The Myth of the Rational Voter

Why Democracies Choose Bad Policies

4/4/2008

By Bryan Caplan

Princeton University Press 2007 Page Count: 280 Hardcover 978-0691129426 Buy here

Book Review
Reviewed by Jowei Chen

If democracy guards citizens from imprudent and myopic governance, then why do democratic governments so frequently enact misguided policies?

Scholars of politics and economics have offered various explanations. It has been said that democratic institutions are tarnished by cronyism, hobbled by corruption, or dominated by special interests. In short, the conventional wisdom goes, bad policies arise when politicians unduly stray from citizens’ interests.

Bryan Caplan’s book, The Myth of the Rational Voter, challenges this conventional wisdom. According to Caplan, it’s not the corrupt politicians who cause democracy’s follies, it’s the voters themselves. It turns out that voters are even worse than ignorant. They view the economic world with a series of systematic biases that consistently deviate from the realities of elementary economics.

Caplan groups voter biases into several categories and then documents each category with extensive survey data. The surveys compare the responses of the general American public with the responses of economists with Ph.D.s. For example, there’s the anti-foreign bias: voters negatively view immigration, foreign trade, and anything else that involves interaction with non-Americans. There’s also the pessimistic bias, whereby most of the general public underestimates past economic growth and harbors an unrealistically gloomy picture of the future.

Caplan thoroughly rebuts the fashionable myth that voters, even when woefully uninformed, can make aggregate decisions that effectively reflect the majority’s interests. He is hardly the first researcher to point out that American voters are systematically biased and irrational when it comes to economic issues. But he is the first to argue that democracy produces bad policies precisely because politicians cave in to voters’ tastes for irrational policies. This argument is the most novel and controversial in Caplan’s book.

In an ideal world, democratic leaders would proactively shape public opinion to direct voters toward prudent policies. Caplan believes that in reality, the opposite occurs. In a frenzy to compete for voter support, elected officials simply take their cues directly from voters’ espoused views, whether rational or not. In this view, a politician uses economically fallacious anti-immigration rhetoric in order to appeal to voters’ xenophobic prejudices. Elected leaders have no other choice if they wish to remain in power.

Do politicians really just cave into voters’ misguided whims? This is a question that merits serious empirical research. Unfortunately, Caplan’s answer in chapters 6 and 7 consists primarily of extensive theorizing and thought experiments. It does make intuitive sense that if voters demand a misguided policy, then leaders will generally give it to them in a bid for electoral rewards. Caplan also cites other previous scholars’ empirical work on the connection between public opinion and elected officials’ voting behavior. But Caplan’s argument concerning misguided economic policies goes a bit further and has yet to explicitly undergo empirical testing. In contrast to his well-supported claim that American voters display systematic biases, Caplan presents no systematic data to show that politicians are as unscrupulously spineless as he alleges.

Existing research by other scholars does support a weaker version of Caplan’s argument. Political scientists have repeatedly found that legislators pay significant attention to voter preferences when it comes to ideological issues. This finding makes complete sense. A Congressman who is about to vote on the Iraq war or on an abortion-related bill will naturally start by asking her constituents how they feel about the issue.

But Caplan’s book isn’t about Americans’ views on Iraq or abortion; it’s about Americans’ misguided understanding of elementary economics. And Caplan’s contention is quite a bold one: Legislators will sabotage the economy, whether intentionally or not, simply because it is electorally advantageous to exploit the public’s failure to grasp basic economic principles. Existing research is insufficient to allow us to evaluate the empirical veracity of this claim. But we should still be thankful that Caplan introduces this hypothesis.

Caplan’s argument is an important one for several reasons. Scholars in several fields have puzzled over why many developing countries remain poor. Caplan’s thesis suggests that in developing countries, citizens’ ignorance of economics gives political leaders incentives to create and sustain backwards economic policies. If he is right, then his book has just given us an invaluable roadmap for improving the fortunes of the third world. Caplan’s argument has potentially important implications for domestic politics as well. Maybe American voters need to dust off their economics textbooks before heading back to the voting booth. Or perhaps during campaign season, the media should spend less time grilling candidates over their platforms and more time quizzing voters on their grasp of supply and demand.

Caplan doesn’t have enough evidence to convince the reader that his explanation is the only correct one. But he does convince us that his story is worth exploring. The greatest contribution of his book is that it should inspire other scholars to pick up where he has left off. How might future research seek to evaluate the accuracy of Caplan’s story?

We should begin by considering alternative explanations for why democracies enact misguided policies. The rent-seeking account of government, of course, is a classic explanation. Special interest groups, including businesses, industries, and ideological coalitions, hijack the bureaucratic process to serve their narrow, selfish interests at the expense of the majority. These groups then launch public relations campaigns to convince the public that these regulatory shenanigans actually benefit the economy. The result is wide public support to retain economically misguided policies. Farm subsidies are a frequently cited example of such rent-seeking activity.

Caplan considers the rent-seeking account in chapter 4 and in his concluding chapter but finds it less persuasive than his own story. If Caplan’s explanation is the correct one, then a direct empirical implication of his book is that democracies with more educated and economically savvy citizens should have fewer misguided policies. However, if the rent-seeking account is the accurate one, then this relationship would not necessarily hold.

A straightforward empirical test would adjudicate between these competing explanations. There are many possible reasons that developing countries might enact backward economic policies, so it would be prudent to limit an empirical study to Western democracies. Among such nations, if the countries with the most educated citizens exhibit the most liberal governments with the fewest misguided policies, then Caplan’s explanation seems accurate. But if no such empirical relationship exists, then one might conclude that Caplan’s hypothesis is not supported by the available data.

It is disappointing that Caplan only attempts to draw evidence from the United States. This provincial limitation prompts us to question why we should view the author’s complaints about voters’ “irrational” preferences so gravely. If the economic policies preferred by most American voters are systematically irrational, then what constitutes rational policy?

Caplan’s answer, of course, is that rational economic policies are those prescribed by most trained economists. He’s technically right. As his book frequently points out, most economics Ph.D.s would agree that the general public underestimates the economic benefits of the market economy. If only voters would drop their systematic errors and simply remain agnostic about basic economics, American attitudes about economic policy would be quite different.

But there is no foreseeable world in which most American voters might drop their misguided prejudices on issues of elementary economics. Caplan speculates at length about the various psychological roots of voters’ misconceptions. He recognizes that voters have little incentive to ever educate themselves about economic policy before each election, since after all, one’s chances of casting the tie-breaking vote are virtually nil.  But neither do voters want to acknowledge that their economic misconceptions might be hurting the country. Consider an analogous example. We would be unsurprised to learn that pediatricians make better medical choices for their own children than ordinary parents do. But how many parents would admit to making systematic errors in the medical care of their children?

Any speculation about the economic policies that might emerge if voters were able to think like economists is purely hypothetical.  Consequently, Caplan’s claim that democracy somehow “fails” because of irrational voters is an overstatement.  Instead, we should draw the conclusion that America’s economic policies are inferior to those of a hypothetical democracy in which voters are more economically savvy. Caplan never argues that American democracy produces policies that are inferior to those of other existing governments.

Caplan has produced a fascinating book, one that will not be fully appreciated until we see the cornucopia of empirical study that his controversial ideas should inspire. He has laid out solid theoretical reasons to suspect that voter irrationality may cause misguided economic policies. Many students of democracy may disagree with Caplan’s explanations, but the testing of his theories will be of great interest to scholars both of the third world and of developed countries.

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Jowei received a M.S. in Statistics from Stanford University (2007) and graduated from college at Yale University (2004). He is a native of Appalachian Tennessee.