Comments on a excellent inteview

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George Masons Bryan Caplan is probably my favorite economist outside of Chicago, mainly because of his fantastic theories on �rational irrationality�. He and Alex Tabarrok are interviewed today by the WSJ-blog. A few remarks:

1. Tabarrok jokingly suggest the 1995 "War Politics" paper (presidents with bad economy go to war in order to win elections) predicts the Iraq war. The theory has discretionary war as a way to signal skill to voters. But Bush had already demonstrated his skill as a wartime president with great success against the Taliban.

2. In my view Caplan is exaggerating irrationality by defining it overly narrow (a little odd, since he gets it right in his papers). First of all he argues that the jump in trust in government post 9/11 is a sign of irrational voters. When asked before 9/11 �do you trust government� people associate government with the prioritized activities at the time, health care, taxes etc. So only 22% of Conservative Republican answer they trust the government. After 9/11 if you ask someone the same question of course they will give an answer given the most important current priority, killing terrorist.

So it seems natural that +53% of Conservative Republicans now say yes. For Liberal Democrats, who presumably had less preference for bombing Al-Quaida, the jump was only +11%. If you had asked Republicans the same week �do you support socialized health care� I bet support had not gone up, if anything it has gone down by more focuse on the core duties of the State.

3. Caplan is completely right when he questions the ration choice models of politics. His irrational belief story is much more likely to explain public support for protectionism than say special interests. But he is barking up the wrong tree when he goes after Gary Becker.

The reason Becker applies rationality to so many areas with such great success is that he has a broad definition of rationality (maximizing given preferences). For example Becker has very elegant models of �self deception�. Now according to the narrow definition this is irrational, but is consistent with broad rationality, do it if it can make you happier.

This is similar to how I interpret Caplans �rational irrationality�: choicing to believe in something that is not necessarily true as a form of consumption. Since the cost of having crazy ideas is very low to each individual in the political system in the this may well be individually rational.

Becker and Mulligan also solve the (narrow) rational choice voting paradox with (broad) rational choice. People vote because they get utility from voting, not because they think their vote matters.

The same for rallying around the flag. People have some altruism towards their extended tribe - the nation state - hardwired into their preferences. Such norms may not be narrowly rational (robots might not have patriotic feelings) but they are very efficient way to solve collection action problems, s.a national unity in times of war.

4. I am not convinced of intelligent people being more rational in politics. At least the variability seems to go up a lot with IQ. There are far more convinced Marxists and Deconstructionists with high IQ than low ones. America�s universities are their strongest bastion of the same socialist fallacies Caplan defines as rational irrationality. There have been many attempts to explain this. Hayek and Nozick both have good theories.

I personally also think smart people gravitate towards leftist ideas for the same reasons cultured people like old French movies or Finnegans Wake: consuming the inaccessible is a form of social signaling. Market liberalism is just too simple, even Joe Twelve pack could read and understand Free to Choice, just like anyone can like The Godfather. But it takes a high level of abstraction to (bear to) read Marx or Foucault.

In reality Marx is inaccessible because it is illogical and incoherent, but that will not matter as the costs of inaccurate ideas is near zero to any one individual. Signaling sophistication thus leads to costly behavior.

5 Comments

When did Joe Sixpack change his name to Joe Twelvepack? Or was there a sale on beer at the store?

Speaking of Becker, preferences, etc. - here is a little paper on psychometrics and preferences that was at least a bit interesting:

http://www.gmu.edu/departments/economics/bcaplan/bsmb2.doc

You are a very smart blogger, especially point #2. I am subscribing based just on your posts from today and yesterday. And you give good link; that article by Robert Nozick explains so much about my attitude toward capitalism and does some good intellectual bashing.

The biggest problem I have with Caplan is that he seems to put so much weight on surveys, as if they are useful for telling you beliefs of the public. There are just too many problems with them. Between revealed v. stated preference and signaling problems, surveys seem to be almost entirely useless.

Somebody can tell you how they don't like free trade, but why do they keep buying at Wal-Mart and why do free traders keep winning elections? Or like in Oregon how surveys revealed strong support for universal health care, but when drafted and brought to a referendum, it lost 2-to-1.

It is just so hard to take anything that he writes seriously when his evidence is some survey.

Joe Twelvepack is a Simpson�s joke, I liked the sound of it.

Caplan does use survey results, but surveys are not useless. There is no reason why people should on average give stupid answers on surveys if they know the true one.

Free traders do not always win, 44% of Senators voted no to no-brainer today.

The fact that anti-traders buy at Wal-Mart perfectly illustrates Caplans and similar scholars point: The cost of being irrational is much higher in the private sector than the political market (where your opinion doesn�t matter anyway).

Thank you Noumenon for the compliment, I am just starting now so possitive feedback is great.

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