If that summary is a good summary of what Caplan talked about, it misses a lot of the insight in his book. I don't know what he actually said in his talk (planned to go to austin to see him but didn't), but his argument is more like:
"People have much weaker incentives to make the right decisions in voting, since their individual vote doesn't really matter, compared to the incentives to making wise choices as consumers, where you bear most of the cost of indulging irrationalities. Therefore, they don't rationally apply the data they gather, and their choices skew to bad policy, rather than randomly changing the result."
I think his argument accuately accounts for the objections you've raised, and they don't change the conclusion. Yes, people can access better data, but none of that matters if you lack the will to apply it rationally. As he points out, irrationality is different from ignorace (former makes opinions vary more, latter changes the media opinion).
Caplan often recommends an experiment you can do to yourself that shows the impact of incentives on your frame of mind: Take a political belief you hold that claims that some result will come from some policy. Then, imagine betting a large amount of your own money on a concrete test of that belief. ("Win if, after congress passes bankruptcy reform, the poverty rate increases by 10% after 2 years.") Notice the change in your own frame of mind.
His argument is not about the elites as such, but that they are both more informed, and more importantly, have better incentives to find the truth.
(Btw, for someone so interested in what the masses think, your "unverified" distinction of my opinion is surprising.)
dphiffer
· 1 year ago
I thought the panel strayed a bit off his advertised topic -- at one point he conceded that, yes he was talking more broadly about "people," but since voters are also people we could apply the same arguments to them. This got a good laugh. But you're describing an argument that was in the mix: we don't bear the costs, personally, for an irrational voting choice, so are not held economically accountable to our votes. Is this a different argument when the costs are collective? Is voting not a collective act?
The other thing I didn't understand is what the extension of this argument is? Should we have to pony up before we're allowed to vote? Or should elites get two votes (which I think, it was mentioned, how England used to do things with college grads)?
Alex J.
· 1 year ago
Caplan is too diplomatic to say this, but the implication is that fewer things should be decided by voters choosing for everyone and more things should be decided by individuals choosing for themselves.
josh
· 1 year ago
I agree that this is the obvious conclusion.
Silas
· 1 year ago
"Is this a different argument when the costs are collective? Is voting not a collective act?"
I'm not sure I understand your question, but the argument *relies* on (in some sense) the costs being collective, which is the problem, and no, charging for voting doesn't change that problem.
To see why, it helps to refer to where Caplan's analogy: Pollution. What if someone said, "Of course people would never pollute -- who would want to breathe that stuff?" What's wrong with that argument?
Have an answer? Now, recognize the parallels to someone saying, "Of course people vote rationally -- who would want to live under bad policies?"
(Btw, at this point, I don't think you're doing an experiment to test the wisdom of crowds; you're rooking people into simplifying Caplan's arguments for you so you don't have to read them yourself. Well, it worked, but I'd recommend reading his stuff anyway, just for his style.)
Now, as for the solution? In addition to what Alex J. mentioned, there's Robin Hanson's futarchy idea at the link below. (not gonna try html when I can't preview) The idea is to allow people to vote, but ONLY for purposes of determining the social utility curve: that is, the definition of what counts as a good social outcome. Prediction markets, in which people would bet on the merit of various policies at achieving various goals (specifically, the goal achieving the best social outcome, as voters have defined it), would then determine the policy taken to achieve that.
People's votes would matter, since they influence the definition of what counts as a good outcome i.e., whether it favors equality or GDP growth or the environment); and the policies would be good because they would be determined in an arena where being right about their effectiveness matters dearly to the people who determine it.
He summarizes it as "vote on values, bet on beliefs".
Also, yes, the "unverified" label is ironic in this context. You can sign up at disq.us if you'd like to become more sanctioned. ;)
Silas
· 1 year ago
Yikes! Correction:
Irrationality changes the median opinion.
Ignorance keeps the same median opinion, but increases the variance.
Previously I had it reversed.
Seamus McCauley
· 1 year ago
I think the important distinction here is not between experts and the non-experts but between people acting in circumstances where they have the incentive to behave in an informed and rational manner and people acting in circumstances where they do not. The argument is simply that if you do something that doesn't matter to you, you won't do it especially well. Voting for a national government is a classic example. The chance of my vote mattering is sufficiently close to zero to make no odds, so there's no incentive for me to vote even vaguely sensibly.
Or to take an example from social media - anonymous or pseudonymous message boards generate a terrible noise/signal ratio compared to discussions that require verifiable identities on the part of participants. One (economic) explanation for this is that posting anonymous nonsense to a board has no reputational cost. Posting under your own name does. I'd be reluctant to deliberately troll here (or anywhere) under my own name: but under a momentarily-adopted nom de plume, there's nothing to lose.
In this sense your experiment should confirm Bryan's hypothesis. If you get sensible comments from people writing under their own names or linking back to real, relevant blogs it's because there's a reputational gain for them and/or they're keen to gain the collective benefits of sharing knowledge through debate. If you get nonsense from trolls I'd lay money on that nonsense being attached to made-up names and with no return path.
dphiffer
· 1 year ago
Yeah, I agree that voting feels meaningless leading up to it but I feel like after the fact, once the votes are tallied, that it might take on some meaning. It's not that I rationally think my vote counted for more after the fact, but it comes to signify my participation in society. That connection is just as important, I think, as how the vote counts toward a tangible outcome.
As for the reputation thing, I agree that it's an effect, but it's not the only effect. For blogs it seems like (in my very limited experience) there are a lot of other more powerful factors such as audience size, number of return visitors, type of inbound links, etc.
josh
· 1 year ago
I think Hanson's futurarchy idea really does get to the heart of the issue. Would anyone not expect the prediction markets to come much closer to the "experts" opinions when it comes to maximizing the voters chosen utility function than does the result of a typical election. If this is the case, than essentially Caplan's is correct, experts>median voter (although still worse than prediction markets) when it comes to actually meeting some predetermined goal.
Irena
· 1 year ago
Dan, thanks for posting this topic!!!
I am an "outside the structure of the academy" painter educating my daughter "outside the structure of the academy" while making living for us both slaving "inside of the structure of economy", applying knowledge and skills gained "outside and inside the structure of academy and economy". I think both ways are necessary for survival (if one is decided to have children, not pets). In terms of "eliminating the value of more educated / expert opinions": i think that the speed of development of contemporary knowledge and expertize is much faster then speed of gaining academy titles and official recognition. So, if officially recognized expert can't compete in a free market of unofficially recognized experts, then probably, he should consider refreshing his knowledge on his own utilizing new technologies (it's just faster) rather then sponsoring slow motion of academic regales with investments of his unpredictable future possibilities.
Brandon Berg
· 1 year ago
I feel like economics also fails to take that into account the self-educating, network-savvy individual.
For what it's worth, my eyes commence rolling whenever I hear or read the phrase "economics doesn't account for." Uusally what people really mean when they say this is "The one economics class I had to take in college didn't cover this," or, more cynically, "I just don't like the conclusions implied by economics." The breadth and depth of the topics addressed in economic literature are far greater than most laymen realize.
Besides, the self-educating, network-savvy individual is irrelevant to Dr. Caplan's thesis, because the self-educating, network-savvy individual is rare, and his vote counts no more than anyone else's. Furthermore, there's no incentive for the median voter to self-educate on the topic of economics. Some people do so because they find it interesting, but most do not.
This thread is also irrelevant to Caplan's thesis. Your readers, and Caplan's, are a highly self-selected group, and as such not indicative of the median voter. What's going on here is more analogous to markets than to democracy.
dphiffer
· 1 year ago
Brandon, thanks for your critique -- I think you're right that I might have been a bit lazy with that sentence. I probably should have edited my post down to be a little more specific.
mgroves
· 1 year ago
I would assert that the "organic" way that useful material rises out of "crowds" on sites like Wikipedia, Digg, etc. isn't actually from crowds in the vast majority of cases, but from a small amount of committed subject matter experts. If anything, there might be some actual crowd influence in the long tail. This renders the crux of the "organic" argument moot, because it's essentially begging the question. See: http://www.slate.com/id/2184487.
Also, if the "crypto-fascist" comment is a reference to the famous Gore Vidal/William Buckley exchange, then I think Caplan should be proud and know that he has "arrived."
Rimfax
· 1 year ago
Caplan's arguments, when read as an implied policy prescription, appear to most as elitist claptrap. But he's not implying a policy prescription. There really is nothing between the lines. He's making an observation comparing the economic decisions of voters to the prevailing opinions of economics experts. The same kind of observation could be made about education or environmental science. Irrational voter bias will likely consistently disagree with the experts on any number of subjects. Arguably, few other subjects are as important to governance as economics.
dphiffer
· 1 year ago
Ah, this might answer my question above... I probably will need to read the book to better judge his argument, but my current objection is that I don't know that voting necessarily *needs* to be rational, or economically sound. On some level it's a symbolic act to prevent against popular revolt. The thing that interests me more is how to make people feel more responsible for their government's actions. Maybe I'm more in agreement on that point than I thought.
josh
· 1 year ago
Well, first you identify he problem (eg voters could do a much better job), then you think of solutions that are within the principles of justice. Caplan is only doing the first bit.
cvcfg
· 1 year ago
Well, I obviously didn't go to this seminar, but there's a lot of evidence that voters don't really understand the policies that the federal gov'n enacts. Here are some tidbits:
http://health.dailynewscentral.com/content/view... (the point of this one is that during the Bush presidency we passed one of the largest new federal programs in years, and most Americans don't know anything about it)
The problem really is that most Americans don't understand economics because the concepts are somewhat counter-intuitive.
Alex J.
· 1 year ago
Regarding the absence of another economist at the table, Donald Wittman can't be everywhere at once and Caplan has already debated him.
But I understand what you are saying about expert opinion. (Some call this "Academic Libertarianism", denying that professors and the like exert some special rational authority because of their official positions.) But Caplan has made it clear that he considers economic experts to have only a rebuttable presumption of being right. In fact, his own concept of rational irrationality goes against the more mainstream economic position of rational ignorance.
I have also frequently felt a gnawing objection to something that I couldn't quite put into words. I find that it usually solidifies later - sometimes days or weeks later. This seems most common when dealing with unfamiliar lines of reasoning - such as that our democracy's voting public is routinely irrational. I'm sure that specialists find it easier to move from an emotional objection in their domain to a rhetorical one. However, if someone has trouble articulating a position, you have to admit that would count as evidence against the position's likely weight to outside observers.
Troy Camplin
· 1 year ago
I don't know if Caplan addresses this in his book, but it seems to me that people act far differently as private individuals than they do as voters. While they would never, ever go to their neighbor and steal anything from them, they will turn around and vote for a law that allows the government to do just that with taxes. While we would personally never threaten to lock someone in our basement for using drugs or visiting (or being) a prostitute, we will vote for a law allowing others to do it for us. I think people are quite wise when they act in their own and their own family's self-interest, but act quite unwisely when they vote. Why do we feel comfortable voting to have someone else do something we find distasteful and uncomfortable to do ourselves? Shouldn't we have laws that reflect what we would ourselves be comfortable doing and enforcing? We would step in to stop a rape or a murder or a robbery or to let someone know they are being lied to -- but we wouldn't step in to do most of the other things government does.
AMW
· 1 year ago
I agree that people are capable of educating themselves, and the low cost of transferring information has made this even easier in the last 10 years or so. But Caplan's main point is that individuals have internal biases, and these biases are difficult to overcome. Left to one's own devices, one tends to learn more about why his original position was the correct one. In the "inorganic" system, there is more of a tendency to be forced to confront evidence that one's original position was not correct.
In my experience, people with a lot of exposure to the inorganic system are more likely to recognize the real possibility that they are wrong, and are more willing to admit their errors. It seems to be a reasonably good way of overcoming (or at least becoming aware of) one's own biases.
AMW
· 1 year ago
Oh, one other thing. I would bet good money that experts are more reliable than the layman when there is a substantial body of established knowledge in a given area. When they are branching out into uncharted territory, all bets are off.
dphiffer
· 1 year ago
I'm not sure that I've yet proven anything about wisdom of crowds or the capacity of non-verified experts, but I do appreciate all the pointers and thoughtful comments. There is a lot to read and mull over here. And I do intend to read Caplan's book to see whether my uneasiness still holds for me.
Dr. T
· 1 year ago
I have to agree with Bryan Caplan. Voters do a poor job of electing politicians. They often are ignorant of the issues, don't fully understand the positions of the candidates (including the ones they voted for), elect known scoundrels and criminals (but he's our scoundrel), focus on superficial factors (height, looks, race, religion) instead of on performance in office, etc. I'll take elitism over this pattern of voting any day.
dphiffer
· 1 year ago
But what does this elitism imply policy-wise? That is, what response you would advocate in light of these deficiencies? My response isn't to tout the qualities of the better-informed but rather to think about ways to inform people about their candidates. Some of this has to do with media literacy, and some of it is a cultural argument -- you might say I'm in favor of Anti-anti-intellectualism. (Google informs me there is already Anti-anti-anti-intellectualism.)
SilasX
· 1 year ago
Dan, you're still failing to understand the distinction between "uninformed" (ignorant) and "irrational", which I have explained twice now. Either state why you disagree with Caplan's argument that irrationality exists and is the key problem, or stop talking about how you're going to cure the problem of ignorance.
Several people have, at this point, already given you excellent, concise explanations of Caplan's work that apparently were not represented in his talk. With all due respect, I do not think you have made a similar effort in learning from them and formulating a response that articulates where and why you disagree. Please do so.
dphiffer
· 1 year ago
Aw, Silas, you're being that guy! Don't be that guy...
You may be correct that I'm not fully grasping Caplan's argument (and I've already committed to reading his book to clarify any misconceptions), but I don't intend this to only be a referendum on The Myth of the Rational Voter (you'll notice I said "what response would *you* advocate," not which Caplan would). Surely there are other valid reactions in addition to the one you outlined above. Does media literacy have no place in this discussion?
josh
· 1 year ago
Futurarchy. But this is purely utopian. The problem with your suggestions is that the systematic poor judgment of voters is natural, and essentially uncurable unless it becomes worth a persons while to become an expert. This would require changing the way we make collective decisions.
This best thing we can and should do is fight to leave as many decisions as possible to individuals.
another bob
· 1 year ago
Here's an irrational voter (David Mamet, no less) explaining why his choices are less irrational now.
Bryan's argument (I've read the book but only once) is neatly summarized in his book - only about 5 bullets - would fit on one powerpoint slide.
Plebes have systematically inaccurate economic beliefs (when compared to economists) possibly hardwired as a result of our past as hunter-gatherers.
Plebes have little incentive to change their own beliefs. It is costly (in time and emotional certainty) to become an economist. Plebes who do educate themselves garner no benefit (only one more smart vote among zillions of idiots).
Bryan might say that we don't expect everyone to be a lawyer. We delegate that to courts. We can't expect everyone to be an economist, let's have a supreme court of economics to invalidate truly idiotic policies.
the only thing wrong with democracy is the demos.
how 'dat?
Ajay
· 1 year ago
I think you're trivially right that the internet will lead to a lot more people being able to build reputations online and take part. You're wrong however, if you take that to an extreme and say that EVERYONE or even a large majority of people will contribute expertise to a significant degree. Caplan is right in that only a minority of people ever wants to take the time to become expert and that reputation will always be important, but the internet will allow many more people to take part in these markets by making them more efficient and allowing the work to be split up many more ways. For example, rather than going to grad school and getting a PhD in economics, people will be able to do independent research on their own, blog about it, and build up a reputation through their writing. Also, others will be able to easily share small snippets of data that they have momentarily become experts in, say on the best digital camera below $500 for prosumers, because they just researched it for themselves or someone paid for them to. People can already do this but they mostly do not get paid for it yet. They will.
dphiffer
· 1 year ago
I think my argument (which isn't fully baked) might be that on the Internet, the exchange of knowledge can be a powerful force, independent of social capital (which helps identify trustworthy sources). The scarcity lies in attention, as you point out, rather than published works. In this environment the editorial process (collective or individual) becomes relatively more valuable. Maybe I'm talking about a different kind of expertise (skill?) that works to identify experts intuitively rather than rationally. This idea "feels" right vs. this idea is logically sound.
Ajay
· 1 year ago
Exchange of knowledge is the defining feature of the internet, yes, but social capital will always be important in that process. For example, you can currently go read on the internet that linux is the best thing since sliced bread and blows away all other operating systems and you can also read the converse. The only way for a layman to know which fact is probably true is by knowing who to trust. You're right that a new decentralized editorial process will spring up to provide this reputation currency on the internet, an editorial filter that wasn't as necessary before when there was a lot less information being communicated (Google is a first hack at a more automated version of this editorial filter). The nice thing is that since this filter is much larger and widespread than the previous filters of peer review or getting published, there will be many more people filtering at varying levels of expertise. You don't have to slog away for decades as an editor at The Economist or get tenure to get to your status (link blogs are an early version of this, where people post their best links and you get to use them as your filter). As for your notion of intuitive judging, I don't think that's what will happen. I think you're just saying that to try and justify not having any formal editorial filter at all, but I think there will be one, it will just be much bigger, decentralized, and quicker for people to start contributing to than society's current filters, sort of like google search is today. :)
Abe
· 1 year ago
Dan man, don't waste your time.
As best I can tell Caplan is just trying to work out a libertarian paradox, that they think masses are doing the right thing when it comes to markets and the wrong thing when it comes to government. It's only a relevant issue if you buy into two of the key tenets of the libertarian faith, that "markets" (or "the market") are good and that government is bad. If you don't believe both those things, ignore the fucker. Otherwise you're gonna be stuck in essentially a religious argument...
Silas
· 1 year ago
Apparently, Dan thinks this is still a novel response,
despite this alleged inconsistency having been resolved several times above on this very page. To repeat: voters bear none of the cost of irrational voting, while they bear the full cost of irrational market choices.
Who's wasting whose time here? I don't like sounding rude, but even more, I don't like people who claim to want to hear ideas and then ignore them.
AMW
· 1 year ago
Markets achieving efficient outcomes and governments achieving inefficient outcomes are not matters of faith for libertarians. They are stylized facts well butressed by both theory and empirical evidence. People are people; they are generally self-interested and will exert the most effort to make themselves and those they are closest to better off. Markets are generally good at channeling this self-interest into socially beneficial behavior, (activist) governments are generally good at channeling it into behavior that is socially neutral at best and detrimental at worst. To be sure, free rider problems and externalities throw a wrench in the system for markets. But even in these instances minimal government involvement is all that is called for (to tax or subsidize).
Abe
· 1 year ago
That's a really nice summation of the libertarian faith right there!
I'd agree that governments tend to be inefficient, but I disagree with libertarians on two points. One I don't think the inefficiency is tied to being a government per se, but to the fact that governments are almost always bureaucracies. Governments tend to be larger, more entrenched and more tied to the land then other large bureaucracies like corporations, but they are prone to the exact same failures. Two, I'm not sure that inefficiency is always a bad thing, but in fact it might just provide a necessary degree of stability and slowness to the world...
As for markets being efficient..... Ha, for one you can look at Bear Sterns... Established markets in calm waters, yeah they are pretty efficient, but a quick look at economic history shows that markets are prone to all sorts of bubbles, panics and crashes that are as far from efficient as you can get. In addition there is a huge issue of survivor bias when looking at markets, yes markets that survive need to have a degree of efficiency, otherwise why should they exist? But the world is littered with failed markets and potential markets, that are not efficient at all.
The of course there is the whole issue that markets no matter how efficient they are, need governments to provide the stability they need to exist. Without governments market transactions get trumped by guns at every maneuver. Not exactly efficient is it?
Alex J.
· 1 year ago
I'll take your word that your beliefs held via faith, but you'd need to provide some evidence for me to believe that Caplan's are.
AMW
· 1 year ago
I tried to post this over at econlog, but I'm having trouble with their server. Also, it's directed to you, so I might as well post it here where you are more likely to see it.
Dan Wrote: "Also, how would you guys respond to commenter Abe's claim that there's an inconsistency between trusting non-experts in the marketplace but not in the voting booth?"
My response:
Dan, I posted a short reply to Abe on your blog. It all comes down to incentives. You may be surprised to hear this (and I'm not being sarcastic), but economists are generally pessimistic about how markets will perform when there are externalities (like, say pollution). In those cases markets are not predicted to be perfectly efficient. Same goes with markets with asymmetric information (like used cars, health care and plubming).
So economists are willing to grant that people will behave badly in markets under certain situations. (Economists are generally of the mind that people will behave badly whenever it is in their interest.) But the question isn't just "do markets fail?" The question is "do they fail worse than government addressing the same issue?" And in most cases the answer is no.
There is an enormous existing body of literature called Public Choice theory that explores government failure. Public Choice generally assumes that people are rational, but their desire for good economic policy is thwarted by lobbyists (in a nutshell), so we end up with bad policy. Caplan goes further and argues that voters are themselves irrational when it comes to abstract economic ideas, so we don't even need the lobbyists to screw up economic policy.
So back on topic, the asymmetry between behavior in the voting booth and in the market is that in the latter there are strong incentives not to be irrational. If you, as an individual, make systemmatically stupid decisions in the market, you will first go bankrupt, then go hungry. Since so much is on the line, people tend to wise up quickly. But you, as an individual, have virtually zero impact on what happens in government through your vote. So you have nothing to punish you individually for making stupid decisions at the voting booth. Hence, irrationality at the voting booth tends to persist, while in the market it tends to disappear (or at least shrink).
Caplan likes to draw the analogy with the theory of gravity and the theory of evolution. People who consistently reject the theory of gravity tend to be heavily punished by their own actions. People who consistently reject the theory of evolution suffer pretty much no ill effects as a result. Lo and behold, very few people reject the theory of gravity, and loads of them (in the U.S. at least) reject the theory of evolution.
I hope this comment is helpful (if a bit long).
AMW
· 1 year ago
Oh, and note also that experts accept both the theory of gravity and the theory of evolution. Non-experts are more likely to reject the theory of evolution. Make of that what you will.
Grant
· 1 year ago
For anyone who isn't convinced of Bryan Caplan's arguments, consider the efforts needed truly be able to predict the effects of one political candidate being elected versus another. Consider all the economics and history a voter needs to know. Consider how incredibly difficult (impossible?) it is for anyone to understand all the effects of even one of the bills passed by congress. Consider how hard it is to judge what a candidate will actually do once elected. Consider how much more complicated the effects of legislation become year after year, as technology and society grow in complexity.
Who would go to all this work? Following politics would be an 80-hour a week job.
More voices are good when those voices have incentives to provide good information (e.g., prediction markets). But if the uninformed and incorrect have the same incentives to share their information as the experts, you don't get good results.
Or put another way, who do you want designing airplanes and skyscrapers, professional engineers or voters? Do we vote on the aluminum alloys used in airframes? Why would we think "engineering" society would be any different?
(I don't mean to be arguing for any sort of aristocratic elitism here, I'm just trying to point out the differences in the decision making of market processes vs. democratic processes)
AMW
· 1 year ago
As long as the uninformed are not systematically incorrect you will still get good results, because the ignorant-but-lucky will cancel out the ignorant-and-wrong, and the informed will win out.
The main thrust of Caplan's book is that when it comes to economic policies, the uninformed are very systematically incorrect, so you won't get good results.
RobD
· 1 year ago
I know that this may be slightly off topic, but as a blogger who tracks different "wisdom of the crowds" experiments, I couldn't help but notice what's going on here. Great stuff. As an amusing anecdote, I'm actually planning a wedding as my own little test case, where "the crowd" is making all of our wedding planning decisions for us. Would love any feedback:
Getting back to the book, I have read it (not every page yet, but most) and keep coming back to Chapter 3, which underpins the whole rest of the book.
Basic argument:
o The main argument against economists and their recommendations is that the economists are biased. (Self-serving based on economic and other conditions, indoctrinated based on previous economists.)
o Through some regression analysis comparing economists to non-economists, we can determine that they're not biased as charged.
So, absent any other evidence, we should conclude that they're (mostly) right.
Maybe you've noticed the problem here" Caplan says it himself (p. 81):
"If A and B disagree, there are three logical possibilities. The first is that A is right and B is wrong. The second is that A is wrong and B is right. The third is that both A and B are wrong. But we can rule out the possibility that both A and B are right." (He's talking about economists and non-economists here.)
Okay first, he doesn't mention an important case: what if A and B agree? What are the possibilities? They're both right or they're both wrong.
So of the five possibilities, ceteris parabus, the odds are:
Both right: 20% One right: 40% Both wrong: 40%
Allow me to address the latter case, which arises in the very first SAEE question, which asks (condensed) "here is a list of reasons for why is the economy not doing better than it is. Is each not a reason at all (0), a minor reason (1), or a major reason (2)?"
The first reason: "Taxes are too high."
Results:
Public 1.5 Economists .75 "Enlightened" public: .95
The Enlightened Public's answer lies between the economists' and the public's. According to Caplan, this means that "the truth lies somewhere in the middle."
Okay here's the problem: they're both wrong. (though the economists are significantly *less* wrong.) The consensus among economists who have studied the subject is that the level of taxation (and the size of government in general, for that matter), has no effect on long-term growth in developed countries. It's a myth.
Why do the economists get this wrong, even though the literature is clear, extensive, and pretty much unopposed (by real economists)? Must be bias. Here's a great example, in one mighty impressive economist, Greg Mankiw:
And that must mean--based on Caplan's analysis--that the whole society is biased to believe this thing.
It sort of casts a pall over the rest of the book.
for various criteria, popular
Alex J.
· 1 year ago
I think you'd find that ongoing tax rates of 100% would have an effect on a country's long term growth.
izforever
· 1 year ago
Alex J.: "I think you'd find that ongoing tax rates of 100% would have an effect on a country's long term growth."
Do I really have to explain what a profoundly meaningless argument that is?
aesylvatica
· 1 year ago
My apologies if this is going to be a repeat response, I don't have time to read all 46 comments at the moment, but thought I may have something to add....
I see the problem with his argument as two fold:
1. Traditional economics is grounded in the assumption that humans make decisions that are rationally based, but most don't. I don't mean this in some condescending way; I mean it very literally. Only 30% of the world's population (but 50% of the people in power) have developed to a stage where they can access the tools of rationality. Before that stage is reached, people just simply haven't developed the capacity to use rationality as a tool. Before people develop the capacity for rational though, they rely mostly on mythic thought processes: religion, nationalism, 'moral majority' (40% pop; 30% power)... Of course, the people who developed economics are capable of rational thought and it seems 'rational' to them that other people would behave 'rationally,' since that's 'rational.' However, that's just not the case. An 'economics' based on religious or other mythic-membership decision-making would be a more true reflection of the way in which the majority of humanity makes decisions. (This is more of a critique of economics broadly than his argument specifically.)
2. Now more to the specifics of his argument (I needed to lay that groundwork first). One of the main challenges that I see with relying on 'experts' is that they are most often aligned with majority thought. It seems to me that if you've managed to stick with academia long enough to become a certified 'expert,' then you most likely either agreed with their point of view to begin with, or you've been converted long ago. (Given, there are always some rebels inside of any institution, but they are generally few and far between because it is such a painful place to be if you have a different belief.) The challenge with believing non-experts is that it is hard to distinguish between the nuts and the visionaries (and sometimes they are the same people!) There are pre-majority beliefs and post-majority beliefs in circulation, and it can be challenging for the average Joe to tell the difference. So, it is probably 'safer' for them to get their facts from an expert. However, it you're looking for cutting edge, paradigm-changing ideas, than experts are the last place you want to look. If you are undertaking your own education, you have to be more vigilant about what you take in as truth. It requires a lot more work, but can be a lot more rewarding.
All Comments
http://bloggingheads.tv/forum/showthread.php?t=...
"People have much weaker incentives to make the right decisions in voting, since their individual vote doesn't really matter, compared to the incentives to making wise choices as consumers, where you bear most of the cost of indulging irrationalities. Therefore, they don't rationally apply the data they gather, and their choices skew to bad policy, rather than randomly changing the result."
I think his argument accuately accounts for the objections you've raised, and they don't change the conclusion. Yes, people can access better data, but none of that matters if you lack the will to apply it rationally. As he points out, irrationality is different from ignorace (former makes opinions vary more, latter changes the media opinion).
Caplan often recommends an experiment you can do to yourself that shows the impact of incentives on your frame of mind: Take a political belief you hold that claims that some result will come from some policy. Then, imagine betting a large amount of your own money on a concrete test of that belief. ("Win if, after congress passes bankruptcy reform, the poverty rate increases by 10% after 2 years.") Notice the change in your own frame of mind.
His argument is not about the elites as such, but that they are both more informed, and more importantly, have better incentives to find the truth.
(Btw, for someone so interested in what the masses think, your "unverified" distinction of my opinion is surprising.)
The other thing I didn't understand is what the extension of this argument is? Should we have to pony up before we're allowed to vote? Or should elites get two votes (which I think, it was mentioned, how England used to do things with college grads)?
I'm not sure I understand your question, but the argument *relies* on (in some sense) the costs being collective, which is the problem, and no, charging for voting doesn't change that problem.
To see why, it helps to refer to where Caplan's analogy: Pollution. What if someone said, "Of course people would never pollute -- who would want to breathe that stuff?" What's wrong with that argument?
Have an answer? Now, recognize the parallels to someone saying, "Of course people vote rationally -- who would want to live under bad policies?"
(Btw, at this point, I don't think you're doing an experiment to test the wisdom of crowds; you're rooking people into simplifying Caplan's arguments for you so you don't have to read them yourself. Well, it worked, but I'd recommend reading his stuff anyway, just for his style.)
Now, as for the solution? In addition to what Alex J. mentioned, there's Robin Hanson's futarchy idea at the link below. (not gonna try html when I can't preview) The idea is to allow people to vote, but ONLY for purposes of determining the social utility curve: that is, the definition of what counts as a good social outcome. Prediction markets, in which people would bet on the merit of various policies at achieving various goals (specifically, the goal achieving the best social outcome, as voters have defined it), would then determine the policy taken to achieve that.
People's votes would matter, since they influence the definition of what counts as a good outcome i.e., whether it favors equality or GDP growth or the environment); and the policies would be good because they would be determined in an arena where being right about their effectiveness matters dearly to the people who determine it.
He summarizes it as "vote on values, bet on beliefs".
http://hanson.gmu.edu/futarchy.html
Irrationality changes the median opinion.
Ignorance keeps the same median opinion, but increases the variance.
Previously I had it reversed.
Or to take an example from social media - anonymous or pseudonymous message boards generate a terrible noise/signal ratio compared to discussions that require verifiable identities on the part of participants. One (economic) explanation for this is that posting anonymous nonsense to a board has no reputational cost. Posting under your own name does. I'd be reluctant to deliberately troll here (or anywhere) under my own name: but under a momentarily-adopted nom de plume, there's nothing to lose.
In this sense your experiment should confirm Bryan's hypothesis. If you get sensible comments from people writing under their own names or linking back to real, relevant blogs it's because there's a reputational gain for them and/or they're keen to gain the collective benefits of sharing knowledge through debate. If you get nonsense from trolls I'd lay money on that nonsense being attached to made-up names and with no return path.
As for the reputation thing, I agree that it's an effect, but it's not the only effect. For blogs it seems like (in my very limited experience) there are a lot of other more powerful factors such as audience size, number of return visitors, type of inbound links, etc.
I am an "outside the structure of the academy" painter educating my daughter "outside the structure of the academy" while making living for us both slaving "inside of the structure of economy", applying knowledge and skills gained "outside and inside the structure of academy and economy".
I think both ways are necessary for survival (if one is decided to have children, not pets).
In terms of "eliminating the value of more educated / expert opinions": i think that the speed of development of contemporary knowledge and expertize is much faster then speed of gaining academy titles and official recognition. So, if officially recognized expert can't compete in a free market of unofficially recognized experts, then probably, he should consider refreshing his knowledge on his own utilizing new technologies (it's just faster) rather then sponsoring slow motion of academic regales with investments of his unpredictable future possibilities.
For what it's worth, my eyes commence rolling whenever I hear or read the phrase "economics doesn't account for." Uusally what people really mean when they say this is "The one economics class I had to take in college didn't cover this," or, more cynically, "I just don't like the conclusions implied by economics." The breadth and depth of the topics addressed in economic literature are far greater than most laymen realize.
Besides, the self-educating, network-savvy individual is irrelevant to Dr. Caplan's thesis, because the self-educating, network-savvy individual is rare, and his vote counts no more than anyone else's. Furthermore, there's no incentive for the median voter to self-educate on the topic of economics. Some people do so because they find it interesting, but most do not.
This thread is also irrelevant to Caplan's thesis. Your readers, and Caplan's, are a highly self-selected group, and as such not indicative of the median voter. What's going on here is more analogous to markets than to democracy.
Also, if the "crypto-fascist" comment is a reference to the famous Gore Vidal/William Buckley exchange, then I think Caplan should be proud and know that he has "arrived."
http://econlog.econlib.org/archives/2005/06/yes...
(this one doesn't need much of an explanation)
http://health.dailynewscentral.com/content/view...
(the point of this one is that during the Bush presidency we passed one of the largest new federal programs in years, and most Americans don't know anything about it)
The problem really is that most Americans don't understand economics because the concepts are somewhat counter-intuitive.
http://gmueconsociety.blogspot.com/2007/09/capl...
But I understand what you are saying about expert opinion. (Some call this "Academic Libertarianism", denying that professors and the like exert some special rational authority because of their official positions.) But Caplan has made it clear that he considers economic experts to have only a rebuttable presumption of being right. In fact, his own concept of rational irrationality goes against the more mainstream economic position of rational ignorance.
http://econlog.econlib.org/archives/2007/05/our...
I have also frequently felt a gnawing objection to something that I couldn't quite put into words. I find that it usually solidifies later - sometimes days or weeks later. This seems most common when dealing with unfamiliar lines of reasoning - such as that our democracy's voting public is routinely irrational. I'm sure that specialists find it easier to move from an emotional objection in their domain to a rhetorical one. However, if someone has trouble articulating a position, you have to admit that would count as evidence against the position's likely weight to outside observers.
In my experience, people with a lot of exposure to the inorganic system are more likely to recognize the real possibility that they are wrong, and are more willing to admit their errors. It seems to be a reasonably good way of overcoming (or at least becoming aware of) one's own biases.
Several people have, at this point, already given you excellent, concise explanations of Caplan's work that apparently were not represented in his talk. With all due respect, I do not think you have made a similar effort in learning from them and formulating a response that articulates where and why you disagree. Please do so.
You may be correct that I'm not fully grasping Caplan's argument (and I've already committed to reading his book to clarify any misconceptions), but I don't intend this to only be a referendum on The Myth of the Rational Voter (you'll notice I said "what response would *you* advocate," not which Caplan would). Surely there are other valid reactions in addition to the one you outlined above. Does media literacy have no place in this discussion?
This best thing we can and should do is fight to leave as many decisions as possible to individuals.
http://www.villagevoice.com/news/0811,374064,37...
Bryan's argument (I've read the book but only once) is neatly summarized in his book - only about 5 bullets - would fit on one powerpoint slide.
Plebes have systematically inaccurate economic beliefs (when compared to economists) possibly hardwired as a result of our past as hunter-gatherers.
Plebes have little incentive to change their own beliefs. It is costly (in time and emotional certainty) to become an economist. Plebes who do educate themselves garner no benefit (only one more smart vote among zillions of idiots).
Bryan might say that we don't expect everyone to be a lawyer. We delegate that to courts. We can't expect everyone to be an economist, let's have a supreme court of economics to invalidate truly idiotic policies.
the only thing wrong with democracy is the demos.
how 'dat?
As best I can tell Caplan is just trying to work out a libertarian paradox, that they think masses are doing the right thing when it comes to markets and the wrong thing when it comes to government. It's only a relevant issue if you buy into two of the key tenets of the libertarian faith, that "markets" (or "the market") are good and that government is bad. If you don't believe both those things, ignore the fucker. Otherwise you're gonna be stuck in essentially a religious argument...
http://econlog.econlib.org/archives/2008/03/wis...
despite this alleged inconsistency having been resolved several times above on this very page. To repeat: voters bear none of the cost of irrational voting, while they bear the full cost of irrational market choices.
Who's wasting whose time here? I don't like sounding rude, but even more, I don't like people who claim to want to hear ideas and then ignore them.
I'd agree that governments tend to be inefficient, but I disagree with libertarians on two points. One I don't think the inefficiency is tied to being a government per se, but to the fact that governments are almost always bureaucracies. Governments tend to be larger, more entrenched and more tied to the land then other large bureaucracies like corporations, but they are prone to the exact same failures. Two, I'm not sure that inefficiency is always a bad thing, but in fact it might just provide a necessary degree of stability and slowness to the world...
As for markets being efficient..... Ha, for one you can look at Bear Sterns... Established markets in calm waters, yeah they are pretty efficient, but a quick look at economic history shows that markets are prone to all sorts of bubbles, panics and crashes that are as far from efficient as you can get. In addition there is a huge issue of survivor bias when looking at markets, yes markets that survive need to have a degree of efficiency, otherwise why should they exist? But the world is littered with failed markets and potential markets, that are not efficient at all.
The of course there is the whole issue that markets no matter how efficient they are, need governments to provide the stability they need to exist. Without governments market transactions get trumped by guns at every maneuver. Not exactly efficient is it?
Dan Wrote: "Also, how would you guys respond to commenter Abe's claim that there's an inconsistency between trusting non-experts in the marketplace but not in the voting booth?"
My response:
Dan, I posted a short reply to Abe on your blog. It all comes down to incentives. You may be surprised to hear this (and I'm not being sarcastic), but economists are generally pessimistic about how markets will perform when there are externalities (like, say pollution). In those cases markets are not predicted to be perfectly efficient. Same goes with markets with asymmetric information (like used cars, health care and plubming).
So economists are willing to grant that people will behave badly in markets under certain situations. (Economists are generally of the mind that people will behave badly whenever it is in their interest.) But the question isn't just "do markets fail?" The question is "do they fail worse than government addressing the same issue?" And in most cases the answer is no.
There is an enormous existing body of literature called Public Choice theory that explores government failure. Public Choice generally assumes that people are rational, but their desire for good economic policy is thwarted by lobbyists (in a nutshell), so we end up with bad policy. Caplan goes further and argues that voters are themselves irrational when it comes to abstract economic ideas, so we don't even need the lobbyists to screw up economic policy.
So back on topic, the asymmetry between behavior in the voting booth and in the market is that in the latter there are strong incentives not to be irrational. If you, as an individual, make systemmatically stupid decisions in the market, you will first go bankrupt, then go hungry. Since so much is on the line, people tend to wise up quickly. But you, as an individual, have virtually zero impact on what happens in government through your vote. So you have nothing to punish you individually for making stupid decisions at the voting booth. Hence, irrationality at the voting booth tends to persist, while in the market it tends to disappear (or at least shrink).
Caplan likes to draw the analogy with the theory of gravity and the theory of evolution. People who consistently reject the theory of gravity tend to be heavily punished by their own actions. People who consistently reject the theory of evolution suffer pretty much no ill effects as a result. Lo and behold, very few people reject the theory of gravity, and loads of them (in the U.S. at least) reject the theory of evolution.
I hope this comment is helpful (if a bit long).
Who would go to all this work? Following politics would be an 80-hour a week job.
More voices are good when those voices have incentives to provide good information (e.g., prediction markets). But if the uninformed and incorrect have the same incentives to share their information as the experts, you don't get good results.
Or put another way, who do you want designing airplanes and skyscrapers, professional engineers or voters? Do we vote on the aluminum alloys used in airframes? Why would we think "engineering" society would be any different?
(I don't mean to be arguing for any sort of aristocratic elitism here, I'm just trying to point out the differences in the decision making of market processes vs. democratic processes)
The main thrust of Caplan's book is that when it comes to economic policies, the uninformed are very systematically incorrect, so you won't get good results.
http://thenerfherder.blogspot.com/2008/03/wedding-to-test-wisdom-of-crowds-theory.html
Basic argument:
o The main argument against economists and their recommendations is that the economists are biased. (Self-serving based on economic and other conditions, indoctrinated based on previous economists.)
o Through some regression analysis comparing economists to non-economists, we can determine that they're not biased as charged.
So, absent any other evidence, we should conclude that they're (mostly) right.
Maybe you've noticed the problem here" Caplan says it himself (p. 81):
"If A and B disagree, there are three logical possibilities. The first is that A is right and B is wrong. The second is that A is wrong and B is right. The third is that both A and B are wrong. But we can rule out the possibility that both A and B are right." (He's talking about economists and non-economists here.)
Okay first, he doesn't mention an important case: what if A and B agree? What are the possibilities? They're both right or they're both wrong.
So of the five possibilities, ceteris parabus, the odds are:
Both right: 20%
One right: 40%
Both wrong: 40%
Allow me to address the latter case, which arises in the very first SAEE question, which asks (condensed) "here is a list of reasons for why is the economy not doing better than it is. Is each not a reason at all (0), a minor reason (1), or a major reason (2)?"
The first reason: "Taxes are too high."
Results:
Public 1.5
Economists .75
"Enlightened" public: .95
The Enlightened Public's answer lies between the economists' and the public's. According to Caplan, this means that "the truth lies somewhere in the middle."
Okay here's the problem: they're both wrong. (though the economists are significantly *less* wrong.) The consensus among economists who have studied the subject is that the level of taxation (and the size of government in general, for that matter), has no effect on long-term growth in developed countries. It's a myth.
http://trueconservative.typepad.com/trueconserv...
Why do the economists get this wrong, even though the literature is clear, extensive, and pretty much unopposed (by real economists)? Must be bias. Here's a great example, in one mighty impressive economist, Greg Mankiw:
http://trueconservative.typepad.com/trueconserv...
And that must mean--based on Caplan's analysis--that the whole society is biased to believe this thing.
It sort of casts a pall over the rest of the book.
for various criteria, popular
Do I really have to explain what a profoundly meaningless argument that is?
I see the problem with his argument as two fold:
1. Traditional economics is grounded in the assumption that humans make decisions that are rationally based, but most don't. I don't mean this in some condescending way; I mean it very literally. Only 30% of the world's population (but 50% of the people in power) have developed to a stage where they can access the tools of rationality. Before that stage is reached, people just simply haven't developed the capacity to use rationality as a tool. Before people develop the capacity for rational though, they rely mostly on mythic thought processes: religion, nationalism, 'moral majority' (40% pop; 30% power)... Of course, the people who developed economics are capable of rational thought and it seems 'rational' to them that other people would behave 'rationally,' since that's 'rational.' However, that's just not the case. An 'economics' based on religious or other mythic-membership decision-making would be a more true reflection of the way in which the majority of humanity makes decisions.
(This is more of a critique of economics broadly than his argument specifically.)
2. Now more to the specifics of his argument (I needed to lay that groundwork first). One of the main challenges that I see with relying on 'experts' is that they are most often aligned with majority thought. It seems to me that if you've managed to stick with academia long enough to become a certified 'expert,' then you most likely either agreed with their point of view to begin with, or you've been converted long ago. (Given, there are always some rebels inside of any institution, but they are generally few and far between because it is such a painful place to be if you have a different belief.) The challenge with believing non-experts is that it is hard to distinguish between the nuts and the visionaries (and sometimes they are the same people!) There are pre-majority beliefs and post-majority beliefs in circulation, and it can be challenging for the average Joe to tell the difference. So, it is probably 'safer' for them to get their facts from an expert. However, it you're looking for cutting edge, paradigm-changing ideas, than experts are the last place you want to look. If you are undertaking your own education, you have to be more vigilant about what you take in as truth. It requires a lot more work, but can be a lot more rewarding.
Thanks.