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Friday, May 25, 2007

Christopher Hayes: Who's Afraid of Democracy?

Christopher Hayes reviews Bryan Caplan's new book, The Myth of the Rational Voter [Update at the end]:

Who’s Afraid of Democracy?, by Christopher Hayes, In These Times: ...For Bryan Caplan, ... author of The Myth of the Rational Voter: Why Democracies Choose Bad Policies, the minimum wage is an iconic example of the economically backwards policies favored by the foolish masses. “In theory,” he writes, “democracy is a bulwark against socially harmful policies, but in practice it gives them safe harbor.” Examining this “paradox” takes up [most] of the book, but his explanation is pretty simple: Voters are crazy.

The Myth of the Rational Voter is best understood in the context of a long-standing academic debate over whether democracy works. It’s a question that has two ... sub-components: Do democracies produce optimal policies for its citizens? And do democracies produce policies that accurately reflect the will of the majority?

The most sanguine observers say “yes” on both counts. But given that surveys consistently show that voters are distressingly ignorant about both ... policy ... and politics ..., it’s a difficult case to make. Another strain of thought is the so-called Public Choice school, which answers “no” to both questions. Public Choice theorists tend, like Caplan, to be free market enthusiasts and argue that democracies inevitably lead to bloated bureaucracies, trade protectionism and inefficient subsidies. These sub-optimal economic policies occur not because of their widespread popularity, but rather because the state’s agenda is so easily manipulated by special interests...

Caplan disagrees: Democracy fails to produce good policies precisely because it reflects the will of the majority. ...

What the people want, according to Caplan, is economic bollocks. To establish this point, he devotes a chapter to the Survey of Americans and Economists on the Economy (SAEE). Conducted in 1996, the survey asked economists and members of the general public questions about the economy, and found a divergence of opinion on almost every principle of policy...

Caplan attributes this divergence to four basic biases of the unwashed masses—anti-market bias (a skepticism that the price mechanism works), anti-foreign bias, make-work bias (a desire to create jobs even if it’s inefficient) and pessimistic bias, the tendency to believe the economy’s getting worse instead of better. Imagine the worldview of Lou Dobbs, and that’s roughly the belief system Caplan thinks is typical. Because these biases make people feel good about themselves, people hold to them even in the face of countervailing evidence. Or, more precisely, they hold to them irrationally.

But this argument puts Caplan in a precarious position. ... If people aren’t rational, there’s no reason to assume that they’ll respond predictably to incentives or market signals.

So Caplan requires extra dexterity to withdraw the “rational voter” from ... his theoretical framework. He must somehow maintain that the same person can be rational as a consumer, worker or business owner, but irrational as a citizen and a voter. In other words, voters must be somehow possessed of what Caplan calls “rational irrationality.”

The idea is this: People are rational when they pay for the consequences of their decisions. But in elections, the odds of your vote determining a given election are so slim that the price of voting your irrational whims is nil. This gives people the freedom to indulge delusional notions about the economy. And that results in a populace who are capitalists in the market place and socialists in the voting booth. ... Caplan ... quotes legendary economist Joseph Schumpeter to describe the latter: “[T]he typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. He becomes a primitive again.”

“If people are rational as consumers and irrational as voters,” Caplan writes, “it is a good idea to rely more on markets and less on politics.”

The first and most obvious problem with Caplan’s argument is that it quickly leads to some very dark places. He notes, enthusiastically, that education makes people think more like economists and that, luckily, the highly educated vote at higher rates... But why leave it to chance? You could instead give more votes to businessmen and university graduates, as Caplan comes close to proposing, or simply require people to “pass a test of economic literacy to vote.”

Which brings us to the second problem: what constitutes economic consensus. Caplan spends considerable time attempting to persuade the reader that if experts and the general public disagree, the experts are right and the public wrong. That may often be the case, but it’s not a static proposition: What experts believe evolves over time, and the same is true of the public. In 1996, the public thought taxes were too high, but recent polling suggests that’s no longer the case. The kinds of social democratic market interventions that Caplan holds in such low regard were prominent features of the post-war economies of the United States, Canada and Western Europe, which were some of the most productive and equitable in human history. Not only were the policies relatively effective, they were also largely popular with both the public and economists. Caplan’s book wouldn’t have made much sense 40 years ago, which prompts the question: Will it make much sense in the future? Caplan thinks he’s describing the fundamentals about human nature, but he might just be elaborating on the contingencies of an era.

What’s more, sometimes the public is right and the experts are wrong. ... The record of expertise in matters of public policy is an uneven one, to say the least.

Finally, Caplan over-interprets the degree of economic consensus. He stresses that, appearances to the contrary, economists agree on a broad range of principles... But governments don’t legislate principles; they legislate policies, and when it comes to policies the disagreement is tremendous. Caplan thinks the minimum wage borders on quackery, but last year more than 500 economists, including a half-dozen Nobel laureates, signed a petition in favor of raising it.

Indeed, in this respect, the book eats its own tail. Caplan wants to grant a presumptive authority to the consensus view of economists, but the consensus view of economists is that voters are rational, which is, of course, precisely the position he wants to convince us is wrong.

It’s tempting to dismiss Caplan’s thesis out of hand, because it’s so self-consciously “provocative” and because he’s translating an old discredited anti-democratic argument into the jargon of econocentric elite-speak. But if you support democracy, you must confront the fact that voters can often be stunningly under-informed and that majoritarianism run amok can lead to persecution, hatred and injustice. Reading Caplan’s book, then, is both bracing and necessary because it forces the reader to stare into the abyss...

Caplan’s willingness to embrace the darkness, however, is what makes this book so important: It articulates in lurid detail the obscene id of Chicago-school, Grover-Norquist-style, free market fundamentalism (a term Caplan spends a chapter rebutting). Given a choice between democracy without free markets or free markets without democracy, many conservatives would gladly choose the latter. Hence Milton Friedman advising Augusto Pinochet in Chile and the Bush administration’s support of a coup in Venezuela.

And the book’s manifest elitism is not fringe. It is blurbed by economist Alan Blinder, who advised President Clinton, and N. Gregory Mankiw, who headed the Council of Economic Advisors under George W. Bush. Over the last 30 years, conservatives have made political hay by railing against liberal “elitists” who want to substitute the judgment of faceless bureaucrats, activist judges and pointy-headed intellectuals for that of the common man. Yet if you got some prominent conservatives off the record—after plying them with a few drinks—I bet more than a few would agree with Caplan: Voters are fools.

Good thing our campaign donors are the ones who really run things.

Update: Arnold Kling, who writes at Econolog with Bryan, comments on the review. Here's his response to the statement about Friedman advising Pinochet:

Bryan Gets Some Pushback, by Arnold Kling: ...This is a bit over the top. Would Hayes have preferred that Friedman advise Pinochet not to pursue market-oriented economic policies? I think that one could argue that not only did market-oriented economics help Chile's standard of living, it ultimately resulted in a transition to a more open political system.

Which gets me to a more general point. Democracy is not the same thing as a political system with individual rights and liberty. Democracy can mean populist authoritarian leadership. As Amy Chua points out in World on Fire, democracy can even support genocide.

Democracy is attractive not so much as an end in itself but as a means to check the power of rulers. All the democracy I want is the power of the people to vote rulers out of office.

Instead, some people want popular democracy, meaning that people get to vote on everything. But the implications of unlimited popular democracy are disturbing. It means that if people vote to abolish free speech, so be it. If they vote to criminalize minority religions, that is the majority will. If they vote for genocide, then that becomes state policy.

Supporters of popular democracy might respond by saying, "Come on, the people aren't that bad. Their instincts are basically good. You've gotta trust the people." That's the argument that Myth of the Rational Voter shoots down.

Where I think Bryan goes astray is in making it seem as though the solution is to increase the power of elites. But Government by elites is little better than popular democracy. Instead, the best idea is to limit the power of government.

Update: Bryan also responds.

    Posted by on Friday, May 25, 2007 at 09:36 AM in Economics, Politics | Permalink  TrackBack (0)  Comments (89)



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