The Dull Compulsion of the Economic (#6)

A series of blog entries by D&S collective member Larry Peterson.

Neoliberals are a funny bunch. Always eager to celebrate the dignity and efficiency of the individual, they are increasingly faced with the uncomfortable fact that the worthy individuals themselves reject the very individualistic principles the neoliberals say underpin their individuality. A tricky wicket, indeed.

The latest neo-liberal pundit to confront this paradox in print is the New York Times‘ Nicholas Kristof. In a July 30th editorial, he recommended a book by George Mason University economist Bryan Kaplan, The Myth of the Rational Voter: Why Democracies Choose Bad Policies, calling it “the best political book of the year.” Its basic argument? “That while crowds are good at making predictions, they’re lousy at recognizing their own self-interest.” In other words, the “wisdom of crowds,” so acclaimed by neoliberals only about a year ago, is no longer sufficient to understand–and come up with solutions to–wider questions of politics and society: it must be recognized that collective predictions made by individuals in crowds will only outperform disaggregated, isolated individuals if the subject matter is more-or-less indifferent to them, like the weight of cows, or the date of a Civil war battle; the same success certainly can’t be applied to political choices.

Accordingly, Caplan expostulates: “This book develops an alternative story of how democracy fails. The central idea is that voters are worse than ignorant; they are, in a word, irrational-and vote accordingly.” Thus, you can forget about the massive financial power of special interests, or the stubborn materiality of ideology. It’s all about four primeval “biases”: a suspicion of market outcomes, and a desire to control markets, an anti-foreign bias, a neo-Luddite view that the productivity gains of downsizing or offshoring can have permanent detrimental effects on certain people affected by them, and a tendency to exaggerate economic problems.

It takes very little reflection to counter all these claims. How many truly important “market” outcomes are most Americans exposed to in the fist place, from the value of the dollar to present patent law, even if one assumes that, in some abstract sense, that markets optimize efficiency and welfare? As for the anti-foreign bias, the Economist cited a study last week in which African Americans were shown to agree far less with the ideas that immigrants are likely to commit crime or end up on welfare than whites or Hispanics. And yet, African American have lagged far behind the other groups in employment and other indicators relevant to offshoring and similar economic processes involving foreigners. On productivity, I would offer a countervailing bias: that of workers to accept compensation that doesn’t begin to match productivity gains, or the corporate profits that stem from them: is that not irrational? But it’s not even necessary to make this claim. For some time now, conventional economists like Princeton’s Alan Blinder have been reexamining the effects of offshoring, and arguing that the standard position–which stands 180 degrees on the other side of the “bias”–needs to be reevaluated. As for the pessimistic bias, Kristof writes “Mr. Caplan focuses on economics, but there is also some evidence from research in psychology that we habitually exaggerate military risks compared with health risks.” But Iraq wasn’t a risk at all (didn’t Kristof support the Iraq war?), and the decline in health undergone by much of the population has as much to do with the manipulation of demand by advertisers and lawyers who defend them–some of the most lucrative, and “competitive” sectors of our economy–as it does to some sort of disembodied bias.

Kristof offers, as a small step towards a solution, a call for more economics and statistics education in schools. I personally know of no public high school in the country that does not offer these subjects. But, granting that this call is not rendered thereby completely absurd, it’s interesting to note that, while the former conventional economic view of rationality tended to be assumed, Kristof seems to want to turn the very assumptions placed implicitly in doubt by his hero, Caplan, as a prescription; as a result, rather than a starting point. But, without standing economics totally on its head, and resolving the question of assumptions (as heterodox and even orthodox economists are doing in a piecemeal way now), why would we want to offer them as prescriptions in the first place, especially when Kristof’s ad hoc justifications for them are so poor?

At the end of the day, perhaps the best example of systematic bias would be the tendency of neoliberal pundits to, with ever greater desperation, champion simplistic, poorly-thought-out theses that confirm their prejudices, while condemning the “irrationality” of those who, with greater public support and more empirical data, are coming to reject their theories and policies.

Leave a Reply