its arguments a bit.

First, Caplan focuses on economics, and specifically on economic issues that economists agree on. To the extent the economists disagree, the recommendations are less clear. For example, some economists prefer a strongly graduated income tax, others prefer a flat tax. Caplan would argue, I think, that tax rates in general should be lowered (since that would reduce the role of democratic government in the economic sphere) but it would still be up to Congress to decide the relative rates. This isn’t a weakness of Caplan’s argument; I’m just pointing out a limitation of its applicability. For another example, Caplan asks, “Why are inefficient policies like the minimum wage popular?” Isn’t this a question of values? My impression is that some economists support a higher minimum wage, some don’t.

More generally, non-economic issues–on which there is no general agrement by experts–spread into the economic sphere. Consider policies regarding national security, racial discrimination, and health care. Once again, I’m not saying that Caplan is wrong in his analysis of economic issues, just that democratic goverments do a lot of other things. (At one place he points out that the evidence shows that voters typically decide whom to vote for based on economic considerations; see, for example, Hibbs (2008). But, even thought the economy might be decisive on the margin, that doesn’t mean these other issues don’t matter.)

Another example is Caplan’s discussion of toxicology, an area that I happen to have worked in. One of the difficulties is that people underestimate some risks and overestimate others. Thus, simple advice such as “worry” or “don’t worry” aren’t so helpful. Especially since there is typically a lag between exposure and health problems. In his discussion, Caplan ignores some of the political factors. One one side, industry has a lot of motivation to downplay the risks, and they do lots of lobbying in Congress. On the other hand, agencies such as the EPA sometimes are motivated to overstate risks. So these views don’t occur in a vacuum.

Finally, Caplan generally consideres democracy as if it were direct. But I think representative democracy is much different than direct democracy. Caplan makes some mention of this, the idea that politicians have some “slack” in decision-making, but I suspect he is understating the importance of the role of the politicians in the decision-making process.

Specific comments

Later on, he writes, “What is the full price of ideological loyalty? It is the material wealth you forego in order to believe.” I think that’s part of it but not all. For example, suppose I have a false belief that the economic policy of party A will be good for the country. I (and others like me) vote for A, the party wins the election, implements the policy, and things get worse (compared to what would have happened had party B won). I will be a little unhappy to hear about the problems in the national economy. To the extent I care about others (and, as Caplan notes, that’s why I’m voting in the first place, also probably a big motivation of why he wrote his book), if I have loyalty to a bad ideology, I’ll pay the price in terms of a negative national outcome, even if I’m not personally affected.

Regarding the views of economists and others, I was surprised to see Caplan write, “Out of all the complaints that economists lodge against laymen, four families of beliefs stand out . . . antimarket bias, anti-foreign bias, make-work bias, and pessimistic bias.” I’m surprised to hear this, because I thought that the two concepts that economists thought were most important (and ignored by noneconomists) were (a) opportunity cost, and (b) externalities. These two concepts arise in most of Caplan’s examples so maybe it’s just a labeling issue, I don’t really know. It’s also funny that Caplan mentions “pessimistic bias,” since his book is itself so pessimistic!

On a similar point, he has a quote “ridiculing the ‘abundance denial’ of the developed world.” I don’t know what he’s talking about! People in the U.S. have more cars, T.V.’s, etc, etc, than ever before! This doesn’t look like “abundance denial” to me! Yes, there are poor people in the U.S., but on the average people consume a lot of material goods. Perhaps the problem here is that economist Caplan is judging psychological issues, whereas I (a political scientist) am trying to make an economic judgment.

In discussing the political consequences of his ideas, Caplan writes, “asymmetric information leads to less government.” I see what he’s saying, and this is a key part of his argument, but I don’t know that this is often possible. For example, consider crime control. Ethnic-minority voters often don’t trust the police, but having less police isn’t considered a desirable outcome either. Similarly, if I don’t think the government is doing enough to protect us from terrorism, I probably won’t say the solution is to have a less active government. (Wanting less government protection from terrorism might be a legitimate view to hold, but it doesn’t seem to me to be the natural view.)

To return to issues of psychology, Caplan correctly points out that preferences are unobservable. I’d go futher and say that latent preferences (and “utility functions”) don’t even exist. We construct our preferences as need be to solve particular problems (see Lichtenstein and Slovic, 2006). Caplan expresses surprise about “the political influence of great poets like Pablo Neruda”–why should people trust a poet’s view on political issues? I think he’s missing the point, which is that a poet can take a view that one might already have, but express it very well. More generally, celebrities symbolize a lot of things. I don’t know why seeing Michael Jordan in an ad would make someone more likely to go to McDonald’s, but they pay him a lot of money to create these associations.

One of the interesting things about this book is seeing an economist’s perspective on issues of political psychology. Conversely, in discussing the views that political scientists and others have of economics, Caplan writes, “it is usually economists themselves who discover the exceptions [to ‘market fundamentalism’] in the first place.” Maybe it would be more accurate to write that some of these ideas are taken more seriously by economists, hence they take the trouble to note the exceptions. Scientists in other fields would often never even entertain “market fundamentalism” in the first place so they don’t bother to refute it. For example, when I told my psychology-professor friend about my ideas on rational voting, he wasn’t particularly interested because psychologists know all about how people are irrational. They don’t see rationality as expected. I see rational-choice arguments as complementing rather than competing with psychological explanations of political behavior. Others have examined different ways in which such models are useful. For example, Caplan writes, “A worker could always offer to work for a reduced salary in exchange for more on-the-job safety,” but Dorman (1996) argues convincingly that this does not actually happen.

Summary

It is too much to expect any player in the political system to be entirely rational–Ansolabehere and Snyder (2003) argue that even lobbyists are not particularly rational in their campaign contributions. Despite what is sometimes said, voting is not particularly irrational as compared to other other social and political activities. Voting has low cost and a very small chance of making a difference, but in that unlikely event, the difference can have huge repercussions nationally and globally; hence, the expected return from voting is arguably on the same order of magnitude as its cost (see Parfit, 1984, and Edlin, Gelman, and Kaplan, 2007).

Much of the work on the rationality of voting focuses on the decision of whether to vote, and which candidates to vote for. Caplan usefully switches the focus to policy, and he does a good job at exploring the implications of the fact that people don’t have an economic motivation for being good voters. Even when they are voting rationally (by their own views), the feedback mechanism for updating their preferences is pretty weak.

I’m not so convinced by Caplan’s arguments in favor of the alternatives of rule by business or rule by educated elites. I think his main argument (theoretical and practical problems with democracy) can be separated from some of his more debatable stances.

References

Ansolabehere, S., and Snyder, J. (2003). Why is there so little money in U.S. politics? Journal of Economic Perspectives 17, 105-130.

Dorman, P. (1996). Markets and Mortality: Economics, Dangerous Work, and the Value of Human Life. Cambridge University Press.

Edlin, A., Gelman, A., and Kaplan, N. (2007). Voting as a rational choice: why and how porple vote to improve the well-being of others. Rationality and Society 19, 293-314.

Hibbs, D. A. (2008). The implications of the “bread and peace” model for the 2008 US presidential election outcome. Public Choice 137, 1-10.

Huntington, S. P. (1975). The United States. In The Crisis of Democracy, ed. M. Crozier, S. Huntington, and J. Watanuki. New York University Press.

Lichtenstein, S., and Slovic, P., eds. (2006). The Construction of Preference. Cambridge University Press.

Parfit, D. (1984). Reasons and Persons. Oxford University Press.

13 Comments

  1. Hopefully Anonymous says:

    "I'm not so convinced by Caplan's arguments in favor of the alternatives of rule by business or rule by educated elites."

    This posture is more cowardly than you've been lately in my opinion.

    That's a very limited universe of alternatives -I've seen a lot more and better in various comment threads in the academic blogosphere.

  2. Andrew Gelman says:

    I'm not an expert on political theory and was not trying in my review to consider all the alternatives; my goal was to assess the arguments in Caplan's book. I'm sure that many in and out of the blogosphere can add a lot to the discussion beyond what I have to say. Caplan's book was based on public opinion research, which might be why I was asked to review it.

  3. William Ockham says:

    Perhaps there's room for a book called "The Myth of the Rational Economist". Caplan overlooks many possible answers to the conundrum at the center of his book. He says that the general public and economists disagree about basic economic facts, therefore one of the two groups must be wrong. In reality, there are many other possible explanations. Both groups are made up of human beings and therefore both groups might suffer from systematic bias. As just one example, Caplan states that receiving a free washing machine is just the same as getting downsized because in both case society conserves valuable labor. This is just about the stupidest, most biased thing I have read this week. To fail to see how involuntary unemployment can corrode the social fabric is a blindness far worse than anything he accuses the public of.

  4. Robin Hanson says:

    So you agree with pretty with everything Bryan says, except on topics outside what you consider your area of expertize, where you don't want to offer reasons for your disagreement? Seems you agree just about as much as Bryan could possibly hope for. :)

  5. Andrew Gelman says:

    William:

    Yes, I think this was one thing I was getting at in my review, that Caplan at times jumps from statements about public opinion to his personal political attitudes.

    Robin:

    I hope that Bryan is happy with the review; I think he did an excellent job in his book! But I do think it's useful to point out areas where he is extrapolating beyond his evidence. If you read my review carefully, you'll see that I do offer reasons for my disagreements with several specific points in his book.

    When I write that "his main argument (theoretical and practical problems with democracy) can be separated from some of his more debatable stances," this is intended to be a positive statement. What I'm saying is that, even if you disagree with some of Caplan's strongly-held political views, this shouldn't cause you to dismiss his main argument. (To put it in logical notation, if Caplan's main argument is A and his political views are B, then he does not demonstrate that A -> B. Thus, disbelief in B is not a reason to disbelieve A.)

  6. William Ockham says:

    Well, the point about getting downsized vs. getting a washing machine isn't presented as Caplan's personal political view, but as the unassailable wisdom of the economic experts. We're supposed to be ashamed to hold the uninformed, even beknighted, notion that mass layoffs have ill-effects worth worrying about. I'm not going to quarrel with the notion that the general public suffers from some systematic biases, but the biases that arise from the narrow-minded, cocksure outlook of the economic profession would do far more damage than the pettiness of the democratic process. Real people, at least the ones I know and the ones described in five thousand years of literature and the ones that modern pyschology studies, are far more interesting than the two dimensional caricatures necessary to support economic theory. Real people have conflicting emotions, complex motives, and limited attention spans. All that has a real impact on the choices they make. Economic motivations are real, but they aren't the sum and substance of human existence.

  7. liberal says:

    "The feedback between voting, policy, and economic outcomes is weak enough that there is no reason to suppose that voters will be motivated to have 'correct' views on the economy (in the sense of agreeing with the economics profession)."

    LOL! This is the profession that made a laughingstock of itself by, by and large, missing the housing bubble!

  8. TGGP says:

    In John Lott’s “Freedomnomics” he argues that there is little evidence that campaign contributions change how legislators vote (those retiring with no need for them vote the same) or even have much of an effect on their probability of victory (self-funded candidates have horrible track records). He concludes that donations and votes probably have the same motivations.

    liberal:
    As opposed to the voters or government that did not miss the housing bubble?

    William:
    Could you quote the portion about the washing machine?

  9. William Ockham says:

    From page 43 (available via books.google.com):

    If you receive a washing machine as a gift, the benefit is yours; you have more free time and the same income. If you get downsized, the benefit goes to other people, you have more free time, but your income temporarily falls. In both cases, society conserves labor.

    That's how he finishes up his discussion of the unwashed masses' bias in favor of 'make-work'.

  10. TGGP says:

    He isn't saying that "getting downsized is the same as getting a washing machine" from the individual's perspective. In the former case you have the same income, in the latter your income falls. His point about the nonsense of "creating work" (and the converse point about the benefits of downsizing) is correct though.

  11. liberal says:

    TGGP wrote, "As opposed to the voters or government that did not miss the housing bubble?"

    So? The claim is that economists are somehow more rational or "correct" than voters. The massive failure of the economics profession in regard to the housing bubble shows this is laughable, particularly because there was ample economic evidence that the bubble was in progress.

    Furthermore, there is a good economic reason to distrust economists, supplied by economists themselves. Economists state repeatedly that incentives matter—which I agree with. Clearly, in our current political economy, the incentive of economists is to align themselves with the rich and powerful. For example, Caplan himself is a member of the Mercatus Center—jeez, I wonder who started that?

    Finally, that you brought up John Lott is <a href="http://www.google.com/cse?cx=017254414699180528062%3Auyrcvn__yd0&q=lott+site%3Ahttp%3A%2F%2Fscienceblogs.com%2Fdeltoid%2F&quot; rel="nofollow">pretty amusing.

  12. TGGP says:

    When making a statement about relative competence you should use a standard that one group/person passes that others do not. If economists did no worse than the voters/government you haven't shown anything about relative competence. Since the general public has systematically false beliefs about public policy (the percentage of the budget going toward foreign aid, for instance), it can be shown that economists are more competent in that regard. Members of the public with more education or IQ tend to "think like economists".

    Clearly, in our current political economy, the incentive of economists is to align themselves with the rich and powerful.
    Could you elaborate on that?

  13. Matt Bogard says:

    Liberal:

    'This is the profession that made a laughingstock of itself by, by and large, missing the housing bubble!'

    Some economists have long argued that interventions by the federal reserve that keep interest rates artificially low can lead to excessive leverage, speculation, excessive risk taking, and bubbles.

    Even so, condemning economists based on the recent financial crisis implies nothing about the discipline's accomplishments in other areas:

    'Nothing in the last two years has undermined microeconomic analyses that influenced the deregulation of the airline, trucking, railroad, natural gas, crude oil, telecommunications and cable television markets. These deregulatory successes have not been compromised by the market failures that originated in the financial sector ' – http://www.forbes.com/2009/10/04/economics-microe

    Older examples include the ending of the draft and the fact that economics is known as the 'dismal science' because economists pointed out the inefficiency of slavery! ( which elites of the time found to be a dismal conclusion)

    I don't think these are laughing matters, and I don't see the 'laughing stock' label sticking.