Rational Irrationality and the Micro Foundations of Reform
30 Pages Posted: 8 Aug 2012
Date Written: August 8, 2012
Bryan Caplan’s book The Myth of the Rational Voter (2007) supports the idea that voters indulge in holding irrational beliefs about economic policy because the cost of doing so to the individual is negligible. As a consequences, socially and economically destructive policies receive widespread public support. Furthermore, because there is no private benefit of learning from experience, such policies can persist over time. Voters are biased and do not face sufficient incentives to choose rationally, instead they vote for various private reasons, which Caplan labels biases. We argue here that despite this otherwise dismal outlook on public policy, Caplan's theory leaves two avenues for economically sensible reform: First, when the ex post costs of irrationality are higher than expected, rationally irrational voters will reduce their consumption of irrationality and demand more rational policies. Second, rationally irrational voters can be convinced to rationally update their policy preferences through the use of appealing rhetoric and persuasion by experts (Caplan 2010). We discuss these two avenues for reform using the example of the repeal of the 18th amendment, which as we will show relied on both updating as well as persuasive campaigning.
Keywords: Economics of Regulation, Regulation US: 1913, Public Health, Public Economics
JEL Classification: L51, N42, I18, H00
Suggested Citation: Suggested Citation