Who’s Afraid of Democracy?

Believing that “people are rational as consumers and irrational as voters,” many conservatives would favor free markets without democracy

Christopher Hayes

Behav­ioral econ­o­mists at UC San Diego recent­ly con­duct­ed a study in which tokens were dis­trib­uted among exper­i­men­tal sub­jects, with a few get­ting a con­cen­trat­ed chunk of the wealth and a major­i­ty get­ting lit­tle. They offered the poor” sub­jects the oppor­tu­ni­ty to pay a price to take mon­ey away from the rich. The catch was that rather than being redis­trib­uted, the mon­ey would sim­ply dis­ap­pear. Eco­nom­ic ortho­doxy pre­dicts that few would snap at the chance, since they’d be pay­ing for some­thing that would con­fer no direct ben­e­fit. But they did. In spades.

Given the choice between democracy without free markets or free markets without democracy, many conservatives would cheerfully opt for the latter.

Though only one data point, it sug­gests that peo­ple have a pro­found sense of eco­nom­ic fair­ness, that we are all, more or less, intu­itive social­ists. As far back as Edmund Burke, con­ser­v­a­tives have sus­pect­ed as much and feared democ­ra­cy for that very rea­son. Read James Madi­son in the Fed­er­al­ist Papers and it’s clear that many of the Con­sti­tu­tion’s unde­mo­c­ra­t­ic ele­ments were designed to pre­vent the expro­pri­a­tion of wealth from an out­num­bered elite.

This cen­tral ten­sion between lais­sez faire cap­i­tal­ism and the redis­trib­u­tive whims of a demo­c­ra­t­ic elec­torate isn’t dis­cussed much. But it can poke through the sur­face dur­ing moments of clar­i­ty, such as the last elec­tion, when min­i­mum wage increas­es passed in every state – red and blue – where they were on the ballot.

For Bryan Caplan, an econ­o­mist at George Mason Uni­ver­si­ty and 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 the rest 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 relat­ed, but dis­tinct, 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 the rudi­ments of pol­i­cy (whether we spend more on for­eign aid or social secu­ri­ty) and pol­i­tics (how many sen­a­tors each state has), 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 look­ing to make easy mon­ey by reg­u­lat­ing their com­peti­tors or get­ting their hands on tax­pay­er dollars.

Caplan dis­agrees: Democ­ra­cy fails to pro­duce good poli­cies pre­cise­ly because it reflects the will of the major­i­ty. Or, as H.L. Menck­en once put it: Democ­ra­cy is the the­o­ry that the peo­ple know what they want and deserve to get it good and hard.”

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: whether tax­es, immi­gra­tion and for­eign aid are major or minor con­trib­u­tors to the nation’s eco­nom­ic health, whether busi­ness prof­its are too high,” and whether down­siz­ing” is hurt­ing the economy.

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. The con­sen­sus eco­nom­ic mod­el that he sub­scribes to – and that forms the world­view of the econ­o­mists that he cites as defin­i­tive – is ground­ed on the assump­tion that peo­ple are ratio­nal. Pull out that Jen­ga block and the edi­fice of Caplan’s eco­nom­ic world­view tum­bles down with it: 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 the archi­tec­ture of 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. Need­less to say, Caplan thinks we’re at our best in the for­mer case and 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 than the less edu­cat­ed. 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. Eco­nom­ic experts used to believe in price con­trols. For­eign pol­i­cy experts thought we should go to war with Iraq. 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, and the data from SAEE bear this out. 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 – an abyss the author seems only too hap­py to jump into.

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.

Christo­pher Hayes is the host of MSNBC’s All In with Chris Hayes. He is an edi­tor at large at the Nation and a for­mer senior edi­tor of In These Times.
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