Welcome to Keith and I don't tread on anyone in the Libertarian Institute. This article is vitally important when it comes to understanding what people like Thomas all mean when they say the most important question in political discussions you can ask is compared to what the article is by gentleman named Michael Munger. He says every flaw in consumers is worse in voters. Markets aren't perfect, but politics is worse, Munger says. I have been making a mistake for most of my life.
See, I'm an economist, and one of the things that attracted me to economics is the notion of the ideal economy. This, by the way, is nothing to be ashamed of. When government advocates are constantly saying I support this or that policy, they don't say, well, realistically, here's what governments have done in the past and here's the incentive structure and what they're likely to do in the future. They say ideally we will go into Libya, remove Gaddafi, and the
people of Libya will be free. Ideally, we will have Medicaid. This way, anyone who can afford healthcare can have it, and all poor people can have access to healthcare through Medicaid. They never talk about the reality of the situation. It's always their ideal politician, Munger continues. Of course there are valid objections to the use of markets. There are people who cheat and commit fraud, and there are problems with information and
market power and externalities. Sometimes consumers make mistakes. In fact, some of those mistakes, as my friend and Duke colleague Dan Arley is fond of telling me, raise questions about the very nature of our ideal model of consumption. In his book Predictably Irrational, Dan makes 2 points. First, consumers are not rational, at least not in the sense economists assume. Consumers have trouble choosing among several alternatives. New product prices are arbitrary, and people are
seduced by free stuff. Second, sellers and marketers know that consumers are predictably irrational, and they take advantage of that weakness by advertising, packaging, and carefully framed comparison. So what's the mistake I've been making? For most of my life, I've been trying to defend the perfection of markets. I've been sucked into the notion that markets are ideal, markets aren't so bad, consumers are generally better off, and so on.
Friends, if you have been defending the perfection of markets, you have been played for ASAP, stop it. The simple fact is that people can be hoodwinked. People. Human beings. The results of behavioral economists and psychologists such as Dan Arley, Richard Taylor and others are correct and persuasive. But when someone uses those results to criticize markets and stops there, they are not playing fair because the criticism of markets always has to be in reference to some other system.
Markets are bad compared to what? If you are confronted with someone who has been reading behavioral economics, I would recommend that you grant their claims People are not that great at making decisions, but then challenge your friend with this. Every flaw in consumers is worse in voters. Think about it. Every flaw that people point out in consumer choice is present, but much worse in political choice.
Asymmetric information about quality, where producers have more knowledge about the product than consumers. Check. Consumers can look at ratings or Consumer Reports to learn about product quality, but it's very difficult to know when a politician is lying unless you buy the old line that it's when their lips are moving. Monopoly Check. Yes, the cable company is pretty bad, but the state is the very definition of monopoly. Your only escape is to move to some other monopoly.
There was never competition and the bureaucrats down at the Department of Motor Vehicles know that. That's why they treat you so badly. Also could give a shout out to the Pentagon as well. Spend about a trillion dollars and killed about 20,000 people in Afghanistan to replace the Taliban with the Taliban after 11 days. Third Point. Seductive and misleading advertising is why markets are immoral. So you just have to ask
yourself, do we any see? Do we ever see seductive and misleading advertising when it comes to the political realm? When politicians talk, Monger says check. Maybe I do buy those new Nike kicks because they promised to make me like Mike. And maybe that Twix bar by the checkout counter is too tempting to resist. But at least I like Twix. Politicians place themselves in ads all over the place, like photo bombers from hell. And how often do we really get what we're promised?
Seduced by free stuff? Check Early notes, rightly, that people will often and irrationally choose the free alternative and will fail to understand the other costs of free stuff, like waiting in line or filling out paperwork. Frankly, that sounds to me like a pretty good description of government programs ranging from our new healthcare system. It's all free to recycling programs which conserve on everything except time, which is the one resource that is truly
non renewable. I've seen people waste 10 minutes and $0.50 worth of gas to recycle to plastic soft drink bottles and a cardboard box worth a total of a nickel. But since recycling gives us free resources, it must be worth it. A number of recent books, Brian Kaplan's Myth of the Rational Voter, Elia Salmons, Democracy and Political Ignorance, have made this point. But for some reason, advocates for liberty don't close the
circle very well in debates. Here's the fact people do a poor job of acquiring information and using it to make decisions in the way that the rational choice model predicts. Here's the conclusion. This has implications for the capacity of consumers to benefit from markets, because consumers are people. But the conclusion also has to be that voters have the same problem. Unless you think people are dumb in the supermarket but miraculously smart in the voting booth, it's the same person.
Why are voters even Dumber than consumers? Consider this A consumer who buys a bad television, or pays too much for a coffee maker, or gets ripped off on an investment, is stuck with bad TV or loses her own money on the coffee maker or the dumb stock buy. It happens, but you learn from your mistake. This is called market feedback and make a better decision next
time around. Voters, on the other hand, have even less information, have no way of getting accurate information, and know that their choices won't determine the outcome anyway. This is one of the great contradictions of statism. They'll always say, look, if you're suspected of a crime and you have nothing to hide, hide nothing. Also, the government actively classifieds millions and millions of documents. If you ever try to look into those, you are suspected to be a
terrorist. So governments explicitly brag about restricting information from the population under the guise of helping that same population. Bunker continues. If I spend months learning about the candidates and then cast my vote for president, it has absolutely 0 pack impact on the outcome. Not small mind you. Zero. I still vote, of course I'm a good citizen, but I vote for the candidate who makes me feel good.
As Jason Brennan has pointed out in Ethics of Voting, this breaks the connection between civic commitment, voting, and desirable outcomes. Good government, ignorant, irrational voters don't just make themselves worse off. They can harm everyone. People choose badly, but they choose worse as voters than they do as consumers. So unless you believe in suspending democracy, that's a pretty powerful argument for markets.
So one thing that I want to reiterate is This is why I more or less believe that democracy or getting people involved in politics and the masses need to, you know, start reading more. They need to start voting, they need to start showing up at town halls is simply this rational ignorance aspect.
So even though a very small portion of Americans are involved in agriculture, it's probably a good thing because they are able to produce, through the division of Labor, a great deal of food for the rest of us to eat. So the fact that I am totally ignorant about planes and computers and agriculture and ceiling fans and microphones doesn't mean I'm not able to benefit from them. There's other experts who are in those fields.
And even if people took all the time in the world to get totally informed about the candidates and the policies, future legislation, proposed legislation, historical legislation, economics, history, philosophy, logic, the schooling system, the healthcare system, if they spend thousands and thousands of hours, they only get a one in 10 million vote. And you know, allegedly the votes are counted.
Michael Munger actually followed up on this article from the American Institute for Economic Research. She says the reason I wanted to restate my earlier claims is that a big part of the argument was simply mistaken. My naive and frankly arrogant claim before was that people simply did not understand the public choice counter arguments to rational democratic choice. In my defense, the textbook version of the market failure argument goes like this.
Markets on their own fail to achieve Pareto optimal results. Therefore the state can in principle do better. Therefore, the state should be entrusted with deciding when and where to overrule the outcomes that markets would produce because literally everyone will be better off and Pareto improvements are ethically uncontroversial. I do not know if this is a claim that is made by market failure advocates. Literally everyone will be
better off. I think their claim is that, well, it'll hurt the 1% and Jeff Bezos and Warren Buffett, but it'll help the masses, Munger continues. As many have pointed out, this comparison of markets as they are with the action of the state in principle is poor logic.
It begs the empirical question of whether actual politics as they are, will be better for everyone that actual markets as they are the public choice counter arguments unites 2 lines of reasoning 1. Bureaucrats lack the information they would need to identify the allocation of resources that would in principle improve on the market allocation. By definition, market failures are settings where prices do not accurately reflect the opportunity cost of resources.
But then bureaucrats don't have prices as a guide, and the government has a knowledge problem, just like markets, and actually for the same reason reason #2 politicians lack the incentives they would need to implement the allocation of resources that would in principle improve on the market
allocation. Given the confusion and intentional misinformation the party heaps on voters, the choice between the right policy assuming problem one doesn't exist, and that political leaders know the right policy and the policy that will get me reelected creates reasons for
politicians to act badly. So, number one, they don't have access to the right information to even if by some miracle they did have access to the right information, they don't have the incentive to make sure the right policy is implemented. And of course, right policy is so vague that that's why we need a free market and everything, because we need the freedom to disassociate with bad actors. But just look at the logic that is laid out with the market failure argument.
They're saying people voluntarily, through mutually beneficial voluntary exchanges, yield on ideal results. Well, imperfect people ever since Eve ate that apple, humans have been imperfect, and they're claiming that the existence of imperfection justifies a state coercively intervening. A third party gets to coercively intervene even when consenting adults are engaged in mutually beneficial voluntary exchanges. It is simply like saying Arizonans are imperfect people. Okay. That's correct.
And therefore Nebraskans have the right to coercively rule over Arizonans. The immediate question is, well, aren't Nebraskans also imperfect? And even if they were, by some miracle of Nebraskans were perfect, why does this group have a right to coercively rule over the other group? The It's all absolute nonsense and just a rationalization for domestic imperialists who believe all 330 million Americans should have to bow down to Washington, DC, Munger continues.
Now I have tried for years to do research illustrating the problems of government failure as a primary problem for policy debate and democracy. The 2015 paper with William Cleach, The Anatomy of Government Failure, was the most extensive version of this work, and I think it's still important. But I've come to realize that I was the naive 1. The advocates for government action and direct planning of the economy understood the
problem long ago. One of the first to understand it, this was the British economist Arthur Pigu in 1920 said the following. In any industry where there was reason to believe that the free play of selfinterest will cause an amount of resources to be invested different from the amount of that is required in the best interest of the national dividend, there was prima facia case for public intervention. The case, however, cannot be
more than a prima facia. 1 Until we have considered the qualifications which government agencies may be expected to possess for intervening advantageously, it is not sufficient to contrast the imperfect adjustments of unfettered private enterprise with the best adjustment that economists in their studies can't imagine.
So, in other words, what he's saying If we're making a genuine comparison, we have to do ideal market versus ideal politics, or the reality of a free market and the reality of what politicians yield 4 We cannot expect that any public authority will attain, or will even wholeheartedly seek that ideal.
Such authorities are liable alike to ignorance, to selection, pressure into personal corruption by private interest, a loud voice, part of their constituents, if organized for votes, may easily outweigh the whole. The objection to public intervention in industry applies both to intervention through control of private companies and to intervention through direct public operation. Folks, it's all there. Ignorance, The knowledge problem, interest groups, Corruption.
Voting blocks, the incentive problem. Pigu was actually a founding father of the public choice movement. But then what the heck? If progressives understood that the politics of democracy meant that market processes were no worse and might be better than elections, why did they favor expanding government? The answer is that progressives did not do not favor democracy, at least not majoritarian democracy.
They favor the suppression of individual discretion in favor of centralized planning, government control and direction of resources, and the suppression of individual discretion. This is such a vitally important point because the progressives will say it's vitally important that we fight for you to get one vote every four years between two lying politicians. But if you want to get a job, you need to get an occupational license. If you want to start a business, well, you got to get tons of
business licenses. And if you want to spend your money a certain way, well, we're going to have tariffs on certain countries just to protect domestic workers. And we're going to forcibly confiscate a large portion of that income and give it to other people, even though you've worked for it and we're exploiting your surplus value in this case. So this sentence is vitally
important. Progressives favor the suppression of individual discretion in favor of coerced centralized planning, government control and direction of resources, and the suppression of individual discretion. It's the progressive social contract. Government experts know what voters should want and would want if they were correctly informed and had altruistic motives. Real voters fall short of this
ideal, of course. But that's why voters should want to give up their own power to make free, wrong choices in favor of a priesthood of technocrats who will run things. Pigu was not alone. Everyone in the progressive movement fully recognized the problem with populist movements on the left or right. Paternalism is their preferred alternative to actual agnostic politics, and the reason was government failure, not market failure. I will link to Michael Mongers. Excellent work in the
description. Thank you for watching Keith Knight. Don't tread on anyone in the Libertarian Institute.