Major Actors in a Liberal Democracy
Voters express preferences through elections
Special interest groups provide additional information and advocacy for lawmaking
Politicians create laws reflecting voter and interest gorup preferences
Bureaucrats implement laws according to goals set by politicians
Two Questions for the Next Few Weeks
What incentives does each group face?
- How is this affected by the institutions we set up?
How does this explain policy and behavior we see in the real world?
Voters in a Liberal Democracy
Voters express preferences through elections
Voters as economic agents:
Choose: < a candidate >
In order to maximize: < utility >
Subject to: < constraints? >
Constraints of Voting: An Inconvenience Store
Bundle "D"
Bundle "R"
Recall the spatial model of voting:
- Each candidate represents a bundle of policy positions
- Voters vote for candidate closest to their ideal point
Suppose "D" wins
- Can we say that voters prefer eggs ≻ sausage?
Constraints of Voting: An Inconvenience Store
Bundle "D"
Bundle "R"
- Recall the spatial model of voting:
- Each candidate represents a bundle of policy positions
- Voters vote for candidate closest to their ideal point
The Collective Action Problem of Democracy
Citizens vote in politicians to enact various laws that citizens prefer -- and vote politicians out of office if they fail to deliver
A collective action problem: citizens need to monitor the performance of politicians and bureaucrats to ensure government serves voters' interests
The Collective Action Problem of Democracy
Voting is instrumental in enacting voters' preferences into policy
Good governance is a public good: an individual citizen enjoys small fraction of benefit created
Additionally, policies & elections depend on many millions of people
Individual bears a private cost of informing self and participating
Hence, a free-rider problem
The Rational Calculus of Voting
A rational individual will vote iff: p(B)+W>C
B: perceived net benefits of candidate X over Y
- p: probability individual vote will affect the outcome of the election
- W: individual's utility derived from voting regardless of the outcome (e.g. civic duty, "warm glow," etc)
- C: marginal cost of voting
The Rational Calculus of Voting
- A rational individual will vote iff:
p(B)+W>C
p≈0
- Outcome requires many votes
B is a public good
- Get small fraction of total benefit
C>0
- Cost of informing oneself and voting informed
The Rational Calculus of Voting
A rational individual will vote iff: p(B)+W>C
If citizens are purely rational, W=0
Citizens then vote if p(B)>C
Prediction: rational citizen does not vote
The Rational Calculus of Voting
A rational individual will vote iff: p(B)+W>C
Now suppose, D>0
Citizens then vote if D>C
More importantly, the voter votes regardless of the positions of the candidates!
Vote for non-rational reasons: "more presidential looking," "taller," "a better temperament," etc.
The Rational Calculus of Voting
Many do vote, even at significant personal cost!
"Expressive voting": people vote to express identity, solidarity, tribalism, preferences, etc
Voting as a pure consumption good, not an instrumental investment to achieve policy preferences
Rational Ignorance
Model predicts rational ignorance
Not necessarily no voting, but
- Less than maximum turnout
- Voting not for instrumental, "rational" reasons, but for non-rational reasons
Rational Ignorance
Winston Churchill
1874-1965
"The best argument against democracy is a five minute conversation with the average voter."
Rational Ignorance
Somin, Ilya, 2014, Democracy and Political Ignorance
Rational Ignorance
Somin, Ilya, 2014, Democracy and Political Ignorance
The Miracle of Aggregation
Miracle of Aggregation: under the right conditions, large groups can pick reach the optimal outcome, even if each individual is unlikely to choose the optimal outcome
The Miracle of Aggregation
Miracle of Aggregation: under the right conditions, large groups can pick reach the optimal outcome, even if each individual is unlikely to choose the optimal outcome
The Miracle of Aggregation
Some basic statistics of sampling:
- Central Limit Theorem: With large enough n, distribution of outcomes is approximately normal
- Extreme "errors" on either side of the mean cancel out such that the sample mean is, on average, an unbiased estimator of the truth
The Miracle of Aggregation
If there are systematic biases, or individuals are all likely to be wrong in the same way, the mean is no longer unbiased!
The Miracle of Aggregation: Juries
Why do we have trial by jury instead of an expert judge decide most cases?
The Miracle of Aggregation: Juries
- Suppose an expert judge is correct 90% of the time
Pr(J=Wrong)=0.10
The Miracle of Aggregation: Juries
Suppose an expert judge is correct 90% of the time Pr(J=Wrong)=0.10
Suppose each individual juror, i, is no better than random Pr(i=Wrong)=0.50
The Miracle of Aggregation: Juries
Suppose an expert judge is correct 90% of the time Pr(J=Wrong)=0.10
Suppose each individual juror, i, is no better than random Pr(i=Wrong)=0.50
Pr(All i=Wrong)=n∏i=10.50=0.5012=0.0002
The Miracle of Aggregation: Juries
- The decision rule for criminal cases at common law is unanimous consent of a jury beyond a reasonable doubt
- Minimize external costs of false conviction of innocents
Pr(All i=wrong)<Pr(J=wrong)
Condorcet Jury Theorem
Marquis of Condorcet
1743--1794
Suppose there is a correct outcome (e.g. innocent or guilty) and a group wishes to reach a decision by majority rule
Each voter has an independent probability pi of voting for the correct decision
How many voters should we include in the group?
M. Le Marquis de Condorcet, Essai Sur L'Application de L'Analyse a la Probabilite des Decisions Rendues a la pluralite des voix
Condorcet Jury Theorem
Marquis of Condorcet
1743--1794
Condorcet Jury Theorem: if pi>0.50, then as n→∞, p(Correct)→1
- Adding more voters increases the probability of the correct outcome
Note: if pi<0.50, adding more voters decreases the probability of the correct outcome!
- Optimal jury consists of n=1
M. Le Marquis de Condorcet, Essai Sur L'Application de L'Analyse a la Probabilite des Decisions Rendues a la pluralite des voix
The Miracle of Aggregation and MVT
Applied to mass election:
Even if individual voters are rationally ignorant, individual votes on either side of optimum cancel out
Socially optimum policy remains at the median, and is thus, the winning policy enacted
The Miracle of Aggregation and MVT
Applied to mass election:
Even if individual voters are rationally ignorant, individual votes on either side of optimum cancel out
Socially optimum policy remains at the median, and is thus, the winning policy enacted
...so long as there are not systematic biases
The Miracle of Aggregation and MVT
- If there are systematic biases, the median (winning) policy platform will not be the socially optimal policy
Systematically-Biased Beliefs
People do have systematically biased beliefs?
Caplan:
- Anti-market bias
- Anti-foreign bias
- Make-work bias
- Pessimistic bias
Systematically-Biased Beliefs
Think about your own experience taking economics classes!
They probably have disabused you of some things you thought before taking them!
Rational Irrationality
Bryan Caplan
1971-
Irrationality is a consumption good that protects our comforting beliefs from reality or scrutiny
Many biases are costly to indulge: anti-vaxx, faith healing, quack medicine, etc
- have to face tradeoffs between maintaining belief and suffering a cost
Rational Irrationality
Bryan Caplan
1971-
Caplan, Bryan, 2001, "Rational Ignorance versus Rational Irrationality," Kyklos 54: 3-26
Rational Irrationality
Bryan Caplan
1971-
But in many areas (politics, religion, astrology), the "cost" of irrationality is zero!
Irrationality in politics: beliefs that are non-falsifiable, false, or biased
Voting often signals an identity and membership in a particular tribe (ideology, identity politics, etc)
Having your biases questioned is painful!!
Caplan, Bryan, 2007, The Myth of the Rational Voter
Rational Irrationality: Implications
Bryan Caplan
1971-
It's rational for individuals to maintain irrational (objectively wrong) beliefs about politics
Actual policies are not necessarily bad because of corruption, special interests, backroom deals, etc
Voters might be getting exactly what they want!
- "The median voter is a moderate National Socialist"
Caplan, Bryan, 2007, The Myth of the Rational Voter
Rational Irrationality: Implications
H.L. Mencken
1880-1956
"Democracy is the theory that the common people know what they want, and deserve to get it good and hard."
Mencken, H. L, 1926, Notes on Democracy