Irrationality, or Just Plain Ignorance?

Bryan Caplan’s essay reminded me of an April, 2004 conference commemorating the late, great development economist Peter Bauer. All weekend long, the assembled economists reiterated that Bauer was right in teaching, among other things, that foreign aid is disastrously counterproductive. At the final session, the conferees turned to the question of why, despite Bauer’s teachings, rivers of foreign aid continue to flow to the Third World, particularly from Scandinavian countries. All sorts of unsavory motives were adduced, including one very much like the explanation Caplan offers for voters’ misconceptions of economics: namely, that it makes people (especially Scandinavians, I guess) feel good to favor foreign aid, even though they know that foreign aid is disastrous.

As the lone philosopher in the room, my role was to ask an epistemological question: Has Bauer’s work even been translated into Finnish, Norwegian, or Swedish? If it hasn’t (and, of course, even if it has), isn’t it possible that foreign aid continues to flow simply because Scandinavian voters and politicians, like voters and politicians in other Western countries, haven’t read the works of Peter Bauer, and thus have never even thought about whether foreign aid might backfire? Is the perversity of foreign aid really so obvious that anyone in the world who favors foreign aid must, at some level, know that it is a disaster (in that case, why did we have to wait for Peter Bauer to discover this knowledge?), yet choose to ignore this knowledge for self-interested or emotional reasons? Isn’t it more likely that people back foreign aid because they are flat-out ignorant of arguments like Bauer’s?

To these questions, the most prominent economist present retorted that he “preferred to invoke ignorance as an explanation for irrational behavior only as a last resort.” I don’t see the merit in such an uncharitable approach to the behavior of fallible human beings. The economist’s approach reduces human error to the merely so-called “errors” of people who actually know that they are wrong, but prefer to be wrong—either because (1) they have some sinister interest in supporting what they know is wrong; or (2) because they get some sort of emotional gratification from being wrong, which is Caplan’s view. Like the Bauer conferees, Caplan seems to think that economic arguments are so well known and intuitively plausible that some act of will—or of irrationality—must be responsible for the public’s failure to agree with Caplan and his fellow economists. Wouldn’t it be more plausible to allow that most people have never even heard the economists’ arguments; and that these arguments are, in any event, counterintuitive—which is why we needed Adam Smith, and Peter Bauer, and so forth, to produce them in the first place?

Caplan believes (as I understand him) that people “normally” have high intellectual standards that include the open-minded consideration of counterarguments to their beliefs, but that they “relax” these standards in order to reach conclusions that make them feel good. That relaxation, of course, would be irrational. But I’ve been editing scholars in all disciplines for two decades, and talking to non-scholars about politics for three decades, and I can count on one hand the number of people I’ve encountered for whom open-mindedness of this sort is the rule, or even the exception. So I don’t think most people have intellectual standards in place that they need to relax in order to make mistakes. Moreover, even people who incline toward open-minded self-criticism, and are good at weighing evidence and following arguments (another rarity among the people I know, including myself; but this is a defect in people’s logical faculties, not a triumph of emotion over reason), need to actually hear and understand arguments against their beliefs if they are to take them into account. But how many members of a public as inattentive to politics as Caplan’s own data suggest are likely to have encountered arguments against their economic misconceptions? If they haven’t read Smith, or Bauer, or Mises, or Hayek, or Milton Friedman, they can be as open minded and logical as we could ask for, and they would still be prone to (what an adept of such economists might consider to be) economic errors.

Caplan has such a heroic view of human perceptiveness that he even wonders “How Misconceptions Are Possible.” As an extremely mistake-prone member of the human race, I tend to wonder instead how accurate conceptions are possible. But I don’t think Caplan is really talking about Homo sapiens. I think he is talking about Homo economicus.

Here is what I speculate is going on. According to the assumptions of standard-issue (non-Austrian) neoclassical economics, capitalism works by approximating the equilibrium model of “perfect markets.” One of the assumptions of this model is that market participants have complete knowledge of supply and demand conditions.[1] It is all too easy for economists theorizing about politics to extend this assumption from economic actors to political actors, and this is what Caplan may be doing. Only voters who approximate perfect knowledge of economic theory—or who could do so, if they just put their minds to it—but who nonetheless refuse to do so, can be accused of “irrationality,” rather than of simply being mistaken about economic theory. The readiest explanation for being simply mistaken about economic theory, however, is that the voters just haven’t read any economic theory. Voters who don’t understand economics because they haven’t been exposed to it, or because they’ve been exposed to it but have found it tough going, aren’t irrational; they’re just ignorant.

For decades, political scientists have probed the implications of public ignorance.[2] Efforts like Caplan’s are the obvious next step in such research, since most political scientists, like most members of the general public, are clueless about economics, and thus have not thought to interrogate the public about its own economic cluelessness. Some of the most important knowledge that voters need is knowledge of economic theory—at least if voters are to elect a government that has the power to regulate the economy. If the voters don’t have that knowledge, maybe the government shouldn’t have that power.

Just such a thought was, I believe, the actual basis of the modern libertarian movement, which began to take shape after World War II—when the direction of economic policy was truly frightening to anyone with a grounding in free-market economics. If the postwar free marketeers had included any political scientists, they might have been able to develop a better argument for libertarian conclusions than the philosophical arguments to which they eventually turned.[3] I agree with Caplan, then, that the ultimate implication of findings like his is that we should rely a lot less on politics, and a lot more on markets. That depends, as Caplan recognizes, on whether we have reasons to think that errors are less likely to occur, or are more likely to be corrected, in the economic than in the political realm. I differ with Caplan on what those reasons are, but that is a different story; I do agree with him that such reasons exist.[4] It may therefore seem quarrelsome for me to focus on my disagreements with Caplan, but I do so because I think it’s important that, having unwittingly discarded the pivotal public-ignorance argument against an omnipotent democratic state 60 years ago, we get it right this time around. And I think that there is one glaring respect in which Caplan has not only gotten it wrong, but has done so in a manner that renders the study of public ignorance vulnerable to caricature and dismissal.

Since Caplan has received the same training as most of his colleagues, he agrees with most of their views; and since he agrees with most of their views, he takes findings of public disagreement with those views to constitute reasons for elite rule. Loren Lomasky and David Estlund have pointed out the similarities between Caplan’s view and easily rebutted Platonism (Who guards the Guardians? Or, better, how do we tell the real experts from the charlatans?). I’d like to offer a suggestion about just how Caplan could have gone astray in such an obvious way.

Caplan is right to think that what the public lacks is expertise in economics. He is wrong to think that expertise should be conflated with educational credentials, even for heuristic purposes; or, as a corollary, that public wisdom should be equated to public agreement with credentialed “experts.” If Caplan were in a discipline (such as any of the other social sciences) in which he did not happen to agree with his colleagues, or if he found himself writing about the views of economists trained in the Soviet Union or the Islamic Republic of Iran, he would not so readily overlook the fact that when an educational institution credentials an “expert,” it is merely certifying that this person has been indoctrinated with whatever is thought by the faculty of the institution to be the truth—which has no necessary correlation with what is actually the truth.

One need not flatter the public’s wisdom, therefore, in order to resist rule by putative experts. Indeed, one of the most important findings of the political-science and political-psychology literature on public ignorance is that there is a perverse tradeoff between ignorance and ideology: less of the first leads to more of the second.[5] So if I had to choose, I’d pick rule by the masses over rule by elites. That’s not because I entertain illusions about “the wisdom of crowds.” It’s because I’d rather be ruled by open-minded ignoramuses than by doctrinaire ideologues.

The deeper lesson of the tradeoff between ignorance and ideology, though, is that the political world is far harder for people to grasp than is implicit in Caplan’s economistic view. Even people who accumulate lots of information about the world tend to accumulate only the information that fits their mental models of it—their ideologies. That’s the function of ideologies: they simplify the world by screening most of it out (even while making the world far more legible to the ideologue than it is to people who lack such a filter). Thus, most of the political ideologies in which very intelligent and rational people have believed in the modern era have been as deficient in economic wisdom as are the casual economic beliefs held by members of the general public.

All of this stands to reason. The human mind evolved in hunter-gatherer settings that were far less complex than societies like ours. No reproductive advantage would have flowed to a hunter-gatherer with a knack for economic theorizing, since there weren’t any economies for hunter-gatherers to theorize about. If one seeks to understand the pattern of people’s errors about economics, evolutionary psychology is probably a good place to start.

Economic theory, unlike evolutionary psychology, will probably have little to contribute to the enterprise of understanding why economic theory is, itself, so hard for people to understand. Economics is very important, and economic ignorance is both rampant and dangerous. But economics is not the only tool we have for understanding economic ignorance, and that’s very fortunate.

Notes

[1] Peter J. Boettke, “Where Did Economics Go Wrong? Equilibrium as a Flight from Reality.” Critical Review vol. 11 (1997), no. 1.

[2] The seminal documents are Walter Lippmann, Public Opinion (New York: The Free Press, [1922] 1949); and Philip E. Converse, “The Nature of Belief Systems in Mass Publics,” in David E. Apter, ed., Ideology and Discontent (New York: The Free Press, 1964).

[3] Or so I argue in “What’s Wrong with Libertarianism,” Critical Review vol. 11 (1997), no. 3.

[4] Jeffrey Friedman, “Popper, Weber, and Hayek: The Epistemology and Politics of Ignorance.” Critical Review vol. 17 (2005), nos. 1-2.

[5] E.g., Charles Lord et al., “Biased Assimilation and Attitude Polarization: The Effects of Prior Theories on Subsequently Considered Evidence,” Journal of Personality and Social Psychology 37(11): 2098-2109; Jeffrey Friedman, “Public Competence in Normative and Positive Theory: Neglected Implications of ‘The Nature of Belief Systems in Mass Publics.’” Critical Review 18 (2006), Appendix.

Also from This Issue

Lead Essay

  • The Myth of the Rational Voter by Bryan Caplan

    In this month’s lead essay, George Mason University economist Bryan Caplan argues that voters are not just ignorant, they’re irrational. According to Caplan, when the cost of holding irrational beliefs is low—as it is in religion and politics—we should expect a lot of irrational belief. “Even when his views are completely wrong,” Caplan writes, “[the voter] gets the psychological benefit of emotionally appealing political beliefs at a bargain price.” But the low personal cost of irrationality has a high social cost. Caplan provides statistical evidence of voters’ “systematically biased beliefs” in economics, and argues this undermines the electorate’s ability to implement good policy. Caplan suggests we should rely “less on democracy and more on private choice and free markets,” in addition to several other provocative reforms sure to make civics teachers blanch.

Response Essays

  • Outsmarting Democracy? by David Estlund

    In his reply to Bryan Caplan’s lead essay, Brown University political philosopher David Estlund argues that neither of Caplan’s proposed alternatives to democracy, markets and experts, satisfactorily correct for the problem of voter irrationality. With respect to experts, Estlund observes that political questions are moral as well as empirical: “[M]aybe … my morally wise mother would perform better overall than the economists. That settles nothing, since there is no entitlement to rule others based simply on the fact that you know what is best.” As far as markets go, Estlund says “Voters and market actors are the same people, so we should expect the charges of ignorance and irrationality to be leveled against people in both guises… In the aggregate many market mistakes, like voting mistakes, affect everyone.”

  • Caplan’s Republic by Loren Lomasky

    University of Virginia political philosopher Loren Lomasky compares Caplan’s criticism of democracy and defense of expertise with Plato’s argument in The Republic, while noting that in a modern system of representative democracy, voters choose among candidates, not policies. “If voters are as intellectually maladroit as Caplan suggests,” Lomasky writes, “then they are incapable of mastery of their elected representatives,” who are thus left with a fairly free hand to set policy. “What [voters] can do, though, is ‘throw the rascals out,’” and that, Lomasky argues, is good enough.

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