Tag Archives: Bryan Caplan

Reading right now: “The Myth of the Rational Voter: Why Democracies Choose Bad Policies.”

Lately, I’ve not had a lot of time to read. But when I have had time, I’ve enjoyed reading the wonkish and pointed “The Myth of the Rational Voter” by Bryan Caplan.

It’s an economist’s look at why, as the sub-title says, voters tend to support bad public policies. The reason, Caplan argues, is not special interests or rampant lobbying, but rather, it is “popular misconceptions, irrational beliefs, and personal biases head by ordinary voters” (from the fly-leaf).

What is interesting, as I have barely begun to read it, is the biases that he points out and, to deepen the plot, as it were, is that economists have long seen and known these biases.

For example:

  • Antimarket Bias: “the tendency to underestimate the economic benefits of the market mechanism.” (p. 30)
  • Antiforeign Bias: “a tendency to underestimate the economic benefits of interaction with foreigners.” (p. 36) Interestingly, Caplan tells in association with this bias of an business associate of his that believes everything wrong with the American economy could be solved with a naval blockade of Japan and a Berlin Wall at the Mexican border…hmmm, I can’t imagine where I’ve heard something like that latter one before.
  • Make-work Bias: “a tendency to underestimate the economic benefits of conserving labor.” (p. 40) In other words, “[w]here noneconomists see the destruction of jobs, economists see the essence of economic growth–the production of more with less.” Not sure how you’d explain that one to the 10% of America who is under or unemployed right now.
  • Pessimistic Bias: “a tendency to overestimate the severity of economic problems and underestimate the recent past, present, and future performance of the economy.” (p. 44) I know one man who must wish this one didn’t exist, and he’s the Cheerleader-in-Chief.
The results? People act irrationally while making ballot box decisions, resulting in public policy that is against their interests. 
Check it out. It’s an interesting read and well worth your time as we move into an election year where the economy really is the only issue.

“I have often wondered why economists, with these absurdities all around them, so easily adopt the view that men act rationally.”

“I have often wondered why economists, with these absurdities all around them, so easily adopt the view that men act rationally.  This may be because they study an economic system in which the discipline of the market ensures that, in a business setting, decisions are more or less rational.  The employee of a corporation who buys something for $10 and sells it for $8 is not likely to do so for long.  Someone who, in a family setting, does much the same thing, may make his wife and children miserable throughout his life.  A politician who wastes his country’s resources on a grand scale may have a successful career.”

Ronald Coase, “Comment on Thomas W. Hazlett” (1998: 577) Quoted in The Myth of the Rational Voter: Why Democracies Choose Bad Policies by Bryan Caplan

Do you really need all that education?

And now for something completely different, let’s ask ourselves the question: DO YOU REALLY NEED ALL THAT EDUCATION?

Arnold Kling doesn’t necessarily think so. Rather, education just separates the “wheat from the chaff. ”

There’s a great debate going on between a some economists over at Econlog.com.  Their question? Does more education endows more benefit, or is it just “signaling” to employers to select the smarter, harder working workers. It’s called “signal theory” and Bryan Caplan explains it like this:

If you haven’t heard, the signaling theory says that to a significant extent, education does not increase workers’ productivity. Instead, the fact that you obtain an education shows that you were more productive all along, which makes employers want to hire you.

Here’s a simple thought experiment to illustrate the distinction. Which would do more for your career: A Princeton education, but no diploma, or a Princeton diploma, but no education?

Does that mean we all take standardized tests in seventh grade and call it good? Enter the workforce at our level of IQ or productivity?  Not necessarily (though there are those who would say that standardized tests already do that):

Even firm believers in the signaling model like myself grant that schools teach some useful skills. But more importantly, this objection only works against specific kinds of signaling. Yes, if all that school signals is IQ, then a test is a cheap substitute. But what if school signals conscientiousness and/orconformism? Think about it this way: Would you want to hire a high school drop-out with a 150 IQ? Probably not, because you’d immediately think “This guy had the brains to do anything. Why didn’t he finish high school? What’s wrong with him?!”

But what about college? That graduate degree?  Necessary. Because it’s part of what differentiates the dumb from the smart, the lazy from the industrious. Academia may be so many hoops to jump through, result in a lot of social waste, but still provide the utility of helping employers find the best workers. It’s a conundrum, but not a contradiction.

You can believe that IQ matters quite a lot for earnings, but still think that education teaches nothing but bona fide job market skills. If this is so, then comparing the earnings of college graduates to high school graduates overstates the private benefit of education. Why? College graduates were smarter to begin with, so they would have earned more money than the typical high school graduate even if they didn’t go to college. Labor economists call this “ability bias.”

Similarly, you can believe that a lot of education is mere signaling, without thinking that IQ by itself puts money in your pocket. Suppose that the world is rigidly credentialist, so that no one will even consider a person without a degree for anything beyond a low-skilled job. If this is so, then comparing the earnings of college graduates to high school graduates overstates the social benefit of education. Why? Because part of the effect of education is just to make yourself look better compared to other people without increasing production.

As a high school drop out with less than a full five years of k-12 public education under my belt, I tend to lean towards the theory that much of public education is time wasted. Even as a high school dropout, I managed to earn a bachelors and a law degree. Neither degree came from Ivy League institutions, but nor were they bottom feeders, either. Quite the contrary. All without the full thirteen years of public education.

I don’t say this to toot my horn, but rather to note that it may not be necessary to attend the full gamut of public education to succeed. On the contrary, it is innate ability (aka IQ) and work ethic that is a greater indicator of success.

That said, I love learning, and I would never have turned down my years of study at Brigham Young or at the University of Utah’s College of Law for anything. Both were very enriching experiences, albeit a bit expensive, and I found them to be personally valuable.

High school, though, I could have done without. Even the year and a half I did attend. Waste. Of. Time.

Check out Bryan Caplan’s posts on the topic here and here.

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