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Tilting at Windmills

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May 26, 2007
By: Kevin Drum

ON BEING RATIONAL....In The Myth of the Rational Voter, Bryan Caplan argues that although people are rational in the marketplace (which is a good thing, since this assumption is required to make classical economics work), they become foolish and incoherent when they step into the voting booth. Chris Hayes lays it out:

The idea is this: People are rational when they pay for the consequences of their decisions. But in elections, the odds of your vote determining a given election are so slim that the price of voting your irrational whims is nil. This gives people the freedom to indulge delusional notions about the economy. And that results in a populace who are capitalists in the market place and socialists in the voting booth.

Needless to say, Caplan thinks we're at our best in the former case and quotes legendary economist Joseph Schumpeter to describe the latter: "[T]he typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. He becomes a primitive again."

There's way too much to unpack here for a single blog post, but allow me to make one wee point: there's a distinction between "rational" and "good," and most of us know it when we see it. Thomas Jefferson, for example, kept slaves because it was, after all, a rational thing to do. He needed the money his slaves brought in and he was too weak-willed to forego that money and free them. However, he also argued that slavery was wrong and should be banned — a position that's usually presented as an unfathomable paradox. But it's not. Jefferson wanted slavery banned because he understood that individuals often lack the willpower to do individually what they know is right. Sometimes it takes the power of community action to force ourselves to do good things that we can't (or won't) do on our own.

In the marketplace we are competitive, selfish, meanspirited, and xenophobic, so it's no surprise that left to its own devices that's the kind of society a free market will produce — in fact, has produced at various points in history. But although we're seldom strong enough to personally sacrifice our own immediate economic self-interests (yes, that means you too), we often recognize as a society that we ought to do better. And so, as long as the rules apply to all of us, we occasionally allow our better natures to be shamed, cajoled, or inspired into insisting on it. And civilization slowly progresses because of it.

So slavery and child labor are gone, even though both were efficient means of production in their time. We went to war against Nazi Germany even though Hitler was as good a trading partner as the Weimar Republic. We pass minimum wage laws because our guts tell us that it's wrong to expect an adult in a rich country to work like a dog seven days a week for subsistence wages. And some of us continue to press for national healthcare not simply because it addresses known market failures (though it does), but because we think it's fundamentally wrong to make people beg, plead, and scrape in order to receive decent medical care.

The free market rejects all of these things. But in the voting booth, sometimes the better angels of our natures take wing for a moment and persuade us to try to make ourselves into better people. The free market pushes back, of course, and warns us that we can't always have everything we want. Thankfully, though, it doesn't always win. Rationality is a high virtue, but it's not the only virtue.

Kevin Drum 2:10 PM Permalink | Trackbacks | Comments (94)

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100% agreed. Seems obvious to me.

Posted by: chris on May 26, 2007 at 2:16 PM | PERMALINK

Well put.

Posted by: dob on May 26, 2007 at 2:28 PM | PERMALINK

Goodness without rationality, however, is self-defeating, as the road to hell is paved with good intentions. We had good intentions when we crusaded into Iraq to build a democracy, but in our march to war we abandoned ration, and because of this we entered war which brought results not nearly up to par with our intentions.

The same can be said at home. It may be well-minded to increased the power of the federal government for the common good, but not necessarily rational. After all, the past two decades have proven that the federal government seems more intent on serving the special interests than the American people. Why give the federal government that power to run a socialist health care system, for example, when that system would likely be designed for the benefit not of the consumers, but of the powerful interest groups and lobbies?

The tired rebuttal that "if the Democrats do it, it WILL serve the people!" will not do, as the Democrats have proven to be just as entrenched in special interest power as the GOP.

Posted by: brian on May 26, 2007 at 2:31 PM | PERMALINK

"Bryan Caplan argues that although people are rational in the marketplace "

People aren't rational in the marketplace either. Maybe a bit more rational. If people were rational neither the credit card nor the payday loan industries, to name just two obvious examples, could exist as they do today.

Posted by: jefff on May 26, 2007 at 2:33 PM | PERMALINK

This gives people the freedom to indulge delusional notions about the economy.

--magical thinking; those delusional notions are more usually about patriotic dementia disguised as economic thinking.

Jefferson wanted slavery banned because he understood that individuals often lack the willpower to do individually what they know is right. Sometimes it takes the power of community action to force ourselves to do good things that we can't (or won't) do on our own.


Republican policies that are meant to drive people further from one another by given precedence to notional selfishness as the central virtue are by definition anti-social.

While policies that decrease the distance between people will inevitably cause Republican paranoia.

Republicanism is a social disease.

Posted by: cld on May 26, 2007 at 2:37 PM | PERMALINK

Jefferson was a professional deadbeat. His estate was mortgaged to over 5 times value when he died. He couldn't free his slaves because he didn't own them.

Posted by: historian on May 26, 2007 at 2:38 PM | PERMALINK

Rationality isn't a virtue at all, let alone a high one. A strength maybe. But as you say at the outset, it isn't the same thing as good. The classical virtues are prudence, justice, temperance, and fortitude. Rational isn't in there.

Posted by: Jon on May 26, 2007 at 2:39 PM | PERMALINK

"Well, I say cheating is the gift man gives himself!" - C. Montgomery Burns

Posted by: cld on May 26, 2007 at 2:40 PM | PERMALINK

Neither slavery nor child labor are very efficient means of production, unless nothing else is available.

It was the Western capitalist system that came up with mechanized farming and other means to free millions of people from the sunrise-to-sunset stoop labor that had been the hallmark of human life for thousands of years.

Posted by: harry on May 26, 2007 at 2:41 PM | PERMALINK

"Republican policies that are meant to drive people further from one another by given precedence to notional selfishness as the central virtue are by definition anti-social.

Republicanism is a social disease" -cld

Conservatives (I don't say Republicans, there are few conservatives left in the Party) do not believe that selfishness is a virtue. They do believe, however, that it is a sin that many people hold, and, because many individuals and groups operate on self-interest to various degrees, it makes no sense to consolidate power in the hands of a few. That is why conservatives oppose centralized power, and that is why the Founding Fathers opposed such power as well.

Posted by: brian on May 26, 2007 at 2:44 PM | PERMALINK

Instead of bringing slaves to the plantations, now NAFTA & CAFTA etal. are taking the plantations to the slaves. It's still slave labor.

Posted by: Wish He Had on May 26, 2007 at 2:48 PM | PERMALINK

A minor quibble:

I think there is only a significant difference between "rational" and "good" if you define "rational" very narrowly, as something like "good at making decisions that effectively bring about one's ends" where those ends are determined by something external to one's rational decisions.

There is nothing irrational about rejecting a course of action that will lead to a small economic gain on the grounds that it will have negative moral consequences.

Posted by: Greg on May 26, 2007 at 2:50 PM | PERMALINK

Rationality is a high virtue, but it's not the only virtue.

When did "Rationality" come to mean "acting in your own selfish interest"? I thought it meant "acting based on reason".

Posted by: Boronx on May 26, 2007 at 2:53 PM | PERMALINK

brian,

Conservatives resent centralized power because it represents a check on their selfishness.

I don't disagree that they explain this to themselves in self-serving ways that deny their obvious cupidity.

Posted by: cld on May 26, 2007 at 2:56 PM | PERMALINK

"Jefferson wanted slavery banned because he understood that individuals often lack the willpower to do individually what they know is right."

Damn, that makes sense. It's weird that I never saw his position explained in such simple and obvious language before.

Posted by: Matt Stevens on May 26, 2007 at 2:58 PM | PERMALINK

The Nation's Hip Heterodoxy about the split between neo-classical economists and the Heterodox and how the neo-classicals own the Academy and the publications, even though their theory of the rational man has been debunked at every step.

Posted by: jerry on May 26, 2007 at 2:59 PM | PERMALINK

This is a bunch of tripe. People aren't even "rational" in their economic thinking. Seriously. You need to assume that to make neoclassical econ work, yes, but that still does not make it a valid assumption. It ain't.

Let's also define what "rational" means.

This is all empty pabulum, masquerading as deep thought.

Posted by: teece on May 26, 2007 at 3:01 PM | PERMALINK

I should clarify: Hayes' thinking is tripe, not Drum's.

Posted by: teece on May 26, 2007 at 3:03 PM | PERMALINK

I think it was really well put.

Posted by: cld on May 26, 2007 at 3:05 PM | PERMALINK

Are you talking to me?

Are you talking to me?

I don't see any other reference to Hayes here, so you must be talking to me.

Posted by: jerry on May 26, 2007 at 3:06 PM | PERMALINK

If you're referring to the Nation article I linked to, teece, I think Hayes is agreeing with you.

Posted by: jerry on May 26, 2007 at 3:08 PM | PERMALINK

I guess I need to go back to sleep. Seems like Drum linked to a Christopher Hayes article too. Who would have figured there were so many of these guys born in the same year.

Posted by: jerry on May 26, 2007 at 3:10 PM | PERMALINK

I meant Drum, not Hayes, was well put.

Posted by: cld on May 26, 2007 at 3:13 PM | PERMALINK

It's true, the assumption that people are rational in the marketplace is required to make classical economics work. It's the primary reason for failure of classical economics to describe what actually happens, without resorting to Ptolemaic epicycles within epicycles that attempt to bring the theory back into line with observation, because economics has not yet found its Copernicus, Kepler, and Newton.

Posted by: derek on May 26, 2007 at 3:14 PM | PERMALINK

The idea that people are rational in the market place is specious. Most of the consumer market place is driven by advertising which uses all sorts of means, subtle and blatant, to make the consumer make irrational choices. Nor is there anything rational about the stock market. It rises with irrational exuberance and falls with the panic of a stampeding herd. Check the housing market. It rose with irrational expectations. Other markets are similar. Classical Economics is a crock. Thorstein Veblen saw the human animal more accurately than the Neoclassical economist.

Voters are not all that rational either. Image usually ranks as being more important than policy. It is also wildly incorrect to say voters are "socialist" in the voting booth. How many 'socialists' have been elected in this country, 0.000001%?
Studies have shown that people are more likely to come out to vote against a candidate rather than for one.


We had good intentions when we crusaded into Iraq to build a democracy...
... It may be well-minded to increased the power of the federal government for the common good....brian at 2:31 PM

That is revisionist history are its finest. The war was sold, quoting the Bush administration, not to build democracy but to protect against WMD, in particular nuclear weapons. The talk of democracy is just current spin. No one seriously thinks that the Bush Administration cares about democracy either in the Middle East or in the US.

You should look back to recent history of the progressive era and the immediate post war period to see that the government was expected to and did work for the interest of the common man, as it were. However, for most of our history the Hamilitonian idea was that government should help business and that's what it's done. It's far easier for a rich man to bribe an official than a poor one.

... I prefer to believe that Adam Smith was correct when he postulated that societal good is better served by people who want to better their own lives ...meathead republican at 2:59 PM
Of course you do, but you are wilfully ignorant of all the misery and death that your capitalists have caused over the centuries. If you can't read history, read Dickens, read Frank Norris, read the headlines. Cheap imports killing pets, contaminated fish imports contain puffer fish, antifreeze in toothpaste, drugs that increase death rates like Vioxx and Avandia, tobacco companies that kill their customers. Plus you need to take into account the damage that your companies do to their workers. Posted by: Mike on May 26, 2007 at 3:14 PM | PERMALINK

mhr, Now name any other society that has achieved as much for average people as this "selfish and manipulative" one.

Didn't cover this yesterday? That was France, England, Germany, Netherlands, Sweden. . .

Posted by: cld on May 26, 2007 at 3:16 PM | PERMALINK

I think Greg and Boronx above is pointing in the right direction. There is no reason at all to equate "rational" with narrow self interest -- that's a contrivance only someone as limited in perspective as an economist would endorse.

When we approach issues that have a "value" component, making rational decisions involves whatever factors pertain to that set of values. If we are voting for President, choosing the person best suited to bring about a happier, more productive, more just society overall may indeed be constituitive of rational behavior, given the set of values concerned.

Posted by: frankly0 on May 26, 2007 at 3:16 PM | PERMALINK

brain, everyone's favorite faux-reasonable -- faux-rational? -- concern troll, wrote: We had good intentions when we crusaded into Iraq to build a democracy, but in our march to war we abandoned ration, and because of this we entered war which brought results not nearly up to par with our intentions.

Who's this "we" of which you speak?

Posted by: Gregory on May 26, 2007 at 3:22 PM | PERMALINK

I think Greg and Boronx above is pointing in the right direction.

should be

I think Greg and Boronx above are pointing in the right direction.

Obvious though the mistake may be, it was simply too illiterate for me not to correct it.

Posted by: frankly0 on May 26, 2007 at 3:30 PM | PERMALINK

To say that voters don't behave according to the classical economics' definition of rational says less about voters and more about attempting to apply economic definitions and theories where they don't belong. Or, to rephrase Caplan:

[T]he typical economist drops down to a lower level of mental performance as soon as he enters the political field.

Posted by: has407 on May 26, 2007 at 3:46 PM | PERMALINK

Ultimately, slavery disappeared because the owners of capital discovered it was cheaper to pay the serfs wages and let them fend for themselves than it was to provide them with room and board.

Socialism in the voting booth? Just once in my life, I wish I would get the chance to be a socialist in the voting booth...

Posted by: dr sardonicus on May 26, 2007 at 3:50 PM | PERMALINK

Sometimes it takes the power of community action to force ourselves to do good things that we can't (or won't) do on our own.

That is interesting. Smoking tobak came to mind. Despite all of the education about the perils of smoking that started in the Sixties, very few were able to quit and many still started to smoke. It was not until the non-smoker rights movement began that people began to smoke less and quit.

Posted by: Brojo on May 26, 2007 at 3:57 PM | PERMALINK

The level of government also influences how idealistic people are willing to be. The grandest actions are considered appropriate to national government, but the same voters are more mean-spirited, in the same voting booth in the same election, when the matter is before state or local institutions.

Posted by: essjay on May 26, 2007 at 4:09 PM | PERMALINK

Fascinating post with several interesting observations. I agree that it makes sense for someone to take advantage of something society gives him, even though he would rather see society not provide that benefit. E.g., I've benefited from federal aid to education even though I think federal involvement in eeucation has made education worse.

I will quibble with Kevin's assertion that in the marketplace we are competitive, selfish, meanspirited, and xenophobic. Yes, we are selfish and competitive, but not meanspirited. There's no profit in being meanspirited. Few of the cappitalists I've met have been meanspirited.

Furthermore, the marketplace should be an antidote to xenophobia. An employer needs to hire the most competent employees regardless of ethnicity. And, a consumer wants the best product at the cheapest price, regardless of the ethnicity of the manufacturer.

Another point is that the marketplace rewards cooperation. The Evolution of Cooperation by Robert Axelrod describes the fascinating research. It's excellent reading.

In particular, success in the marketplace requires a higher degree of integrity. If someone lies, his buyers and sellers won't continue dealing with him. If a producer lies about his goods, the product itself will not succeed.

Posted by: ex-liberal on May 26, 2007 at 4:10 PM | PERMALINK

Here we go again. Down the same trodden path that is, by now, a ditch becoming a morass. We started on it in the early morning lamplight of the 19th century and we still are subjected to its thin, anemic line. No one should get money or promotion for dragging it out once again and redressing it. But they do.

The position, in its origin is not against democracy or irrational voters, but the possibility of government for the benefit of the people. It is an argument stacked up against utilitarianism, common needs, common wealth, the rights of classes of men- as in ancient Rome and Republics of every description. It is draped in noble liberty and unavoidable Nature. These being substitutes for the older notion of Divine Order. In place of the Republic should be a set of eternal machine mechanisms derived from theories of political economy that regulate human individuals so that they fall into natural classes. It could be that the natural mechanism of society sorts people into classes of athletes but, as we have it, wealth is the trait on which selection supposedly works.

In the older form it was simply stated that the Will of the people, or their happiness, was multiple and unquantifiable, indeed not really a Will at all, and therefore government could not truly satisfy needs. But Caplan’s newer version is post-socialist and not so gentle. The complexity of Nature is deemphasized and discipline with political violence is threatened- even required. In the 1920’s many men of property threw it in the fascists because they thought fascism was the only force that could stop the demands of that inflamed stage of democratic feeling known as communism. There is nothing new in Caplan’s fears or solutions. His utopia is one where the upper House of Owners has veto power over the wishes of the lower house of people –these being injurious to national and private wealth by definition. Caplan's utopia, like all utopias, is authoritarian. It categorizes men in static groups, closes public discourse, derives its legitimacy from a revealed Nature (as usual something only understood by a vanguard) and reduces the complex and changing nature of human society to technical management. It is a vision of slavery.

Posted by: bellumregio on May 26, 2007 at 4:19 PM | PERMALINK

Many many comments to make here. Rational behavior in the economic sense is the assumption that individuals choose alternatives that maximize their private benefit. It's well-established that private benefit ("rational") and social welfare ("good") don't always align, but this doesn't seem to be the thrust of the argument. The argument here seems to be that voters, as "naive economist" choose alternatives that are bad both individually and socially out of a fundamental misunderstanding of economic principles. This shouldn't be that surprising, it's pretty well known that laypeople have a "naive" understanding of physics that predates Newton, so to accept that their understanding of economics is pre-Adam Smithian isn't much of a stretch.

Posted by: ogmb on May 26, 2007 at 4:40 PM | PERMALINK

"Jefferson wanted slavery banned because he understood that individuals often lack the willpower to do individually what they know is right."

Matt Stevens:

Damn, that makes sense. It's weird that I never saw his position explained in such simple and obvious language before.

This post illustrates why I come to this blog. Once in a while, usually on issues of economic fairness, Kevin is *really* smart.

Posted by: Emma Anne on May 26, 2007 at 4:44 PM | PERMALINK

teece-

Rational in this context is making decisions that conform to your personal preferences, which are complete and transitive.

If you like A more than B, and B more than C, it therefore follows that you will like A more than C.

Likewise you will prefer the cheaper of identical goods costing $8.01 and $8.02, unless you derive $0.01 of value from the place that sold you the more expensive one.

Likewise you will not make exchanges that decrease your utility. If you personally value a good at $15 you will not trade it for a good that you value at $10 unless you will be compensated by at least $5 on top of it.

Posted by: Saam Barrager on May 26, 2007 at 4:58 PM | PERMALINK

Good god the number of people who misunderstand Rational Choice theory...

First, for those confused, RCT is clear that rational does not equal logical.

Second, it is called Rational Choice for a reason. Once an individual identifies her preferences based upon their own internal metric for deriving a utility (ie Costs versus benefits), they are able to rank order those preferences from best to worst...

Once that is achieved, they will pursue their optimum preferences in a rational manner.

Now that are any number of factors that can cause an individual to chose a less optimal preference, such as lack of information, information asymmetry, etc.

An individuals moral preferences are part of that construct that decides on the value (benefit/costs) of choosing an action.

Political science has moved way beyond the Rational Choice of economics.

Posted by: Nazgul35 on May 26, 2007 at 5:09 PM | PERMALINK

People aren't rational in the marketplace. The high priests of mammon might assume rationality because it gets them where they want to go, but it's just not true.

A great is example is choices: the classical assumption is that more choices results in happier people. Experimentally, this just isn't the case. People are happier with a limited set of choices than with a single choice, but as the number of choices increases people become unhappy. In fact, they may refuse to make a choice at all -- which makes no sense from the classical perspective, as any choice if better than nothing.

Posted by: Adam on May 26, 2007 at 5:22 PM | PERMALINK

Rational Choice theory can justify anything post-hoc.

If the set of payoff functions is not restricted then for any policy there will exist a payoff function for which that policy is optimal.

Economics performs the same legitamizing function in our current secular society that religion performed in the past.

Posted by: Adam on May 26, 2007 at 5:34 PM | PERMALINK

Kevin-

We don't distinguish between 'rational' and 'good'. It's the same as the distinction between 'boiling point' and 'hot'. Your argument mostly falls apart after that.

1)Voters and consumers are the same. They don't become 'rational' or 'good' or monkeys in one instance and not in the other.

2)Sample sizes differ wildly. Consumers consume votes every so often, but participate in the marketplace virtually every day. If consumers made single binary decisions about their consumption bundle every other year, or made voting decisions throughout the day, their consumption patterns would look identical.

3)People are not always rational when they pay for the consequences of their actions. Even for large purchases (which consumers are more likely to scrutinize) consumers make poor decisions that they then have to live with. The housing market is a great example - if you've ever watched a recently painted home sell for $30,000 more than a similar one that wasn't.

4)Optimal individual decisions are oftentimes suboptimal in the aggregate. Slavery fails as an institution not just on moral grounds, but on economic grounds. In 1865 Alabama had productivity levels similar to those of Guatemala. A modern parallel might be vehicular pollution - I consume miles traveled and produce smog. But I only consume a fraction of the smog that I produce. While it might be good for me to consume as many miles as I can, it is not good for me that everybody do so - but only provided that we all don't do so. Your point about Jefferson is correct, but confirms that markets and governance are conjoined. A rational consumer will elect to have limits placed on their own smog production, or will appeal that slavery be abolished.

5)Many economists are surprised to find how not "competitive, selfish, meanspirited, and xenophobic" marketplaces are. Likely because they spend so much time telling themselves that they are those things - only to find the market replete with counterexamples. One fascinating finding from game theory is that complex societies perform similarly - and oftentimes irrationally - on games. After the collapse of the Soviet Union economists could play games with Russians at a fraction of what it would cost in the United States (circumventing the criticism that the games had no real stakes). But the subjects responded almost identically to their American counterparts. In other words, there are social mechanisms here that transcend the specific economic construct of a given society.

Posted by: Saam Barrager on May 26, 2007 at 5:36 PM | PERMALINK

"The Nation's Hip Heterodoxy about the split between neo-classical economists and the Heterodox and how the neo-classicals own the Academy and the publications, even though their theory of the rational man has been debunked at every step."
Posted by: jerry on May 26, 2007 at 2:59 PM

From the article you linked to:
"The empirical work that Gowdy and other heterodox economists tend to cite most is that of behavioral economists, those who study how humans actually reason about economic decisions, calculate risk and respond to incentives. What they routinely find is that the rational utility maximizer of the neoclassical model is a convenient fiction. A growing literature shows humans to be systematically biased in their calculations of risk, disposed to punish antisocial behavior, even at a cost to themselves. By creating a framework for empirically testing one of the founding axioms of the field, behavioral economics has opened a space for dissenters that can get a hearing from the mainstream. If you were to draw an intellectual Venn diagram of mainstream and heterodox economics, the behavioral economists would be in the intersecting section."

Economics perhaps is finally moving away from ideology and becoming more of a true empirical behavioral science rather than some bastardization of physics that we have been plagued with for so many years recently.

Posted by: Doc at the Radar Station on May 26, 2007 at 5:43 PM | PERMALINK

Rationality is often in the eye of the beholder.

When dealing with a commodity like fresh water or natural gas then most people's idea of rationality coincides and most people make the same decision to choose the lower cost supplier.

However, if we consider something like a Vivendi or Gucci bag then I, being a nerdy male, would put almost no value on it while a woman who cared deeply about fashion and style might value it at over $1,000. Neither of us is being irrational yet we come to quite different conclusions.

The "market" is not a fixed, objective system. It is whatever we define it to be. Industrialists often say we should have a free market unfettered by regulation. What they really mean is that they want to have free access to all sorts of resources without having to pay for these external costs. They don't want to pay for the education of their customers, the cost of polluting air and water, compensating people harmed by their products, and so on.

IMHO, we can set the rules however we like, as long as they apply more or less equally to all, then if we let prices float that is a free market.

Posted by: JohnK on May 26, 2007 at 5:57 PM | PERMALINK

Great post.

I, too, see too much rationality applied to market behavior, but it's still pretty fuckin' good blogging.

Posted by: paradox on May 26, 2007 at 6:33 PM | PERMALINK

People aren't rational in the marketplace either.

True dat, or perfume commercials on TV would make zero sense. There is reams of research that shows that people do *not* make decisions in the rational choice method, but will often go through great pains to take the decisions they've already made and rationalize them.

And I'm glad too, otherwise we could just replace humans with robots that always acted to maximize their utility function in a totally predictable manner.

Posted by: anonymous on May 26, 2007 at 6:43 PM | PERMALINK

National security is way over valued in the voting booth.

Posted by: Brojo on May 26, 2007 at 7:00 PM | PERMALINK

Huh?

Posted by: Keith G on May 26, 2007 at 7:26 PM | PERMALINK

Sounds to me like it's the economists and their sycophants who become "foolish and incoherent" when they enter the hallowed halls of academe.

What could be more "foolish and incoherent" than quoting a "legendary economist" who, offering no proof whatsoever, psychoanalyzes the behavior of people he doesn't know, in spite of the fact that he really can't know what their behavior is when they cast secret ballots?

Frankly, I don't even know why Kevin reads this gibberish. The "free market"? And where, pray tell, was this exotic creature spotted? Surely only in the demented hallucinations of legendary economists.

The proof is absurdly simple- suppressing the vote leads to George Bush. Republicans themselves have totally demonstrated their belief that if we added more voters with less education, the result would have been not-George Bush.

It may drive you crazy sometimes, but the strongest lesson from history is that the more democracy you have, the better things become. If that weren't the case, the world would be full of new and improved dictators instead of democracies and would-be democracies.

We're just lucky people bring a lot more sense and wisdom into the voting booth than they take to the automobile showroom. In spite of what "legendary economists" would like us to believe.

Posted by: serial catowner on May 26, 2007 at 7:57 PM | PERMALINK

To my surprise, I'm finding myself in agreement with ex-liberal on something: his recommendation of Axelrod's book. Axelrod's experiments in how people interact over time--specifically, experiments to determine which strategies led to cooperation among two people playing the prisoner's dilemma repeatedly--were eye-opening for me when I encountered them in grad school. And for academic political science, it's very accessible to lay readers.

Posted by: Jeremy B. on May 26, 2007 at 9:03 PM | PERMALINK

An employer needs to hire the most competent employees regardless of ethnicity.

That assumes some kind of extreme shortage of competent employees, especially for low-level jobs.

By contrast, it seems that it is "rational" for individual employers to realize that for many jobs, the pool of employees is essentially indistinguishable, or at least difficult to differentiate. The employer (or client) may decide that the most rational thing for him to do is "stick with whom he knows" as a "differentiating factor" when it comes to making a choice.

There is reams of research that shows that people do *not* make decisions in the rational choice method, but will often go through great pains to take the decisions they've already made and rationalize them.

I've heard it speculated that car commercials aren't necessarily targeted to potential car buyers, but rather are targeted at people who have already bought that particular model of car as a means of reinforcing their wise decision.

Economics talking about rational consumers are almost always explaining a phenomenon in reverse-- they look at an odd phenomenon in the market and try to explain how this is "rational." Never have I heard an economics theorist predict counter-intuitive behavior (that said, I'm not very well versed in the economic research literature. "Popular economics" always seems to make post-hoc explanations rather than predictions.)

Posted by: Constantine on May 26, 2007 at 9:15 PM | PERMALINK

"Bryan Caplan argues that although people are rational in the marketplace "

People aren't rational in the marketplace either. Maybe a bit more rational. If people were rational neither the credit card nor the payday loan industries, to name just two obvious examples, could exist as they do today.
Posted by: jefff on May 26, 2007 at 2:33 PM

What Jefff said.

Posted by: beb on May 26, 2007 at 9:39 PM | PERMALINK

Child labor gets abolished everywhere, including the U.S., when people become wealthy enough not to need their children to work to survive. Law has played a minimal role, at best, in its abolition. In the U.S., not surprisingly, child labor lastest longest in the South, because people were much, much, poorer there than in the rest of the country.

Posted by: DB on May 26, 2007 at 11:17 PM | PERMALINK

In the marketplace we are competitive, selfish, meanspirited, and xenophobic, so it's no surprise that left to its own devices that's the kind of society a free market will produce — in fact, has produced at various points in history. But although we're seldom strong enough to personally sacrifice our own immediate economic self-interests (yes, that means you too), we often recognize as a society that we ought to do better. And so, as long as the rules apply to all of us, we occasionally allow our better natures to be shamed, cajoled, or inspired into insisting on it. And civilization slowly progresses because of it.

So slavery and child labor are gone, even though both were efficient means of production in their time. We went to war against Nazi Germany even though Hitler was as good a trading partner as the Weimar Republic. We pass minimum wage laws because our guts tell us that it's wrong to expect an adult in a rich country to work like a dog seven days a week for subsistence wages. And some of us continue to press for national healthcare not simply because it addresses known market failures (though it does), but because we think it's fundamentally wrong to make people beg, plead, and scrape in order to receive decent medical care.

And we work tirelessly to outlaw the murder of innocent unborn children, even though it's terribly inconvenient to allow them to be born.

Oops...

Posted by: Heartland Knuckledragger on May 27, 2007 at 12:17 AM | PERMALINK

To give another example: since the E. coli on lettuce scare, many Californians want mandatory regulation, while the Bush administration wants voluntary guidelines. But as complying with the voluntary guidelines has a cost, honest farmers who don't want to poison the public suffer a competitive disadvantage as compared to those who put the public at risk. For that reason, most farmers want their jerk competitors to be forced to comply as well.

(I don't claim that farmers favor all health safety legislation, but certainly they favor strong measures to restore the reputation of California produce; otherwise people will just stop buying).

Posted by: Joe Buck on May 27, 2007 at 12:42 AM | PERMALINK

"[T]he typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. He becomes a primitive again."

How is this known? Lots of times in politics you can't ever find out if your decisions were correct, since they outcomes depend on so many other things beyond your control, and so much information is only crudely known.

I am happy to have voted for Humphrey over Nixon, but there is no sense in which I can say I "know" I made the right decision. In most of my purchases, by contrast, I have found out very quickly whether I did well or not, though I still can't know for certain whether I did "best".

Posted by: MatthewRmarler on May 27, 2007 at 12:46 AM | PERMALINK

Another legendary economist, Herbert Simon, wrote about "satisficing", that is setting a goal that is "good enough". In every walk of life, there is no perfectly rational way to set the next goal. After all ratiocination, there is no way to know in advance that a chosen goal is achievable.

Posted by: MatthewRmarler on May 27, 2007 at 12:51 AM | PERMALINK

George Lakoff reminds liberals what conservatives have long known. Many voters vote against one might consider to be their best economic interests, not because they are stupid, but because of their values. When a voter resonates with the values projected by the conservative candidate more than with the values projected by the liberal candidate, the voter will probably vote for the conservative candidate.

Posted by: Joel Rubinstein on May 27, 2007 at 12:57 AM | PERMALINK

Like many artists (and Jefferson was the most gifted architect in America), Jefferson was a spendthrift and was bad at business so he was on the verge of bankruptcy most of the time. Monticello was exquisite but it was a money pit. His slaves were a big part of the collateral that his creditors held, and they didn't want him to give his collateral away. In contrast, George Washington, a good businessman and not an artist, was financially free to free his slaves upon his death, which he did.

Posted by: Steve Sailer on May 27, 2007 at 2:17 AM | PERMALINK

The argument Caplan seems to be making strikes me as mostly missing the point.

Look, people tend to be more effectively rational in their decisions about economic matters for the very simple reason that the decisions are easier to make. It's easier for me to choose to buy the best soup for myself because I usually know what I like, and I know how much I am willing to spend. If I find the same soup in two different places and one is cheaper than the other, I buy the cheaper one.

Suffice it to say, determining who is the better President, in the sense of who is going to bring about a happier, more just society simply is NOT so easy. Even "experts" get it wrong -- just look at the behavior of our pundit class, for example.

This doesn't mean that voters become entirely irrational when they make their decisions. The complexity of what they are deciding is inherently much greater. Most voters, I suspect, do make a sincere effort to choose the candidate most likely to bring about the sort of society that they think would be optimal. If they fail, and attend to issues, such as perceived character or values in a candidate, that do not well predict actual outcome, it's mostly in virtue of accommodations they make to the complexity and uncertainty of the decision.

And it is flat out wrong, and in this particular day and age absurd, to assert that voters don't see or pay for the consequences of their own decisions, and vote accordingly. If there's one thing that Bush's Presidency has proved beyond a shadow of a doubt to most Americans -- the same voters who supported him in enormous numbers after 9/11 -- it's that Bush has been an utter disaster and disgrace as a President, and that he has completely failed to bring about the sort of society and world that voters had been expecting he might effect.

Does anybody really believe that voters did not reject, decisively, what Bush stood for in the 2006 election? Even if each voter understands full well that his/her particular vote does not determine the election, can anyone argue that voters did not take their vote very seriously in 2006, and use it to register their disapproval of Bush's policies, based on the outcomes of those policies?

Because, you see, even if the issues are inherently complex in making many electoral decisions, sometimes the choice is so stark, and the outcomes are so obvious, that the choice becomes in fact fully rational in every important sense of the word.

Posted by: frankly0 on May 27, 2007 at 2:22 AM | PERMALINK

Not so sure about the whole idea that people make "rational" economic choices in the first place. There's been a lot of research into how people actually make choices, as opposed to how they would "rationally" make choices. In many cases, they don't make the rational choice, and it can often work for them. See the current Scientific American issue for one article on this.
Another thing that gets ignored is opportunity cost. This is common in arguments against global warming, for example. The usual argument is that implementing policy Y will cost X amount of dollars, which may be true. But that ignores the cost of not implementing policy Y.
For example, it may cost me $10k to fix my roof (no, no idea if the $ amount is correct), and since I can't easily come up with the money, I don't fix it. Hey, maybe it won't leak. But when it collapses, or leaks bad enough to go through a couple floors (this happened in my college apartment), now the cost to fix it is $40k. Any homeowner can relate to this. Yes, it costs money to fix something now. It costs a lot more to fix it later.

Posted by: sal on May 27, 2007 at 4:21 AM | PERMALINK

mhr, is there anyone in the world who thinks about Karl Friggin' Marx as much as you do? You should think about marrying the guy.

Just don't understand why a gay communist like you supports Bush so heartily. Very confusing.

Posted by: Kenji on May 27, 2007 at 5:37 AM | PERMALINK

There is an underlying assumption in Caplan's work, that economists are not only rational but unbiased, observers of data. That is patently false. Ask any historian of feminist economics. Until the later "gendered" economics came to the scene, it was "rational" for women to stay home and let their husbands work.

Caplan's suggestion that economists get extra credit at the voting booth is chilling.

Posted by: Marc on May 27, 2007 at 6:41 AM | PERMALINK

At election time, the voters can be rational only to the extent they have sufficient information that matters on which to act. The 2000 election is an example (among many) of the voters being given insufficient information that mattered to make their choice. The voters, unfortunately, relied on the various media to present that information. Media figures, like Drum, allowed RNC talking points to dominate instead of rational analysis of the positions of the candidates.

The result of the media failure, which continues to the present, was and is Iraq. Gore regularly showed himself to be the best informed, most rational candidate, easily winning the debates. GwB showed himself to be uninformed, irrational and had a history of failure. Nonetheless, the media was more concerned with the internet, the Loves (canal and story), earth tones, polo shirts and which candidate one would like to have a beer with.


Knowing these stories to be off topic, people like Drum failed to refute the stories and refused to take to task media figures like Dowd, Friedman, Cohen and Broder inter alii. As a result of Drum's irrationality, the country suffers through the presidency of an idiot end-timer who has debased our values, our currency and our country.

Some rationality.

Posted by: TJM on May 27, 2007 at 7:14 AM | PERMALINK

Actually, we're born with a built-in conflict between our selfish instincts and a tendency to deny selfishness to help the group survive. I'd write a book about it if I could ever find a publisher.
http://makethemaccountable.com/balance/

Carolyn Kay
MakeThemAccountable.com

Posted by: Carolyn Kay on May 27, 2007 at 7:23 AM | PERMALINK

Why would anyone say that people are rational in the marketplace? Consumers fall victim to silly fads, they eat foods that make them fat and unhealthy, they run up huge debts on credit cards to the point that they are spending more on interest payments than on anything they want or need, they spend a dollar a bottle to get water that is no better than the tap water that cost less than a penny a gallon. Their shopping habits destroy communities and encourage the development of suburb + mall arrangements that have them spending hours every day in traffic jams commuting to work or to shopping. They continue to guzzle gasoline even though it makes them dangerously dependent on unfriendly foreign governments. They continue consumption habits that pollute the air, deforest the world, destroys habitats, endangers food supplies, causes catastrophic climate change.

Thank God people are not as "rational" in the voting booth...

Posted by: Daryl McCullough on May 27, 2007 at 9:59 AM | PERMALINK

Wow, this thread really pans out the subject of rationality as well as any philosophy professor or french movie maker could ever have.
There's enough material for several dissertations here.

Anyone who can soberly say that they believe in a universal concept of Rationality after reading through this, should have their head examined.

Posted by: OmniDane on May 27, 2007 at 11:00 AM | PERMALINK

"Jefferson wanted slavery banned because he understood that individuals often lack the willpower to do individually what they know is right. Sometimes it takes the power of community.... blah blah blah"

Where, exactly, does this come from? Your collectivist prejudices?

Posted by: peanut on May 27, 2007 at 11:01 AM | PERMALINK

Also, a Godwin-law (or whatever it's called) violation in the original post? Isn't that usually the preserve of the commenters here, like Kenji and franklyO?

Posted by: peanut on May 27, 2007 at 11:04 AM | PERMALINK

"[T]he typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. He becomes a primitive again."

Politics -- so easy a caveman could do it. (Which explains many of the Neanderthals in the Republican party.)

Posted by: Vincent on May 27, 2007 at 11:31 AM | PERMALINK

Also, a Godwin-law (or whatever it's called) violation in the original post?

A mention of Hitler is not a "Godwin's law violation", but a confirmation. Why does it bother you?

Posted by: Dave Howard on May 27, 2007 at 12:33 PM | PERMALINK

You want an example of rational players in a Free Market?

Look at any supermarket checkout lines.

You'll see products targeted at the profoundly IRrational consumer. Candy (to shut up bored screaming kids), and Tabloid Celebri-porn.

Posted by: bungholio on May 27, 2007 at 12:35 PM | PERMALINK
...In particular, success in the marketplace requires a higher degree of integrity. If someone lies, his buyers and sellers won't continue dealing with him.... ex-lax at 4:10 PM
That is not true. You are still, despite all evidence to the contrary, claiming that the 'free market" is self correcting. You conveniently ignore much. For example, the damage done by corporate bad behavior before they are found out, if they ever are. While Enron did implode, the damage done to consumers and shareholders was enormous and could have been prevented. Suppose a corporate sells a bad product. Until it's discovered and publicized, they profit greatly. Even if sued successfully, many court cases are sealed, so their acts remain hidden from future purchasers.

There are many instances of corporate malfeasance that goes unpunished. One example, energy companies. Oil companies restrict supply, reap huge profits, suffer no ill consequence.
In other cases, companies will be formed to bid a job at minimum, do shoddy work, collect payment and declare bankruptcy.

Nor do people stop doing business with others merely because they lie. There are many companies that are regarded as being bastards to deal with, yet deal with them one must.

One can try to make rational choices, but all too often the needed data is concealed. This is especially true in politics where image is everything.

Posted by: Mike on May 27, 2007 at 3:07 PM | PERMALINK

The USA went to war with Germany in 1941 not because war with Germany was the good or right or irrational choice. We went to war with Germany in 1941 because Hitler's government declared war on the United States.

Posted by: ownedByTwoCats on May 27, 2007 at 4:16 PM | PERMALINK

I'll just add my opinion to what has already been said to some degree or other.

Economic rationality is a convenience of theory to approximately explain consumption and production behavior. We know it to be untrue in that we have data that shows that advertising can work purely by adding glamorous or fashioable associations. In that sense, rational product quality, utility or performance against price can go out the window.

The same happens in politics. Basically misinformation, lies, or attractive associations in both cases work, and the deception can continue to work for some time because people may not want to admit that they were duped.

For instance, I am a uniter.

There are plenty of other negative effects and behaviors within free-market economics or politics. They work the same.

Never-ever's claims about honesty and civic-mindedness of "cappitalists (sic) I've met" -- by which I assume he means captains of industry rather than the plurality of society as I thought we were all capitalists -- shows what la-la land he lives in.

Not my experience.

And there are other indicators of irrational behavior such as conformity or mass hysteria, which is infectious.

Posted by: notthere on May 27, 2007 at 4:30 PM | PERMALINK

This central tension between laissez faire capitalism and the redistributive whims of a democratic electorate isnt discussed much.

Because laissez-faire capitalism is a complete myth.

On the domestic front, corporate interests trump voter sentiment 99.9% of the time.

The immigration issue provides an excellent example; the 'nativist' bloc is backed by literally millions of racist Republicans, but since illegal immigrants provide cheap labor, business wins.

Its profits over people, every single time.

Posted by: Monty on May 27, 2007 at 4:46 PM | PERMALINK


I once managed to maneuver some libertarians into arguing that since most people leave money on their credit cards, they must have good reasons for doing so. Some of them were drunk at the time.

Posted by: gcochran on May 27, 2007 at 4:47 PM | PERMALINK

I am not well versed in the intricacies of economic theory, but I have observed that the idea that somehow the marketplace fosters excellence and government mediocrity is not supported by my practical experience. I have worked for private galleries and non-profit ones, and for for-profit academic institutions and state universities, and it seems that it is most profitable (i.e. rational) from a market perspective to be as mediocre as the company can get away with by investing more in advertising than in the actual product. Despite the fact that the publicly funded institutions were always broke, there was a much higher commitment to doing truly excellent work for it's own sake. Which is, actually, an irrational--or at least impractical--thing to do. It makes much more sense to do the bare minimum and bs your way through the rest. But a nation that does this on a regular basis will not remain competitive for long. Nor will a company, but that doesn't seem to stop them, whatever the free-market fundamentalists claim.

Posted by: Jess on May 27, 2007 at 4:59 PM | PERMALINK

The BBC documentary "The Trap" is an excellent documentary on how extreme self interest has become a justification for for everything, and how it limits our real freedom.

Posted by: Archie on May 27, 2007 at 5:36 PM | PERMALINK

"Jefferson wanted slavery banned because he understood that individuals often lack the willpower to do individually what they know is right."

Since slaves were a measure of wealth and status, why not argue that Jefferson did not want to unilaterally step down a few rungs on the Virginia ladder of status, but was happy to see everyone do so together. Then it is not a matter of "willpower" at all - he simply didn't want to pay a price for doing the right thing unless everyone did. As an aside, it may be that since wealth and status are relative there is no price at all if everyone's *relative* wealth post-freeing is unchanged.

Or take Warren Buffet's preference *for* an estate tax - onemight laud hi saltruism, or one might note that his kids will almost surely be made directors of a very well-endowed foundation (and hence be assured of being on everyone's "A" list forever), and their relative power will be enhanced if other wealthy folks have to put their kids in charge of foundation smaller than Bufffets. With no estate tax, some of these families will leave their kids as outright owners of valuable enterprises, which may increase their power/prestige relative to the Buffet heirs, and maybe Buffet doesn't want that.

Just a theory. The same theory apples to Stephen Spielberg supporting higher income taxes - he could give his own money to the government and sliede down the ladder a bit, but if we have a tax hike, his *relative* earning power remains unchanged.

And the minimum wage example is unconvincing. First, the number of adult heads of households earning the minimum wage is a tiny fraction of total minimum wage earners, so the "solution" barely hits the target - the Earned Income tax credit is much more precise.

Secondly, support for the minimum wage is easily explained in terms of self-interest - e.g., unions love a higher min wage because it eliminates cheap competetion (domestically, anyway).

And the notion that my decision to be generous with someone else's money somehow reflects better on me is, hmm, puzzling. Sure, I can vote for a higher minimum wage, but I am not paying it to anyone, so where is my virtue - a willingness to maybe pay more for a burger and fries at McDonalds?

Finally, I thought the standard Dem plaint was that voters, particularly Southern white males, get distracted by silliness about race, religion, and national security and *fail* to vote their pocketbooks - who amongst us could fail to support more generous Government programs for most of us paid for by higher taxes on some of us? Now Kevin tells us that failing to vote one's pocketbook is a good thing? Baffling.

Posted by: Tom Maguire on May 27, 2007 at 6:53 PM | PERMALINK

As Darryl McCullough noted upthread, the assertion that people become rational when making economic decisions is patently ridiculous.

Just to give one example....this afternoon I drove by a corner where there are two Shell stations right across the street from each other....one was charging $3.59 a gallon, the other $3.45 a gallon. Yet the station with the cheaper price had only one car in it, while the station with the more expensive price had three cars in it. Of course, the people in the more expensive station (remember they are the same brand and eqally easy to get to) are making a completely irrational decision.

The truth is that most people's math skills aren't good enough to make rational economic decisions, since they are incapable of correctly doing the calculations necessary to weigh costs and benefits of their various options.

Posted by: mfw13 on May 27, 2007 at 6:55 PM | PERMALINK

Tom Maguire: Now Kevin tells us that failing to vote one's pocketbook is a good thing? Baffling.

Not so baffling if your sense of worth is more than a bank statement.

Posted by: has407 on May 27, 2007 at 7:21 PM | PERMALINK

It seems to me that although Kevin's essay was really good he (and many of his posters) are confusing "rationality" with "informed" and *also* "good" or "desirable."

Look, as many have pointed out people are not really very economically rational if by that we mean thrifty or able to see what their long term financial advantage requires them to do. But they are often better *informed* about the costs and benefits to them of a particular economic choice than they are about a particular *political* choice. But that is not because the person who shops carefully, thoughtfully, and thriftily for the right peanut butter is a different person from the person who steps into the voting booth--its that the same person is "choosing" (or being forced to choose) between very different kinds of things when they choose an object (peanut butter) for their own immiediate needs and when they choose a proxy tool (a political leader) to satisfy their own sense of what they *and the country* need.

I think if you looked at the way people make decisions about which authorities to trust, or how to choose a lawyer when they need one, you might be able to generate a more accurate model of how low information voters in a high noise world actually find the nerve to make any decisions at all. And the fact of the matter is that a large percentage of the people who could vote--don't. Because they don't want to vote "irrationally" or "not well" or "incorrectly" but they don't have the confidence in the information they do have to select from among a number of (to them) equally opaque choices. If consumers had as little information about their needs and the material world as voters have about their political needs and their political choices most people would simply lay down in the street and starve before they could buy their peanut butter.

Its silly to reduce this argument to rational vs. non rational. That's not what is happening. Its informed vs uninformed, able to see a direct correllation and unable to see a direct correlation.

aimai

Posted by: aimai on May 27, 2007 at 8:14 PM | PERMALINK

Shorter Mike Cook: "I have nothing to say, but the wine wasn't bad."

Posted by: Kenji on May 28, 2007 at 3:55 AM | PERMALINK

One reason that the "rational marketplace" economics idea is crap is because the idea of a marketplace is up for grabs. Economics fails because it wants to be a theory of everything without dealing with much of anything.

Posted by: Jeffrey Davis on May 28, 2007 at 8:44 AM | PERMALINK

Good points, aimai.

Another example of people acting rationally is how they act when they're on juries. When given all the information and not swayed by theatrics, they weight the evidence, apply their common sense, and in most cases come up with the right answer.

Carolyn Kay
MakeThemAccountable.com

Posted by: Carolyn Kay on May 28, 2007 at 10:05 AM | PERMALINK

Carolyn, you might be interested in this article in todays WaPo:

If It Feels Good to Be Good, It Might Be Only Natural

http://www.washingtonpost.com/wp-dyn/content/article/2007/05/27/AR2007052701056_pf.html

"...Marc Hauser, another Harvard researcher, has used cleverly designed psychological experiments to study morality. He said his research has found that people all over the world process moral questions in the same way, suggesting that moral thinking is intrinsic to the human brain, rather than a product of culture. It may be useful to think about morality much like language, in that its basic features are hard-wired, Hauser said. Different cultures and religions build on that framework in much the way children in different cultures learn different languages using the same neural machinery..."

Posted by: Doc at the Radar Station on May 28, 2007 at 11:17 AM | PERMALINK

So we have scientific proof that Al is a bot...Thank you, Dr. Hauser.

Posted by: Blue Girl, Red State (aka G.C.) on May 28, 2007 at 11:36 AM | PERMALINK

mhr writes:

I prefer to believe that Adam Smith was correct when he postulated that societal good is better served by people who want to better their own lives than by utopians who are filled with good intentions like all those men mentioned above.

Are you referring to the Adam Smith that wrote this (from An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter 11, "Conclusion of the Chapter"):

[The labourer's] employers constitute the third order, that of those who live by profit. It is the stock that is employed for the sake of profit which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connection with the general interest of the society as that of the other two. [...] As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. [...] The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

Certainly not as positive of a view of self-interest as you seem to be attributing to him, at least when it comes to the class now popularly known as "capitalist".

Posted by: cmdicely on May 28, 2007 at 1:11 PM | PERMALINK

cmdicely: interesting quote:

The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin.

What is the empirical support for the third sentence? When you look at the nations rising fastest today (India, China), and the nations goinf fastest to ruin (Zimbabwe, Venezuela), it is hard to see how that sentence can be true now, if it ever was.

There is another neat quote from Adam Smith, but I know it only approximately and don't have it for reference. [Men of business almost never congregate except to conspire against the public good.]

There is a fashion of quoting Adam Smith as though his writings were the word Deity, complete and infallible. People quote his works as part of their testimony in favor of a divine market.

Posted by: MatthewRmarler on May 28, 2007 at 2:16 PM | PERMALINK
Thomas Jefferson had a grand vision for everything, but he went broke and left his family with nothing. I prefer my political soulmates to ...offer their fellow man a good or service .... mike kook at 11:46 PM
Thomas Jefferson left everyone and you the greatest heritage one could hope for.

What have your capitalist heroes to offer?

...O Trade! thine uttermost hope:
Level red gold with blue sky-slope,
And base it deep as devils grope:
When all's done, what hast thou won
Of the only sweet that's under the sun?
Ay, canst thou buy a single sigh [11]
Of true love's least, least ecstasy?"
...
"Yea, what avail the endless tale
Of gain by cunning and plus by sale?
Look up the land, look down the land,
The poor, the poor, the poor, they stand [21]
Wedged by the pressing of Trade's hand
Against an inward-opening door
That pressure tightens evermore:
They sigh a monstrous foul-air sigh
For the outside leagues of liberty,
Where Art, sweet lark, translates the sky
Into a heavenly melody.
`Each day, all day' (these poor folks say),
`In the same old year-long, drear-long way,
We weave in the mills and heave in the kilns, [31]
We sieve mine-meshes under the hills,
And thieve much gold from the Devil's bank tills,
To relieve, O God, what manner of ills? --
The beasts, they hunger, and eat, and die;
And so do we, and the world's a sty;
Hush, fellow-swine: why nuzzle and cry?
"Swinehood hath no remedy" ....

The rest of your drunken raving was equally spurious crap.

Posted by: Mike on May 28, 2007 at 5:52 PM | PERMALINK

Nice post to think on.

I was inclined rather to take issue with his contention that rationality goes away because we don't think our vote counts. I don't think that's it.

If we were truly rational actors in voting for president, we would have governors, members of congress, and several others submit their resumes. We would look at their performance and testamonials and how it relates to the job they're applying for, and we'd pick a president the way a personnel officer picks a job applicant.

Instead, I see all of the people who deride the choice of the unqualified Bush, based on his supposed charisma, lining up behind three candidates with very little resume but are considered "stars" because they are well-known or can read a good speech.

Where's the rationality in that?

Posted by: catherineD on May 28, 2007 at 8:25 PM | PERMALINK

Thanks, Doc at the Radar Station, I'll be sure to look that article up.

As to Adam Smith, this below is from my book, which I would finish if I could find a publisher:

The primary basis of the right-wing elites' selfishness justification campaign is the notion that the father of modern economics, Adam Smith, proved that indulging one's self-interest to the exclusion of all else is a good thing. The allegation is based on one sentence in Smith?s most widely read book, Wealth of Nations: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." In other words, merchants will not give us the components of our dinner unless we pay them.

But even Smith did not believe that receiving money for their wares is merchants' only motivation. Looking at the famous sentence in the context of the paragraph in which it appears sheds some light on what Smith may have actually meant, as opposed to what he is presumed today to have meant.

"[M]an has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only." [Emphasis added.]

So Smith himself was aware that some force must limit self-interest, at least in business dealings. After all, as clinical psychologist Kenneth Lux pointed out in Adam Smith?s Mistake, pure self-interest should lead butchers, brewers, and bakers to cheat us if they can, to put their thumbs on the scale when weighing their contributions to our dinner, making us pay more than we actually owe them. As Lux says, "It is not self-interest that prevents someone from cheating. Self-interest only dictates that they not get caught."

In the vast majority of our business dealings, people do not cheat us. What, then, is the correcting mechanism? Lux goes on to discuss Smith's idea of what the countervailing force must be.

"Smith's forthright talk of businessmen cheating and oppressing the public seems to stand in direct contradiction to his advocacy of self-interest as the sole principle necessary for the achievement of the public good. The saving grace was supposed to be the 'invisible hand' of competition. It was competition that would keep these instincts and 'expensive vanities' of the merchants, dealers, and landlords in line."...

Today's crony capitalists have given us countless examples of how easily competition can be thwarted. They carve up markets, fix prices, and drive competitors out of business using unfair, even ruthless tactics. It is for these reasons that every country in the world puts restrictions on businesses, limitations meant in many cases to prevent collusion and to promote honesty and competition.

Carolyn Kay
MakeThemAccountable.com

Posted by: Carolyn Kay on May 29, 2007 at 8:57 AM | PERMALINK

mike kook at 8:51 AM:
....Tom Jefferson and I would get along just fine....
I doubt if Tomas Jefferson would have found you to be congenial.

...For the Bush-haters out there, have you ever considered that the Presidency not only shouldn't matter that much in a healthy democracy, but in fact doesn't? .... Even all the war spending didn't permanently end the Depression....
So you maintain that imperial, anti-democratic presidencies don't matter? When presidents violate the laws of the land and the constitution as blatantly as Reagan and Bush did with impunity, it puts the nation at peril and vitiates the notion of democracy.

Neither the first or second New Deal ended the depression, but in 1941 the economy increased to beyond pre-depression levels. The reason for the failures of the New Deal was the reluctance of FDR to engage in deficit spending to boost the economy overall. That happened in '41 due to war spending. It is now standard economic thinking that the war spending did, in fact, end the depression.

In the post war period, the US economy was supreme and the Marshall Plan helped devastated Europe rebuilt. Since Sweden, Norway and other "socialist" economies now enjoy the world's highest standard of living with the least income disparity and the largest economic mobility, you're talking rubbish.

Italian momism is not generally regarded as desirable by young women in Italy and the Church has historically allied itself with reactionary governments against social justice although some brave individuals within the church have gone against higher officials.

Posted by: Mike on May 29, 2007 at 1:30 PM | PERMALINK




 

 

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