In theory, democracy is a bulwark against socially harmful policies. In practice, however, democracies frequently adopt and maintain policies that are damaging. How can this paradox be explained?
The influence of special interests and voter ignorance are two leading explanations. I offer an alternative story of how and why democracy fails. The central idea is that voters are worse than ignorant; they are, in a word, irrational—and they vote accordingly. Despite their lack of knowledge, voters are not humble agnostics; instead, they confidently embrace a long list of misconceptions.
Economic policy is the primary activity of the modern state. And if there is one thing that the public deeply misunderstands, it is economics. People do not grasp the “invisible hand” of the market, with its ability to harmonize private greed and the public interest. I call this anti-market bias. They underestimate the benefits of interaction with foreigners. I call this anti-foreign bias. They equate prosperity not with production, but with employment. I call this make-work bias. Finally, they are overly prone to think that economic conditions are bad and getting worse. I call this pessimistic bias.
In the minds of many, Winston Churchill’s famous aphorism cuts the conversation short: “Democracy is the worst form of government, except all those other forms that have been tried from time to time.” But this saying overlooks the fact that governments vary in scope as well as form. In democracies the main alternative to majority rule is not dictatorship, but markets. A better understanding of voter irrationality advises us to rely less on democracy and more on the market.
INTRODUCTION: THE PARADOX OF DEMOCRACY
In a dictatorship, government policy is often appalling but rarely baffling. The building of the Berlin Wall sparked worldwide outcry, but few wondered, “what are the leaders of East Germany thinking?” That was obvious: they wanted to continue ruling over their subjects, who were inconsiderately fleeing en masse.
No wonder democracy is such a popular political panacea. The history of dictatorships creates a strong impression that bad policies exist because the interests of rulers and ruled diverge. A simple solution is make the rulers and the ruledidentical by giving “power to the people.” If the people decide to delegate decisions to full-time politicians, so what? Those who pay the piper—or vote to pay the piper—call the tune.
This optimistic story is, however, often at odds with the facts. Democracies frequently adopt and maintain policies harmful for most people. Protectionism is a classic example. Economists across the political spectrum have pointed out its folly for centuries, but almost every democracy restricts imports. Admittedly, this is less appalling than the Berlin Wall, yet it is more baffling. In theory, democracy is a bulwark against socially harmful policies, but in practice it gives them a safe harbor.
How can this paradox be explained? One answer is that the people’s “representatives” have turned the tables on them. Elections might be a weaker deterrent to misconduct than they seem on the surface, making it more important to please special interests than the general public. A second answer, which complements the first, is that voters are deeply ignorant about politics. They do not know who their representatives are, much less what they do. This tempts politicians to pursue personal agendas and sell themselves to donors.
I offer 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. Despite their lack of knowledge, voters are not humble agnostics; instead, they confidently embrace a long list of misconceptions.
When cataloging the failures of democracy, one must keep things in perspective. The shortcomings of democracy pale in comparison with those of totalitarian regimes. Democracies do not murder millions of their own citizens. Fair enough, but such comparisons set the bar too low. Now that democracy is the most common form of government, there is little reason to dwell on the truism that it is “better than communism.” It is now more worthwhile to figure out how and why democracy falls short.