The myth of the rational voter

Setanta wrote:

OCCOM BILL wrote:
You seem to have forgotten about the one candidate in recent history, that told the truth as he saw it.

Nonsense. I worked hard for the one candidate i've seen in my lifetime who not only spoke the truth as he saw it, but offered a rational plan to deal with the substantial economic woes of his time, and predicted the likely consequences of the plan offered by Reagan--and his name was John Anderson.

Perot lived in fantasy land. Having enriched himself at the expense of the taxpayer, he ran two imperial Presidential campaigns, with a "Party" organization which he expected to behave like robots and parrots, and offered no more realistic bromides that were offered by the other other candidates, who might reasonably have been said to be at least as sincere as he was.

Ross Perot was an American Icon, who earned his wealth himself, living the American Dream. He remains the only politician ever to have the balls to face the Dept created before 92, (a figure unheard of before then), with a plan that would actually eliminate it in a reasonable period of time. "Is it going to hurt? Well sure it is... but it's work that needs to be done." I have never seen a candidate that could match his integrity. Sorry for the derailment, Joe... I'll stop there.

Strangely; I find myself agreeing with Chumly completely on this. An internet based, direct replacement for the crooks we call Congressmen would be wonderful.

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"I got this graph right here and if you will just follow the blue line you will see that the world ended in 1887"

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Re: The myth of the rational voter

Thomas wrote:

Because dollar votes, unlike ballot votes, give voters feedback about the rationality of their vote, as well as an incentive to act on this feedback.

Not necessarily. If everyone in the marketplace is making the same error, then the participants in the market may be making money even though they're not making rational decisions. A market may be efficient even though it is not rational, so long as most everyone is alike in their irrationality.

Caplan argues not just that a lot of people don't understand economics, but that the vast majority of people don't understand economics, and that this common irrationality "skews the average" in terms of political issues. It isn't hard to imagine that a similar "skewing" would take place in the market as well.

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The efficient market hypothesis is not a pretext for the argument that people do not have albity to discern the better value.

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Re: The myth of the rational voter

joefromchicago wrote:

Not necessarily. If everyone in the marketplace is making the same error,]then the participants in the market may be making money even though they're not making rational decisions.

Caplan is a libertarian economist. He doesn't regard error-making as a constant that institutions have to be built around. Instead, he regards it as a function of the incentives people are facing and responding to. Give people stronger incentives to be more rational, and they will be. Hence, Caplan prefers markets over democracy because the markets encourage individuals to behave rationally while democracy doesn't. If I buy a car ignorantly (or with predictable biases), I end up with a car I don't want. Knowing that encourages me to avert the problem by informing myself and compensating for my biases. By contrast, if I vote ignorantly (or with predictable biases), it has almost no effect on what government I get. So I have no incentive to improve either my ignorance or my irrationality.

joefromchicago wrote:

Caplan argues not just that a lot of people don't understand economics, but that the vast majority of people don't understand economics, and that this common irrationality "skews the average" in terms of political issues. It isn't hard to imagine that a similar "skewing" would take place in the market as well.

I don't think Caplan would deny that. He would answer that in a market, people don't have to understand economics. This knowledge is only important in a democracy, where my vote on economic policy affects the economic system you live under, and vice versa. In a market, this knowledge is secondary. I buy the goods that I want, thereby casting a dollar vote for their producers. You buy the goods that you want, thereby casting a dollar vote for their producers. None of us has to know anything about economics. We only have to know something about our own budgets and our own preferences on spending them. And these are much easier for us to understand than economic policy in a democracy.

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joefromchicago wrote:

fishin wrote:
People don't vote for protectionism because they like the idea. They vote "irrationally" (at least according to him) because they don't trust that other countries are going to do the same and they have no interest in bearing the economic brunt of it while the economists hold their collective breath waitng for everyone else in the world to become rational.

I find this incredibly difficult to believe. I have never -- and I mean never -- heard anyone say that he or she thought protectionism was bad economic policy, but supported it nevertheless because other nations also adopted protectionist measures. The politicians who criticize NAFTA (mostly Democrats), for instance, aren't complaining about Mexico and Canada adopting protectionist trade policies -- after all, NAFTA eliminated a lot of those trade barriers.

You find it difficult to believe? You should go back and reread the 2004 Democratic Party Platform then.

The issue of trust isn't limited to other nations adopting new protectionist measures - in fact I didn't even consider that in forming my response. It does however, include other nations not applying the free trade agreements in the same manner we do. The Canadian lumber issue is one item that sticks out prominently but other issues such as chld and slave labor, environmental concerns in manufacturing, etc... are issues where people who have recognized free trade as beneficial have balked at supporting free trade anyway.

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The argument about the market determining more realistically what people need is pointless for two reasons: the first is that democracy is predicated upon what people want, without reference to whether or not it is what they putatively need; the second is that people don't vote based on the efficacy of economic policy, but what they have been convinced would be a good idea, and usually without regard to any apparent logic. The divide between Anderson and Reagan is a case in point. Anderson advocated raising taxes, reducing spending, paying down the debt (which would reduce the cost of financing the debt) and a complete overhaul of the system of government contracting, especially in defense. Reagan appealed to propagandistic issues dear to the hearts of his World War II generation, and greed. He advocated increased defense spending, although the principle benefit of that would accrue to a small sector of the population with capital deployed in the related industries; and he called for lowering taxes, which was a blatant appeal to greed--and as is usually the case, the tax cuts benefited those least in need of it; and finally, he called for the elimination of government regulation, and practiced union-busting. This brought the securities markets to a fever pitch they had never known. But the benefits don't trickle down, and while a "go-go Wall Street" reached undreamed of heights, hard-working people all over the country found themselves out of work, and many of them homeless.

As Joe has pointed out, people could as easily respond to market forces, prominent among which are advertising, and appeals to conspicuous consumerism, without actually making rational choices. Thomas may buy his automobile, and be satisfied that it is comfortable and high-performance, without recognizing that he could get a car just as comfortable and just as fast for less money, and one which is more fuel efficient and in need of less maintenance, saving him money in the long run. Although it may be different in Germany, in the United States, the auto industry long successfully appealed to conspicuous consumerism, and people could hardly have taken a lesson in rational decision from the market if they had no notion that they could have had a better car for less money, and less expensive to operate and maintain.

A healthy economy could be measured in many ways. That there is constant economic growth, and continually increasing capital evaluation of securities will not mean much if large sections of the population are impoverished in the process. After all, a clothing retailer who gets cheap clothing from Central America and the Pacific Rim could be making money hand over fist, while the textile workers of the American South line up for unemployment benefits.

There is an awful lot of the deployment of vague platitudes in the rhetoric of "libertarian economists" which is predicated upon an assumption that capitalism has a natural right to expand in just about any way that does not result from outright criminality, and that people are somehow deprived of their freedom if their economic activities are regulated. This ignores that the social contract can operate efficiently and effectively on a principle that the people have the right in a democracy to curtail the greed of individuals. Nothing in the United States Constitution, for examples, guarantees individuals freedom from regulation in their public activities directed toward personal gain.

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Re: The myth of the rational voter

Thomas wrote:

Caplan is a libertarian economist. He doesn't regard error-making as a constant that institutions have to be built around. Instead, he regards it as a function of the incentives people are facing and responding to. Give people stronger incentives to be more rational, and they will be.

No doubt that's true. Caplan's article, however, doesn't really go into any detail as to how market mechanisms would replace political institutions -- perhaps that's another unstated libertarian assumption. I remain skeptical that the market can really provide an adequate substitute for democracy, but I suppose anything's possible.

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fishin wrote:

You find it difficult to believe? You should go back and reread the 2004 Democratic Party Platform then.

That assumes that I've read it before.

But a quick glance at the 2004 Democratic Party Platform shows that the Democrats didn't come out in favor of protectionism as some sort of faute de mieux solution that was only advocated because they couldn't trust other countries to adopt free trade policies. Indeed, the platform advocates both free trade and protectionism -- an inconsistency consistent with the inconsistent Democratic position on trade.

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Re: The myth of the rational voter

joefromchicago wrote:

Caplan's article, however, doesn't really go into any detail as to how market mechanisms would replace political institutions -- perhaps that's another unstated libertarian assumption.

That's a fair criticism of the article. Preaching to the choir, Caplan apparently succumbed to a common temptation and built his argument on a false choice: It's either existing institutions or my institutions. Existing institutions are bad, so we have to go with mine. I don't have to prove that my institutions work better.

It gives me no pleasure to say this about a fellow libertarian, but in this article, Caplan's reasoning embarrassingly resembles a common creationist shtick: `Life is either the creation of an intelligent designer or it's just an accident. It's clearly not an accident, so the intelligent designer it is. QED.' Friedrich Hayek and James Buchanan would both have written a much better version of this article.

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OGIONIK wrote:

democracy is the same as any other form of government. It fails because of human greed. Greed is the reason no government will ever be "perfect"

Human greed is the reason capitalism succeeds.

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The simplistic essence of capitalism (to use resources to make resources) does not necessarily in and of itself infer greed.

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It is always easy to refute someone else's argument if you are willing to simply make up your own definitions for a term.

[url=http://www.answers.com/topic/capitalism][b]Answers-dot-com[/b][/url] wrote:

cap·i·tal·ism n.

An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

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Sure but forms of capitalism were around long before the formal delineations as expressed in that rather more modern definition, which is precisely why I made reference to "The simplistic essence of capitalism" something I note your formal rather more modern definition does not make reference to.

I also note your formal rather more modern definition does not make reference to greed, so your point is rather moot on that count also.

I'll also point out that "development" need not be "proportionate to the accumulation and reinvestment of profits gained in a free market" due to many variables. Not the least of which is the fact that there is no real-world equivalent to a true free market, it is a textbook idealization, and not the least of which is irrationality ("inefficient" for those that like the Efficient Market Hypothesis) driving expectations which can push circumstances higher or lower than what "development" would appear to dictate in terms of being "proportionate to the accumulation and reinvestment of profits gained in a free market".

An irony (I say with a bit of tongue in cheek) is that that modern capitalism (remember Eorl claims "Human greed is the reason capitalism succeeds") often raises capital through public means, and the profit sharing and collective company ownership from such endeavors can to some reasonable degree be argued to be the antithesis of greed (which would infer hoarding).

Sorry gotta go, my mom in law has gone to the hospital, sad days may be ahead Sad

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Chumly wrote:

Sure but forms of capitalism were around long before the formal delineations as expressed in that rather more modern definition, which is precisely why I made reference to "The simplistic essence of capitalism" something I note your formal rather more modern definition does not make reference to.

That's because your definition bears no resemblance to the reality of capitalism.

Quote:

I also note your formal rather more modern definition does not make reference to greed, so your point is rather moot on that count also.

It does, however, refer to profit--and the desire for profit can be and often is greed. Those who define capitalism as motivated by greed are much closer to a plausible definition of capitalism than is a contention of "using resources to make resources" which is so broad, which describes very nearly every human activity to eat, shelter, reproduce and survive as to render the term meaningless.

When Indians began trading with Hudson's Bay Company at York Factory on Hudson's Bay, they could get an HBC musket, a cleaning kit, five pounds of lead and a bullet mold, and a five pound keg of black powder for 23 made beaver pelts. The first HBC employee to penetrate into the Rocky Mountains in what is today Idaho, a young coureur du bois and one the few Frenchmen employed by the company in those days, found that the same musket, and the musket alone, no lead, no bullet mold, no powder--traded for 200 made beaver pelts. (Source: the Canadian historian, Peter Newman, Empire of the Bay: The Company of Adventurers that Seized a Continent, Penguin, London & Montreal, 1987.) There are numerous other such incidents which demonstrate that even the most "primitive" humans understand and practice capitalism. It doesn't need a "contemporary" definition to authorize a description of capitalism as motivated by greed.

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Yep.

What I'm suggesting is that basic human nature and capitalism work well together ...much more than, say, communism with which "greed" is less compatible and therefore requires much more effort to maintain.

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Eorl wrote:

Yep.

What I'm suggesting is that basic human nature and capitalism work well together ...much more than, say, communism with which "greed" is less compatible and therefore requires much more effort to maintain.

You know, it it interesting that in the 1920s and -30s, when the then new Soviet Union was establishing an aircraft industry for military and civilian purposes, but primarily for military purposes, someone determined that there should be competing design bureaus established. These bureaus were named for the lead designer--"Il" stands for Ilyushin, "Yak" stands for Yakovlev, "MiG" stands for Mikoyan and Gurevich. Some, but not all, of the design bureaus were affiliated with the factories which manufactured the aircraft--but whether or not, resources were allocated based upon the perceived quality of the aircraft design. So, you wouldn't be getting more resources in order to design, build and test new designs, unless your previous designs had been good enough to warrant production. The basic concept is capitalistic greed--you won't get prestige, a good salary and the opportunity to pursue your chosen avocation unless you excel. You won't get what you want unless your product is popular with the buyer.

The principle distinction was that your buyer in that case was the Soviet government, rather than private consumers. But the principle was the same.

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Setanta wrote:

That's because your definition bears no resemblance to the reality of capitalism.

Are you claiming to be the arbiter of the "the reality of capitalism"? If so I find such a claim rather dubious and it reminds of me of 'theory following the fact', a somewhat specious undertaking I see quite commonly in formalized descriptions of economic models. Yes I stand by my claim that "The simplistic essence of capitalism (to use resources to make resources) does not necessarily in and of itself infer greed."

Setanta wrote:

It does, however, refer to profit--and the desire for profit can be and often is greed.

I point out as discussed "that modern capitalism often raises capital through public means, and the profit sharing and collective company ownership from such endeavors can to some reasonable degree be argued to be the antithesis of greed (which would infer hoarding)."

Setanta wrote:

Those who define capitalism as motivated by greed are much closer to a plausible definition of capitalism than is a contention of "using resources to make resources"

I did not as you claim "define capitalism" as "using resources to make resources" I said "The simplistic essence of capitalism (to use resources to make resources) does not necessarily in and of itself infer greed."

And again I note questionable aspects in your modern definition to wit: that "development" need not be "proportionate to the accumulation and reinvestment of profits gained in a free market" due to many variables. Not the least of which is the fact that there is no real-world equivalent to a true free market, it is a textbook idealization, and not the least of which is irrationality ("inefficient" for those that like the Efficient Market Hypothesis) driving expectations which can push circumstances higher or lower than what "development" would appear to dictate in terms of being "proportionate to the accumulation and reinvestment of profits gained in a free market".

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Eorl wrote:

What I'm suggesting is that basic human nature and capitalism work well together ...much more than, say, communism with which "greed" is less compatible and therefore requires much more effort to maintain.

Looks like you would need to define greed in the terms you refer to as if you are to equate it to hoarding I would take certain exceptions. As discussed "modern capitalism often raises capital through public means, and the profit sharing and collective company ownership from such endeavors can to some reasonable degree be argued to be the antithesis of greed (which would infer hoarding)."

As far as your contention that greed is less compatible with communism can you provide any consequential larger-scale real-world examples whereby communism moderated greed? I am not convinced communism can moderate greed on that basis.

I suggest human nature supersedes / thwarts naive economic models and political idealizations, both of which are more 'theory following the fact' than fact per se.

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Chumly wrote:

Are you claiming to be the arbiter of the "the reality of capitalism"? If so I find such a claim rather dubious and it reminds of me of 'theory following the fact', a somewhat specious undertaking I see quite commonly in formalized descriptions of economic models. Yes I stand by my claim that "The simplistic essence of capitalism (to use resources to make resources) does not necessarily in and of itself infer greed."

Not at all. I provided a definition from an external, reliable source, which doesn't involve the simplistic statement you are continuing to make about "resources used to make resources"--which is, as i say, so vague and broad as to be meaningless. It appears that in insisting upon your idiosyncratic defintion, without appeal to an external and reliable authority for a defintion, it is you who claim to be the "arbiter of the reality of capitalism."

Setanta wrote:

I point out as discussed "that modern capitalism often raises capital through public means, and the profit sharing and collective company ownership from such endeavors can to some reasonable degree be argued to be the antithesis of greed (which would infer hoarding)."

You don't provide any examples of this however. If by public means you mean governmental financial resources, that simply means that government participating in capital venture. If you mean by that joint stock ventures, that is simply collective capitalism. Why should the few and rare examples of collective company ownership and the therefore obligatory profit sharing exempt the joint owners from a charge of "greed?" Not only is it not the antithesis of greed, is provides an example of collective greed--unless you somehow allege that the collective owners would not want to prosper and increase their profits.

[url=http://www.answers.com/topic/greed][b]Answers-dot-com[/b][/url] wrote:

greed n.

An excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth: "Many . . . attach to competition the stigma of selfish greed" (Henry Fawcett).

That site uses the American Heritage Dictionary as a source. It lists greed as a back formation from greedy:

[url=http://www.answers.com/topic/greedy][b]Answers-dot-com[/b][/url] wrote:

greed·y adj.

1. Excessively desirous of acquiring or possessing, especially wishing to possess more than what one needs or deserves.
2. Wanting to eat or drink more than one can reasonably consume; gluttonous.
3. Extremely eager or desirous: greedy for the opportunity to prove their ability.

So, now we have working definitions not only for capitalism (other than what you want to claim capitalism means, and from a reputable, external source), but also for greed and greedy. Greed may sometimes motivate someone who hoards--but greed doesn't automatically "infer" hoarding. In fact, if you look at the second definition of greedy above, far from hoarding, that describes someone who conspicuously consumes, not someone who hoards.

Quote:

I did not as you claim "define capitalism" as "using resources to make resources" I said "The simplistic essence of capitalism (to use resources to make resources) does not necessarily in and of itself infer greed."

You need to look up the verb infer, you're consistently using it when the verb you want is imply. Just what the hell is "to use resources to make resources" supposed to mean--are you trying to say that i'm wrong unless i use the infinitive form, "to use," and that i've fatally slain your meaning if i use the present participle, "using?" Your objection is meaningless. Just because you assert that that is "the simplistic essence of capitalism" does not make it so--it just shows that you are making an assertion, and what is more, an assertion for which you provide no evidence. It may surprise you to know that i don't consider you to be an oracular source on the meaning of words. For my part, i've provided defintions from a reliable external source, which you seem intent on ignoring, because they don't support your argument.

Quote:

And again I note questionable aspects in your modern definition to wit: that "development" need not be "proportionate to the accumulation and reinvestment of profits gained in a free market" due to many variables. Not the least of which is the fact that there is no real-world equivalent to a true free market, it is a textbook idealization, and not the least of which is irrationality ("inefficient" for those that like the Efficient Market Hypothesis) driving expectations which can push circumstances higher or lower than what "development" would appear to dictate in terms of being "proportionate to the accumulation and reinvestment of profits gained in a free market".

None of that serves to found your so-far-unfounded claim that capitalism is, in essence, using resources to make resources. Frankly, i consider your claim to be less founded in reality than anything that Eorl or i have written.

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The myth of the rational voter

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