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

McClough, David

The Myth of the Rational Voter: Why Democracies Choose Bad Policies by Bryan Caplan. Princeton, NJ: Princeton University Press. 2007. 276 pages. ISBN 0-691-12942-8 $29.95

In The Myth of the Rational Voter, Bryan Caplan challenges economic models explaining voter behavior. His interdisciplinary analysis features empirical evidence reflecting deviation in economic beliefs between the general population and economists. The deviation in beliefs supports suspicions that the general public embodies biases that adversely affect policy formation in democracies. Although the book is accessible to all analysts familiar with economics and political science, the intended audience seems to be academic economists slow to incorporate compelling empirical results challenging the rationality assumption.

The miracle of aggregation is a popular retort to concerns regarding voter ignorance and apathy, behaviors economists argue to be rational given the costs in excess of benefits associated with political intelligence and low probability of determining an election. Caplan observes that the miracle of aggregation is feasible only if voters are systematically wrong thereby canceling each other out in a two candidate election and leaving informed voters to determine election outcomes. It is assumed that the median voter is fight and thus, the miracle is that good policy emerges despite apathy and ignorance. Unfortunately, biases resulting in unsystematic error may fail to cancel the effects of the misinformed general public and overwhelm informed voters resulting in bad policy based on incorrect beliefs. The empirical question is: does the general public hold biased economic beliefs?

Caplan identifies four commonly suspected biases of the general public that deviate from the economic beliefs of economists. The antimarket bias tends to underestimate the benefits of the marketplace. This bias seems to emerge from a distrust of profit-seeking and ignores that profits exist and persist only for firms that deliver value to customers. The antiforeign bias reflects underestimation of the benefits of interaction with foreigners. This bias is motivated by belief that foreigners exploit us despite our voluntarily engagement with them. The more different foreigners look, act, or speak, the more nefarious their intentions must be. The make-work bias values employment over productivity. The value of workers is necessarily a function of the worker's output. Strangely, consumers value labor saving appliances but fear labor savings, if jobs appear lost. The pessimistic bias reflects a tendency overstate economic challenges and understate future prospects. Caplan argues that these biases crush the hope implied by the miracle of aggregation and explain the persistence of bad economic policies in democracies.

In addition to compelling intuition and integration of an interdisciplinary literature, the contribution of this book is the empirical evidence supporting the accusation of bias. Caplan uses the Survey of Americans and Economists on the Economy (SAEE) produced by the Washington Post, Kaiser Family Foundation and Harvard University Survey Project to compare the economic beliefs of economists and non-economists. The analysis is enhanced by controlling for self-serving and ideological beliefs of economists. Caplan refers to this adjusted belief as the Enlightened Public, in contrast to Economists and the General Public. Review of survey results reveals that the General Public deviates from Economists and the Enlightened Public on nearly all questions. A technical appendix explains estimation of the Enlightened Public beliefs.

Empowered by the underlying behavioral assumption of rationality, Public Choice economics represents application of the prevailing neoclassical (rational choice) model to politics and voting behavior. The implication of Public Choice is that political ignorance is rational because the cost to reverse ignorance exceeds the benefit associated with political intelligence. Caplan finds Public Choice unsatisfying and argues instead that political actors are rationally irrational.

The notion of rational irrationality is inspired by recognition that economic policy is a public good. When a consumer makes a bad purchase, it is the consumer who bares the full cost. In contrast, when voters vote for bad economic policy, each voter can expect to incur only a tiny fraction of the total cost to society. Accordingly, the utility associated with an irrational vote may easily exceed the expected cost to any individual voter, especially when one considers the low probability of one's vote determining the outcome. Irrational voting represents a low-cost, low risk opportunity for self-expression thereby contributing to an individual's sense of identity, which is an emotional experience rather than rational process.

Having established "the microfoundations of individual voter irrationality" (p. 143), Caplan explores how irrationality influences policy. He uses simple thought experiments to demonstrate how in the presence of irrationality democracy can consistently produce bad policy. The discussion incorporates a compelling challenge to the self-interested voter hypothesis that mistakenly extends the behavioral assumption of self-interest from consumer to voter. Relying upon empirical results presented in the political science literature suggesting that voters, in fact, focus on national rather than individual well-being,

Caplan asserts that the self-interested voter hypothesis is wrong. An implication of this conclusion is the unlimited potential for bad policy in the absence of self-interest. Caplan asserts that economists are experts and it is expert opinion that is right. Accordingly, thinking like economists results in superior economic policy. The defense of this position is compelling; nevertheless, readers may disagree arguing that economists have been mistaken in the past (e.g. mercantilism, physiocracy, advising Hoover to balance the federal budget by increasing taxes, allowing banks to fail during the 1930s, etc.) so there is no reason to think that economists are not wrong now. A valid challenge to be sure. Caplan addresses this challenge convincingly for this reviewer by reminding the reader that economists are the very ones who identify the mistakes within the profession and strive to identify solutions. As such, economics is a field that has progressed considerably and contributed positively overall to the human experience. More simply, if economists are not the experts, who are?

If expertise leads to superior economic policy, it is helpful to know what variables predict thinking as an economist. Caplan includes an interesting discussion examining the variables predicting convergence of the general public with economic beliefs of economists. The data reveal that higher education, income growth, greater job security, and male gender predict greater agreement with the beliefs of economists. Moreover, he notes that voters are less biased than non-voters. Given that education is the best predictor of voter turnout, he concludes that it is the well-educated that are most likely to make society better off. This is a challenging conclusion in a book that asks why democracies generate bad policy unless the author is advocating less democracy to ensure greater influence by the economic literate. On the contrary, the author is advocating more education to increase economic literacy. His clarion call is for economists to present in the classroom what they know to be correct.

The Myth of the Rational Voter is fun. It offers a refreshing look at tired topics that have been embedded in the fabric of our understanding of voting behavior and politics. This book makes an important contribution to the economics literature by effectively integrating empirical results from psychology and political science. The intuition and reasoning are refreshing and engaging. The empirical analysis is creative and compelling. This book arms psychologists and political scientists with the arguments to provoke economists. Constructive provocation often leads to remarkable achievements.

David McClough

Bowling Green State University