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The Myth of the Rational Voter: Why Democracies Choose Bad Policies [Paperback]

Bryan Caplan
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Book Description

Aug. 24 2008 0691138737 978-0691138732 New

The greatest obstacle to sound economic policy is not entrenched special interests or rampant lobbying, but the popular misconceptions, irrational beliefs, and personal biases held by ordinary voters. This is economist Bryan Caplan's sobering assessment in this provocative and eye-opening book. Caplan argues that voters continually elect politicians who either share their biases or else pretend to, resulting in bad policies winning again and again by popular demand.

Boldly calling into question our most basic assumptions about American politics, Caplan contends that democracy fails precisely because it does what voters want. Through an analysis of Americans' voting behavior and opinions on a range of economic issues, he makes the convincing case that noneconomists suffer from four prevailing biases: they underestimate the wisdom of the market mechanism, distrust foreigners, undervalue the benefits of conserving labor, and pessimistically believe the economy is going from bad to worse. Caplan lays out several bold ways to make democratic government work better--for example, urging economic educators to focus on correcting popular misconceptions and recommending that democracies do less and let markets take up the slack.

The Myth of the Rational Voter takes an unflinching look at how people who vote under the influence of false beliefs ultimately end up with government that delivers lousy results. With the upcoming presidential election season drawing nearer, this thought-provoking book is sure to spark a long-overdue reappraisal of our elective system.


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From Publishers Weekly

Caplan, an associate professor of economics, believes that empirical proof of voter irrationality is the key to a realistic picture of democracy and, thus, how to approach and improve it. Focusing on how voters are systematically mistaken in their grasp of economics-according to Caplan, the No. 1 area of concern among voters in most election years-he effectively refutes the "miracle" of aggregation, showing that an uninformed populace will often vote against measures that benefit the majority. Drawing extensively from the Survey of Americans and Economists on the Economy, Caplan discusses how rational consumers often make irrational voters, why it's in politicians' interest to foment that irrationality, what economists make of the (non) existence of systematic bias and how social science's "misguided insistence that every model be a 'story without fools,' " has led them to miss the crucial questions in politics, "where folly is central." Readers unfamiliar with economic theory and its attendant jargon may find themselves occasionally (but only momentarily) lost; otherwise the text is highly readable and Caplan's arguments are impressively original, shedding new light on an age-old political economy conundrum.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. --This text refers to the Hardcover edition.

Review

"The best political book this year."--Nicholas D. Kristof, New York Times

"Caplan thinks that democracy as it is now practiced cannot be salvaged, and his position is based on a simple observation: 'Democracy is a commons, not a market.'"--Louis Menand, The New Yorker

"One of the two or three best books on public choice in the last twenty years."--Tyler Cowen, Marginal Revolution

"Like a few recent best sellers--Freakonomics, The Tipping Point, The Wisdom of Crowds--The Myth of the Rational Voter unwraps economic theories and applies them to everyday life. Mr. Caplan's thesis, though, lacks any semblance of a compliment: The 'unwisdom of crowds' is closer to his point. He believes that the American public is biased against sensible, empirically proved economic policies about which nearly all economists agree. Voters, he says, are not just ignorant in the sense of having insufficient information. They actually hold wrong-headed and damaging beliefs about how the economy works."--Daniel Casse, The Wall Street Journal

"[P]rovocative."--Elsa Dixler, New York Times Book Review

"The Myth of the Rational Voter usefully extends the discussion [about democracy] by linking it with 'public choice' theory. . . . Public choice theory faces a dilemma. A rational and self-interested person has no incentive to study political issues, as the chances of his or her determining the outcome are negligible. This has become known as 'rational ignorance'. Caplan maintains that the reality is much worse. He shows that voters are not just ignorant but systematically biased in favor of mistaken views."--Samuel Brittan, Financial Times

"Caplan is right to detect a stubborn irrationality in ordinary voters and he correctly points out to his rational choice colleagues that their models are hopelessly unrealistic."--Martin Leet, Australian Review of Public Affairs

"Caplan argues convincingly that irrational behaviour is pervasive among many of us today. . . . Caplan's point, however, is that most voters are irrational. And that is worse than being ignorant. . . . Their irrationality comes with a host of misconceptions that drive policy choices."--Fazil Mihlar, The Vancouver Sun

"This engaging and provocative volume describes why democracy gives us far less than its promise. Countering existing theories of rationally ignorant voters, Caplan argues persuasively that voters are irrational, registering systematically biased beliefs--and consequently votes--against markets and other sound economy policy metrics. . . . [T]his is a compelling book, offering readers a well-written and well-argued competing theory for why democracy fails and why we should limit what is done through the political process."--M. Steckbeck, Choice

"[Caplan] argues that voters' own irrational biases, rather than flaws in the democratic process, compel voters to support policies that are not in their interest. While one may quibble with his specifics, the overall argument is convincing and applicable across a variety of fields...Forces the reader to take a second look at our nation's unshakable faith in the wisdom of the electorate."--Pio Szamel, Harvard Political Review

"A brilliant and disturbing analysis of decision making by electorates that--[Caplan] documents--are perversely ignorant and woefully misinformed."--Neil Reynolds, The Globe and Mail

"Scintillating. . . . Outstanding."--Gene Epstein, Barron's Magazine

"Kudos to Caplan for not wanting to leave well enough alone, but he could have given democracy more credit for diffusing--to the relatively benign act of voting--irrational and reactionary human behaviour that has in the past led to violence and war. In the meantime, it certainly would not hurt for more people to learn about the law of supply and demand."--Adam Fleisher, International Affairs

"Caplan's book is a major accomplishment, which breaks new ground in our understanding of democratic politics and opens up a new research territory for further exploration."--Gene Callahan, Independent Review

--Caplan's own blog, EconLog

http://econlog.econlib.org/


--Greg Mankiw's Blog

http://gregmankiw.blogspot.com/2007/04/buy-this-book.html


--Marginal Revolution

http://www.marginalrevolution.com/marginalrevolution/2007/04/the_myth_of_the_1.html


--Café Hayek

http://cafehayek.typepad.com/hayek/2007/04/the_truth_of_th.html


--The Volokh Conspiracy

http://volokh.com/posts/1179450214.shtml


--History News Network

http://hnn.us/blogs/entries/39039.html


--Neumatikos

http://www.neumatikos.org/democracy-fails-because-it-does-what-voters-want/


--Statistical Modeling, Causal Inference, and Social Science

http://www.stat.columbia.edu/~cook/movabletype/archives/2007/04/the_myth_of_the.html

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Most helpful customer reviews
Format:Kindle Edition|Verified Purchase
Why do poorer, conservative Americans vote for the Republicans who will take away their benefits? Why do affluent liberals in New York vote to raise their own taxes?

Bryan Caplan suggests a common economic model for understanding voter behavior: that we vote in our rational self-interest, is false. Political scientists have rejected this idea in the face of clear evidence, but the model persists in economics. Caplan, suggests an alternative model which would explain the evidence we see from political science and observing how government functions. The model has three parts:

1. That voters have almost zero incentive to vote rationally. The chance an individual ballot will change the outcome of an election is so small, that individuals can vote nearly however they like knowing that, individually, their decision will not have costs.
2. That voters have preferences over beliefs. Put simply, there are beliefs that voters hold which they prefer over other beliefs, perhaps because those beliefs make them feel better about themselves, those beliefs signal group loyalty or those beliefs operate as default human assumptions about the world and require effort to be disabused.
3. This mild preference over beliefs dominates the low individual cost of voting misconduct, therefore voters consistently elect politicians that represent these preferenced beliefs, rather than either their self-interest or sense of public welfare.

Bryan Caplan enumerates four types of these beliefs which create harmful policy:

1. Anti-foreign bias. We distrust foreigners, so we limit trade and immigration much more than is necessary.
2. Anti-market bias.
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8 of 10 people found the following review helpful
4.0 out of 5 stars Caplan is fun Nov. 27 2008
Format:Paperback
I don't know if the previous reviewer really understood this book. This is not a forum for a diatribe on the evils of markets and the holiness of government intervention. Caplan does NOT favor an economic autocracy, but rather a move towards markets on the spectrum of government power. The current crisis are by no means an inditement of markets, and the causes that have been pointed out seem to illustrate as much government failure as market failure. Krugman blames Greenspan, which gives the Austrians some ammunition, Caplan does not go nearly as far as most Austrians.
Caplan makes economics fun, which is important. Economic illiteracy is rampant, because many of the core concepts are counter-intuitive. A brief description of Ricardian comparative advantage will leave most people's head spinning for a few minutes... what with all the "best best and least worst" descriptions. Caplan makes a positive contribution to the understanding of the (potential) implications of economic illiteracy in a social democracy.
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3 of 13 people found the following review helpful
2.0 out of 5 stars The Myth of the Rational Economist Nov. 7 2008
Format:Paperback
Which is more foolish, voting behavior that is irrational about economic policies, or economic policies that are irrational about voting behavior? As a fairly literate reader on economic matters, I think it is the latter, but the authour of this book, a professor of economics at George Mason University, (wherever that is) definitely believes that free market economists have a much greater understanding of what is good for society, and if only the public would pay more attention to their brand of economic theory, democracy could be saved from the liberal economic biases inherent in our human nature.

To prove just why economists are so smart he devotes the first part of his book to a mathematical analysis of an opinion survey of 1510 "members of the American public and 250 economics PhDs" called the Survey of Americans and Economists on the Economy, SAEE. There were 37 questions as to why the economy is not doing better than it is. Strangely many of the queries in the survey are leading questions, which prompt a negative or biased response. For example: "taxes too high", "business profits too high", and "companies are sending jobs overseas". As would be expected the public's opinions differ significantly in most cases from those of the economists, so to prove that the economists opinions are more valid he takes the answers of those members of the public that mostly closely match the education and income of the economists and "voila!", the opinions match much more closely and therefore economists must be more correct in their beliefs! Of course all this only proves that different groups have different biases not that economists have greater knowledge of the truth.
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Amazon.com: 3.7 out of 5 stars  66 reviews
188 of 210 people found the following review helpful
5.0 out of 5 stars "Don't confuse us with the facts!" June 8 2007
By Nicole - Published on Amazon.com
Format:Hardcover
Many people have noted that democracy seems not to work - policies are implemented that often are not in the best interest of voters, and when voters are surveyed they routinely lack even the most basic civic knowledge. The way people have typically answered this problem is to say that voters are uninformed, and that if they simply had more access to good information, they would use that information to make better choices. But even so, the tiny informed minority will sway elections because the uninformed majority will vote at random.

Here, Caplan directly challenges that view by asserting that voters are not simply ignorant but irrational, and that this is in fact predicted by economic theory. Voting is not like shopping - it is more like making use of a commons, because the costs of a "bad" vote are borne by the public at large, and the chance of an individual casting the deciding vote is tiny. Therefore, people will vote for what makes them feel good without bothering to find out whether it really is good - it simply doesn't matter. Caplan explores four systematic biases voters hold against good economic policy - antimarket bias, antiforeign bias, make-work bias, and pessimistic bias. The fact that systematic bias exists means that the irrational majority does not in fact vote at random, so it's the irrational voters deciding who wins elections rather than the small, informed, rational minority. Voters get what they want, it's just that what they want is actually bad for them - and they don't care!

Caplan makes a persuasive case for viewing the average voter as irrational rather than simply ignorant, though admittedly I am sympathetic to this idea to begin with. I wish he had been able to include more recommendations in his conclusion, but this should be a promising area for further research.
81 of 98 people found the following review helpful
4.0 out of 5 stars Economists know best? July 25 2007
By J. Gordon - Published on Amazon.com
Format:Hardcover|Verified Purchase
This book is a very interesting read, describing a utility-based model of why voters vote as they do. The author proposes that voters are naturally biased against their own interests. The concept is that the probability of any one voter changing the result of a vote is vanishingly small, and therefore each voter votes for what makes them feel better about themselves, even if the policies go against their own interest and the interests of the economy. For example, voters vote for higher taxes, large inefficient government programs, and protectionist policies.

For example, a voter might vote for a politician who promises to raise the voter's taxes and give their money to the poor. The voter figures that the chances that their individual vote would make the difference between the candidate winning or losing is extremely small; making the cost of the vote effectively zero. However, the psychic benefit of the vote is positive.

Where the author fails is in the chapter where he measures the policy leanings of an artificial "enlightened voter". How he defines an "enlightened voter" is an average voter with the statistical characteristics of one having a graduate degree in Economics. Based on a sophisticated multivariate-regression-based analysis, the author determines that an "enlightened voter" would be predicted to view potential policies more like... an economist! What a surprise!

Caplan asserts that the voting public would support more reasonable policies if they all had graduate degrees in economics. However, there are plenty of Econ PhD's who put too much faith in government policies solving apparent market failures.

The book is well worth reading, and makes many good points regarding the reasons why voters vote for policies that go against their own best interests, and in aggregate against the health of the overall economy. However, it does not make a convincing case that economists should be running the show.
37 of 43 people found the following review helpful
5.0 out of 5 stars A well-researched, well-written book Dec 17 2007
By Howard - Published on Amazon.com
Format:Hardcover|Verified Purchase
Caplan's take on democracy can by summarized as follows: first, he accepts two arguments FOR democracy by democratic enthusiasts, 1. voters are largely unselfish; 2. politicians usually comply with public opinion. He then adds his point: 3. voters are irrational (they have "systematically biased beliefs", or in layman's terms, they have false beliefs). Caplan develops a theoretical framework to prove that it is in fact rational for voters to be irrational because the "price" of their irrationality is low in politics.

The book mainly consists of the following themes: 1. the history of people's economic misconceptions; 2. empirical evidence of systematically biased beliefs; 3. the "rational irrationality" framework and why systematically biased beliefs lead to democratic failure; 4. prescription for overcoming democracy's weakness.

I think Caplan succeeds pretty admirably in 1, 2 and 3, but he is relatively terse at 4. But this is understandable: if you take his arguments seriously, then unless every voter (or at least the "median voter") has a Ph.D. in economics (in fact, she needs to be a libertarian economist!), the outcome of democracy will not be efficient. Increasing the electorate's education, etc. level will somewhat mitigate the situation, but as Caplan himself proves, this is hardly enough (education is not sufficient to eradicate all systematically biased beliefs).

As to the book itself, it is quite readable. I knew about his work before reading the book, what surprised me was how he mixed it with the history of economics with his own research, with quotes and all.

It's also interesting to note that (at least according to my observations) mainstream public choice (the economic approach of studying politics) economists tend to downplay Caplan's work, maybe it is because Caplan's work cuts to the core of public choice (the "rational choice" approach)? Or maybe they really think his work is not much different than rational ignorance? Now that his book seems to have gathered a lot of publicity, maybe others will take a second look.

The only weakness of the book is the part that he repudiates the accusation that economists have "market fundamentalism". His point is basically 1. markets, when free of failures, will lead to efficient outcome (first, "positive", premise); 2. Caplan does not say this, but in most economists' thinking, there is also an implicit second, or "normative" premise, which is that efficient outcome is desirable. In fact, most economists tend to shy away from this conclusion and maintain that they only specialize in cost/benefit analysis and do not make such judgment, but from their passionate, enthusiastic and sometimes vehement arguments for free market, it is not too difficult to detect such deep-rooted belief -- that "free market is good". 3. economists do not always assume there are no market failures, therefore they are not "market fundamentalists". But this is typical economists' thinking: in order to argue with them, you must accept their first premise first, and implicitly also accept the second premise, then the debate about "market fundamentalism" naturally reduces to argument about whether there are market failures. But, they are people who do not accept even the first premise, and there are more -- on moral grounds, etc. -- having difficulty accepting the second. I am not saying I agree with these people (but I have not been blinded by the ivory tower yet, so at least I know the existence of such people and such views). It is very typical of economists to not even acknowledge such views, or pretend they do not exist. It is not an easy task to face these people face-to-face, listen to their arguments, then come up with your own arguments to correct their "biased beliefs", but a good economist should not be daunted. However, this is not a big blemish in an otherwise well researched and well written book, so I am still giving it 5 stars.
56 of 72 people found the following review helpful
4.0 out of 5 stars Is Democracy Overrated? Aug. 12 2007
By Izaak VanGaalen - Published on Amazon.com
Format:Hardcover
Libertarians, in theory, believe in the maximum amount of freedom for individuals as long as that freedom does not interfere with the freedom of others. (See Brian Doherty's Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement.) Bryan Caplan, a libertarian economist at George Washington University, believes that this is true in the realm of economics. In the realm of politics - especially voting - he does not think highly of the choices of free people. He argues that voters are not only ignorant, but irrational. Caplan in fact thinks that low voter turnout is good since those who are voting are usually better informed than those that abstain. Worse yet, he does not fear that politicians will not carry out the will of the people, he fears that they will.

This runs counter to the theory favored by most economists and political scientists known as "the miracle of aggregation." The theory, explained in James Surowiecki's The Wisdom of Crowds, argues that the aggragate choices made by ordinary, minimally informed people will be better or more accurate than those made by small groups of experts. This is true, for example, when people are estimating the number of jelly beans in a jar or the weight of a cow. The guesses are unbiased. In the political and economic realm, biases play a large part in people's choices.

Caplan identifies four economic biases that lead to bad policies:

1)People do not fully appreciate that private profits benefit the general public. When asked about rising prices people usually blame the greed of large corporations, when prices fall they seem to remember the laws of supply and demand. Problems arise when voters start demanding of the government to freeze or to guarantee a certain price, this leads to bad policy decisions.

2)People are generally wary of free trade, for they believe foreign countries are taking their jobs. Caplan, like most economists since Ricardo, believe in free trade. In theory, free trade would be optimal. But when one country is practising free trade with countries that pursue mercantilist policies, then free trade can be detrimental. Here's a case where the public is more rational than the libertarian economist.

3)People think employement is better than productivity. The creative destruction of capitalism is fine from the panoptic view of the economist, but for the ordinary person losing his or her job it looks less beneficial.

4)The general public has a bias towards pessimism. There is a general feeling amoung the public that they are less well off than the previous generation. ("the disappearing middle class" and so forth) But again, when one takes a longer view - or an economist's view - there is more evidence for optimism.

What rational choice theory boils down to is psychology. People can have all the information in the world, but they still go with what they feel more secure with, namely the status quo. They uncertainty and displacement of free trade will not be something they choose. True, voters make irrational choices, but democracy is still the best system. Democracy offers stablity and durability. It can withstand the bad policies, and take corrective measures. Democracy was never about being the most productive or efficient form of government.
21 of 26 people found the following review helpful
5.0 out of 5 stars Pithy critique of economic ignorance Aug. 6 2007
By Rolf Dobelli - Published on Amazon.com
Format:Hardcover
Economists on the right and the left agree on a surprisingly large number of policy issues. They believe free trade is good, the U.S. budget deficit is not a problem and most human beings are better off now than in the past. Yet the democratic public doesn't agree. It fears trade and foreigners, thinks the budget deficit is a big problem and is pessimistic about the economy even during periods of record economic growth. But the worst part, says economics professor Bryan Caplan, is that the public votes. Drawing on empirical research about voter attitudes, Caplan describes how voters are mistaken about many policy issues and - more importantly - why they are wrong. His account is frighteningly plausible, but so is his solution: more economic education. We recommend this pithy volume to anyone concerned about voters' ostensibly self-defeating behavior. Democracy may be better than the alternatives, but no one said it was easy.
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