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.