Politics and Markets: The Myth of the Rational Voter

The Myth of the Rational Voter: Why Democracies Choose Bad Policies
Bryan Caplan

When Messner Vetere won the MCI business the trades reported that their pitch revolved around casting the long distance business as a daily election. Having spent some time as a consultant for AT&T I could buy that analogy as long as we’re talking about an election where votes can be bought. The efficacy of advertising aside, the game of getting people to switch is all about delivering a bribe and by the time I touched the business in the early 90s the bribe was, literally, cash money.

The analogy stuck though, and I continue to read books and papers about political choices because I harbor a hope that they will contain some insight that also informs consumer decision-making. I haven’t struck pay dirt yet but I keep hoping.

Which brings me to Bryan Caplan’s book on the politics of economics. Caplan, an economist, sets out to explore why poor economic policies are embraced by politicians and voters when there is a body of knowledge to inform sound decision-making. This is a flip on a now well-entrenched view of politics. Poli sci majors of a certain age may recognize my title as a tip of the hat to Charles Lindbloom, who published a book with that title in 1980.

Let me cut to the chase for those who hate discursiveness (and yes, for me, 239 words in is cutting to the chase). As any good economist would, Caplan concludes that the incentives for politicians to embrace poor policies outweigh the disincentives. And he demonstrates that if you adjust the level of economic knowledge in the population you can improve outcomes.

He spends a lot of time on economic biases held by the public and this, along with the methodology, is where the value of the book lies. Economics almost always starts with a thought exercise and an overly simple marketplace which is progressively complicated. (In a way this is not unlike theoretical physics which is why I think so many economists think that their work is a hard science.) Consequently, the place where you encounter logical fallacies and a nose for bias outside the philosophy and science departments is in the economics department.

I’m no economist and I had to realize I harbored at least two of the biases he describes. I have a reason for holding them and will gladly concede that they may not yield the best economic outcome. Still, it’s important to remember that these are deeply held beliefs in the populace as a recent conversation about ‘properly’ taxing the wealthy reminded me. It’s always useful to know when your thinking is biased.

What was most enjoyable about the book, for me,  was applying the math to adjust the knowledge levels. This is where the regular reader tunes out. The footnotes, and graphs and explanations of why ordinary least sqaures regression is a more appropriate method than ordered logits are where the value lay for me.

Here’s one difference between holding a PhD and an MS in a social science. As a Master’s candidate you receive certain techniques and apply them. In a strong program you end up better equipped than someone with a BA. But the goodies, the why this and not that or how do you verify something or tricks like converting 7-point Likert scales to point estimates, those are reserved for the priesthood of Doctorates. The only way to get that knowledge is pursue the Phd or read the footnotes. The footnotes are cheaper.

Bottom line, reading this book won’t make you a better marketer. It might make you a better voter on economic matters.

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