About Rationally Speaking

Rationally Speaking is a blog maintained by Prof. Massimo Pigliucci, a philosopher at the City University of New York. The blog reflects the Enlightenment figure Marquis de Condorcet's idea of what a public intellectual (yes, we know, that's such a bad word) ought to be: someone who devotes himself to "the tracking down of prejudices in the hiding places where priests, the schools, the government, and all long-established institutions had gathered and protected them." You're welcome. Please notice that the contents of this blog can be reprinted under the standard Creative Commons license.

Tuesday, August 07, 2007

Irrational voters and the alleged wisdom of market forces

This morning I had higher expectations than usual when listening to the Brian Lehrer Show on WNYC public radio in New York. Brian's show is one of the best talk shows in the nation, but today he had as one of his guests Bryan Caplan, associate professor of economics at George Mason University, and author of “The Myth of the Rational Voter: Why Democracies Choose Bad Policies.” My expectations were high because I wholly agree with a major thesis of the book (that voters tend to vote irrationally, and often not in their own self-interest), and because one of my favorite New York Times op-ed columnists, Nicholas Kristof (though we disagree from time to time) has called “The Myth of the Rational Voter” the “best political book this year.”

I was sorely disappointed. It turns out that Caplan is just another rabid libertarian who thinks that the markets' “invisible hand” has god-like wisdom, and that all our problems would be solved if only we agreed to stop thinking and let capitalism do its job (he was aggressively questioned on this by Brian Lehrer, thankfully).

First, credit where it's due. Caplan's contention that people often behave irrationally is in fact correct, and it is by now supported by plenty of psychological research. We tend to be affected by several biases in the way we evaluate information and situations (e.g., we overestimate the risk of catastrophic events like terrorism and earthquakes, while we grossly underestimate the chances of getting hurt by more mundane things, like smoking or driving a car). We are notoriously bad at assessing probabilities (which is why lotteries and casinos thrive more than ever), and most of us wouldn't recognize a logical fallacy if it smacked us straight between the eyes.

However, I'm not sure where Caplan gets the idea that there is in circulation a myth of the rational voter. Au contraire, Monsieur Caplan. It is painfully obvious that political ads and campaign strategies are constructed to mimic the modus operandi of the general advertising industry: if I want to sell you a car (or whatever), I'm not going to waste time by listing its superior technical characteristics; instead, I simply put a scantly dressed young woman (preferably blond, or at least blue-eyed) next to the car and voila`, you are duped!

Indeed, it is ironic that Caplan is an economist, as it is precisely in the field of economics that specialists have for decades been making the mistake of assuming that people are “rational [economic] agents” while, plainly, they are not. Economics is not quite a pseudoscience, but its ability to make reliable predictions is so abysmal that one wonders why we bother seeking the advice of economists over that of astrologers.

Moreover, and I have said this many times, so-called “free markets” (which don't actually exist, and never will) are not a panacea for society's problems. Caplan said on the Brian Lehrer show that he would abolish Medicare because, you know, the markets “know best.” Bullshit. Market economy works in a fashion similar to natural selection, i.e. with a lot of mayhem occurring before the “best” (economically, of course, not in terms of any other human value) emerges. Now, natural evolution has resulted in the extinction of 99.99% of species that ever existed. Are we sure that we want to leave our societies to the invisible hand of an equally wasteful process, blind to human needs and values? I don't know about you, but I'd rather go with some good old fashioned human irrationality.


  1. Indeed, it is ironic that Caplan is an economist, as it is precisely in the field of economics that specialists have for decades been making the mistake of assuming that people are “rational [economic] agents” while, plainly, they are not. Economics is not quite a pseudoscience, but its ability to make reliable predictions is so abysmal that one wonders why we bother seeking the advice of economists over that of astrologers.

    I have felt that way about economists for years now. I thought I was the only one. Thank you for validating my point of view :-) The other problem with economists is that they also assume people have all the information they need to make proper rational decisions in the first place.

  2. That is what Joe Stiglitz et al. won the Nobel Prize in economics for: Asymmetric information. "Stiglitz (and Greenwald) show that 'whenever markets are incomplete and /or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained Pareto efficient.' In other words, there almost always exists schemes of government intervention which can induce Pareto superior outcomes, thus making everyone better off." From http://en.wikipedia.org/wiki/Joseph_E._Stiglitz

  3. Hmm, do I see a contradiction there or what?

    First time I've heard of this Caplan guy, so forgive (and correct) me if I say something incorrect. But from what I've just read in Massimo's post, it seems like Caplan himself is not very rational himself to begin with...

    Let's see: voters are irrational. OK. But markets (which are, surprise, made of people "voting" with their money, let's say) are somehow great and can get the best out of any situation. Did I get his opinions right?

    If I did, how does he reconcile these two, contradictory things he is saying? I mean, if he does at all see this that way.

    Maybe the "god-like" Massimo put there was more than figurative speech?

  4. Those who proclaim that laissez-faire economics is "the" solution to all our problems, are full of "bullshit", to use Massimo's expression.

    The advocates complain about market restrictions while at the same time they clamor for government assistance, (corporate welfare). Oh, the hypocrisy. An example is the giant farm aid bill, which mostly benefits corporate farmers.

    And then there's the use of government restrictions by corporations, which lobby hard against their competitors. More hypocrisy. The drug companies lobbied hard to keep cheap Canadian drugs off the US market.
    Hardly free-market behavior.

    I'm afraid most economists are living in fantasy-land and know nothing of human nature. The corporate leaders don't really want a free market; they want complete control of the market. To them freedom is supremacy.

  5. I'm stunned. It is as if none of you, Massimo included, have even read an academic economics paper or have even the slightest clue of what academic economics is. Apparently your opinion of economics is informed entirely by a couple vocal libertarians (the vast majority of economists are not libertarians) and self-interested business lobbyists (who never even claimed to be economists). This is akin to using the writings of the most absurd evolutionary psychologist to judge the state of evolutionary biology in general.

    To correct M on a couple points:

    1) Economics is not a pseudoscience. Economics is (correctly) regarded as the "queen" of the social sciences because it is the most rigorous, quantitative, and rational. I would go so far as to say that it has as much explanatory power and is as predictive as the life sciences, but that is probably to vague to test in a meaningful way. That said, most economists regard the "law of unintended conquences" as the only general rule. But anyone familiar with evolution, ecology, psychology, etc. might make similar laments because of the complexity and historical nature of the subject matter.

    2) The connection M makes between economics and evolution is largely superficial and has generally only been advocated by social darwinists who misunderstood evolution as much as anything else. There is no justifcation for the connection as the basic models in the two fields share little to nothing in common. Compare a population genetics textbook to a microeconomics one if you don't believe me.

    M and others usually have brilliant things to say here, but you are all way off on this one, and I suggest taking serious measures to correct your ignorance. I am happy to point to some citations and journals for further reading, though I am no expert on the subject myself.

  6. Chris,

    I respect your opinion, but careful with the language, man. Briefly:

    1) I did not, in fact, say that economics is a pseudoscience. However, being quantitative is no guarantee of being a science. At the very least, as you point out, economics suffers from the same (severe) limitations as ecology, with the difference that economists have a lot more to say than ecologists on how we run society. I.e., equally questionable science, but much more power.

    1) I made an analogy, not a connection, between natural selection and Adam's invisible hand. It has nothing to do with social darwinism, and I never implied that. Moreover, I am actually in contact with economists in Europe who have been asking me for some time to collaborate on papers developing the analogy between the mechanisms (not the ethics) of economic and biological systems. See also Stuart Kauffman's work in this area.

    Lastly, my column was about Caplan's specific ideas, not as much about economics in general (though that subject certainly deserves much more commentary).


  7. M,

    Thanks for the clarifications (and I of course respect your opinion too), but suggesting that I should be careful about my language is a case of the pot calling the kettle black. I interpreted portions of your post to mean that 1) economics generally is little more than pseudoscience and 2) to reach efficiency, markets like natural selection, discard most of its participants. If I mischaracterized your views, I think I can be forgiven. You wrote:

    "Economics is not quite a pseudoscience...one wonders why we bother seeking the advice of economists over that of astrologers."

    It's reasonable to conclude from that statement that hold little more regard for all economists (you didn’t limit your statement to just Caplan) than you do for astrologers, yes? If so, there is a large body of literature that suggests otherwise. I stand by my point that you are misguided.

    You also wrote:

    "Are we sure that we want to leave our societies to the invisible hand of an equally wasteful process, blind to human needs and values?"

    As I said before, the most fundamental and most empirically well verified theories of microeconomics and natural selection bare superficial resemblance at best, so any deep connection is, as you seem to agree, unwarranted even if they share higher order models. That said, your analogy is, frankly, flawed. When an individual is unfit or a population fails to adapt it goes extinct. When a person loses their job or a firm goes out of business, the people involved don’t cease to exist. In fact, the vast majority in a mature market economy with relatively free labor markets find new jobs fairly soon and are no worse for the wear in the long run. Furthermore, unlike natural selection which has no agency, economic decisions, even in the free market, by definition respond respond to human needs and values. I agree that markets do not find optimal solutions in all cases (e.g. market failures for health care and climate change), which is why I'm not a libertarian.

    You also made a couple more dubious comments in your response:

    1) I did not mean to imply that simply being quantative makes economics scientific. Even Behe can make models, but they are as worthless as their assumptions. By contrast, the core assumptions of economic theory have been verified repeatedly. For example, models assuming rational consumers (which is really a set of multiple assumptions, similar to HW) explain reality reasonably well, though much economic research explores the consequences of when said assumptions are violated. That said, the rational consumer is a highly stylized construct and no economist actually believes that people are completely rational at all times, so it’s a straw man argument to suggest otherwise.

    2) “economics suffers from the same (severe) limitations as ecology, with the difference that economists have a lot more to say than ecologists on how we run society. I.e., equally questionable science, but much more power.” Do you mean to suggest that ecology is “not quite a pseudoscience,” barely above the level of astrology? If so, I, and probably many of the people in your department, disagree. That economics plays a greater role in politics is true, but the scope of its subject matter is more intimately related to political issues than ecology, so why wouldn’t it be? Furthermore, ESA, conservation organizations, and a plethora of ecological journals make policy recommendations all the time, many, but not enough, of which are recognized by important politicians.

    While your post was directed primarily at a single author, you made sweeping statements about an entire academic discipline that are wrong and betray a profound ignorance of the subject matter. I apologize if I have mischaracterized your opinion, but I think my interpretation is grounded in what you wrote. Your dismissal of economic opinion is no different than the laissez-faire types who think natural scientists and philosophers have nothing important to say about politics. As a respected public intellectual, you should know better.

  8. Chris,
    We're talking about libertarianism because said man, Caplan, is, to use Massimo's words, a "rabid libertarian who thinks that the markets' “invisible hand” has god-like wisdom." We know not all economists are libertarians. Look at my previous post. You said nothing of my post. I guess I "have [never] read an academic economics paper or have even the slightest clue of what academic economics is" too, right?

  9. mark,

    As I showed, Massimo's statements were not merely directed at libertarian economists, or if they were, he failed to make the distinction. Your post exemplifies why statements like "economics is not quite a pseudoscience" are wrong, as mainstream and widely read economists like Stiglitz use fundamental economic theory to contest the libertarian case. My apologies for writing a bit uncarefully and not recognizing your point. That said, Stiglitz is not god either, and like any active discipline, his ideas have not gone uncontested. As an aside, you might note that asymmetric information was not developed originally by Stiglitz, but by economists at Univ of Chicago, the hub of libertarian economics.

  10. Chris,

    One can make a distinction between a science and those who practice it. Economics is a science, for the most part, but many of those who practice it fail in their methods.

  11. anonymous,

    So economists use failed methods to arrive at a body of scientifically sound conclusions? That's curious...

    Perhaps what you mean to say is that economists have trouble balancing the descriptive and prescriptive. Many are good social scientists, describing phenomena well, but then overstep their expertise when they attempt to make policy prescriptions based on stylized models of human behavior, or fall into naive 'economism', trying to reduce everything to some economic principle. But maybe that is not what you meant at all.

  12. Chris,
    Ok. Thank you for the apology. You didn't have to.

    Could you clarify to us why economics is not a science? And remind us (and especially me) what makes something scientific. Is there more to science, in your view, than Popperian falsifiability?

  13. Chris,

    the "pot" speaking again :)

    Once more, my major intended target was in fact Caplan. However, I can see how some of my phrases could be taken to attack the field of economics at large. And then also ecology, to boot!

    The fact is that I am highly ambivalent about these matters. I honestly do think that both economics and ecology present serious problems if seen as hard-core sciences (I even wrote a technical paper about ecology and evolutionary biology in this context, a few years ago).

    But I also don't think that the world is divided simply between science and pseudoscience, which means that no, of course they are not like astrology. Nonetheless, one has to seriously ask why they cannot make a prediction worth much (they can't, really). That is, I think, because their subject matters are simply too complex for a model of science based on physics to work (too many interactions, toomany assumptions quickly become shaky, etc). Which means that both ecologists and economists should be very careful about what they say and what they advise people to do or not to do. Caplan certainly wasn't!

    And by the way, if economics at large has not been highjacked by libertarians, then the non-libertarians better speak out, because the general public is surely getting the wrong idea!

    Mark, I don't see falsificationism as particularly useful. It has been set aside in philosophy of science, and I wrote a short article on the matter in Skeptical Inquirer some time ago. Actually, I'm writing a whole book that takes Popper's "demarcation problem" between science and pseudoscience (and his answer, falsificationism) as the starting point for an exploration of the nature(s) of science.

  14. M,

    Kettle here :)

    Yes, I've read your paper on whether eco/evo are soft sciences - it actually was a major influence on my decision to start reading seriously about philosophy of science and philosophy in general.

    I don't have much more to say on the topic at hand, but let me close with two quick items:

    1) Your point is well taken, but I think you underestimate the predictive power of economists (and perhaps biologists as well), but that is an empirical matter best discussed over a couple beers rather than on an internet forum.

    2) As for 'non-libertarian' economics popularizers, check out Paul Krugman, Robert Solow, Joseph Stiglitz, Tim Harmon, Jagdeesh Bhagwati, just to name a few. Steven Levitt is an interesting politically neutral source. Good think tanks include the Brookings Institute and the Center for American Progress. It's worth reading the Chicago School people too - while I disagree with their politics, they aren't idiots. The quarterly Journal of Economic Perspectives presents peer-reviewed, but less technical papers and reviews on economic ideas applied relatively broadly. Of course, you will encounter a range of opinion in there. The Economist is a British magazine with a minor libertarian bias (they have also written an obituary for god), but they are very realistic and bring an international perspective.

    I agree that economics has a PR problem (I actually took my first econ class because I wanted to better understand why it was nonsense, but clearly changed my mind). But as any evolutionary biologist knows, public image may bear little resemblance to the actual field.

  15. Massimo,
    Falsificationism is all I hear about and I was surprised to hear somewhere else that it wasn't all that big. I can't wait for the book! Will it be too technical for the common science enthusiast?

  16. Chris,

    looking forward to that beer...


    the book I'm writing is meant for the general public, and it should be available in major bookstores. Of course, I've got to finish it first (by contract, July '08...).

    Meanwhile, my SI article on falsificationism appeared in the May/June '04 issue, and you can download it here:


  17. Massimo,
    Great! Thanks for the link!

  18. Chris,

    Thanks for the posts. I think the quality of your comments enhance the blog.

  19. You are right to be skeptical. (And I posted the very same objection to the existence of "free markets")... but you should read the book... it's a great example of just how badly a theoretician can be unhinged from reality. Caplan’s book is full of illogical and contradictory arguments, mangled terms, cultural prejudice, and a whole lot of other weaknesses. It’s also pretty scary when you really think about what he is arguing for. Like a lot of cloistered academics, he’s hermetically sealed inside his own thinking and theories, and totally unhinged from the real world... past and present. I won’t recap the whole list of objections here... but it’s on my site. (literalmayhem.com)


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