December 7, 2006
Here's a nice quote about the gap or differences in the understandings of markets between economists and ordinary citizens. It is from Bryan Caplan's The Myth of the Rational Voter over at Cato Unbound. Caplan says that compared to the economic experts:
laymen are much more skeptical of markets, especially international and labor markets, and much more pessimistic about the past, present, and future of the economy. When laymen see business conspiracies, economists see supply-and-demand. When laymen see ruinous competition from foreigners, economists see the wonder of comparative advantage. When laymen see dangerous downsizing, economists see wealth-enhancing reallocation of labor. When laymen see decline, economists see progress.
When we citizens speak on important matters of public policy, we show themselves to be clueless. So how do we explain the differences in knowledge or understanding--interpreted as mistaken beliefs about economists by citizens? Caplan argues:
that rational ignorance has been oversold. Rational ignorance cannot explain why people gravitate toward false beliefs, rather than simply being agnostic. Neither can it explain why people who have barely scratched the surface of a subject are so confident in their judgments--- and even get angry when you contradict them.....My view is that these are symptoms not of ignorance, but of irrationality. In politics as in religion, some beliefs are more emotionally appealing than others. For example, it feels a lot better to blame sneaky foreigners for our economic problems
There you have the rationality/irrationality duality of economics that is often used like a hammer against the criticisms of economic policies that harm people.
What then is the solution to voter irrationality in relation to democracy and markets? Caplan says:
So what remedies for voter irrationality would I propose? Above all, relying less on democracy and more on private choice and free markets...Another way to deal with voter irrationality is institutional reform. Imagine, for example, if the Council of Economic Advisers, in the spirit of the Supreme Court, had the power to invalidate legislation as "uneconomical." Similarly, since the data show that well-educated voters hold more sensible policy views... we could emulate pre-1949 Great Britain by giving college graduates an extra vote.
Instead of the alternative to markets, in a democratic country, being democracy we have the old Platonic rule of economic experts. Political decision-making is beyond citizens.
What is odd is that there is no mention by Caplan of representative democracy and the work of legislatures in this account. Isn't that where knowledge and judgement is bought to bear on economic problems?
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Thank you for posting this. This attitude is typical of neoliberalism - the "human costs" of economic efficiency are "irrational" and should be ignored. How absolutely marvelous for those of us who have to find a way to afford health care for our sick children and elderly parents - let the market decide. If you are unfortunate enough not to have health insurance, or have a condition that exhausts your coverage, too bad. We have now entered the era where The Market is God.