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Welcome to Keith and I don't 
tread on anyone in the 

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Libertarian Institute. 
This article is vitally 

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important when it comes to 
understanding what people like 

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Thomas all mean when they say 
the most important question in 

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political discussions you can 
ask is compared to what the 

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article is by gentleman named 
Michael Munger. 

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He says every flaw in consumers 
is worse in voters. 

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Markets aren't perfect, but 
politics is worse, Munger says. 

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I have been making a mistake for
most of my life. 

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See, I'm an economist, and one 
of the things that attracted me 

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to economics is the notion of 
the ideal economy. 

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This, by the way, is nothing to 
be ashamed of. 

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When government advocates are 
constantly saying I support this

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or that policy, they don't say, 
well, realistically, here's what

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governments have done in the 
past and here's the incentive 

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structure and what they're 
likely to do in the future. 

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They say ideally we will go into
Libya, remove Gaddafi, and the 

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people of Libya will be free. 
Ideally, we will have Medicaid. 

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This way, anyone who can afford 
healthcare can have it, and all 

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poor people can have access to 
healthcare through Medicaid. 

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They never talk about the 
reality of the situation. 

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It's always their ideal 
politician, Munger continues. 

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Of course there are valid 
objections to the use of 

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markets. 
There are people who cheat and 

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commit fraud, and there are 
problems with information and 

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market power and externalities. 
Sometimes consumers make 

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mistakes. 
In fact, some of those mistakes,

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as my friend and Duke colleague 
Dan Arley is fond of telling me,

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raise questions about the very 
nature of our ideal model of 

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consumption. 
In his book Predictably 

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Irrational, Dan makes 2 points. 
First, consumers are not 

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rational, at least not in the 
sense economists assume. 

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Consumers have trouble choosing 
among several alternatives. 

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New product prices are 
arbitrary, and people are 

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seduced by free stuff. 
Second, sellers and marketers 

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know that consumers are 
predictably irrational, and they

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take advantage of that weakness 
by advertising, packaging, and 

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carefully framed comparison. 
So what's the mistake I've been 

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making? 
For most of my life, I've been 

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trying to defend the perfection 
of markets. 

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I've been sucked into the notion
that markets are ideal, markets 

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aren't so bad, consumers are 
generally better off, and so on.

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Friends, if you have been 
defending the perfection of 

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markets, you have been played 
for ASAP, stop it. 

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The simple fact is that people 
can be hoodwinked. 

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People. 
Human beings. 

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The results of behavioral 
economists and psychologists 

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such as Dan Arley, Richard 
Taylor and others are correct 

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and persuasive. 
But when someone uses those 

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results to criticize markets and
stops there, they are not 

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playing fair because the 
criticism of markets always has 

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to be in reference to some other
system. 

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Markets are bad compared to 
what? 

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If you are confronted with 
someone who has been reading 

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behavioral economics, I would 
recommend that you grant their 

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claims People are not that great
at making decisions, but then 

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challenge your friend with this.
Every flaw in consumers is worse

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in voters. 
Think about it. 

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Every flaw that people point out
in consumer choice is present, 

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but much worse in political 
choice. 

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Asymmetric information about 
quality, where producers have 

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more knowledge about the product
than consumers. 

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Check. 
Consumers can look at ratings or

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Consumer Reports to learn about 
product quality, but it's very 

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difficult to know when a 
politician is lying unless you 

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buy the old line that it's when 
their lips are moving. 

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Monopoly Check. 
Yes, the cable company is pretty

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bad, but the state is the very 
definition of monopoly. 

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Your only escape is to move to 
some other monopoly. 

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There was never competition and 
the bureaucrats down at the 

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Department of Motor Vehicles 
know that. 

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That's why they treat you so 
badly. 

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Also could give a shout out to 
the Pentagon as well. 

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Spend about a trillion dollars 
and killed about 20,000 people 

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in Afghanistan to replace the 
Taliban with the Taliban after 

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11 days. 
Third Point. 

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Seductive and misleading 
advertising is why markets are 

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immoral. 
So you just have to ask 

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yourself, do we any see? 
Do we ever see seductive and 

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misleading advertising when it 
comes to the political realm? 

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When politicians talk, Monger 
says check. 

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Maybe I do buy those new Nike 
kicks because they promised to 

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make me like Mike. 
And maybe that Twix bar by the 

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checkout counter is too tempting
to resist. 

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But at least I like Twix. 
Politicians place themselves in 

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ads all over the place, like 
photo bombers from hell. 

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And how often do we really get 
what we're promised? 

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Seduced by free stuff? 
Check Early notes, rightly, that

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people will often and 
irrationally choose the free 

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alternative and will fail to 
understand the other costs of 

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free stuff, like waiting in line
or filling out paperwork. 

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Frankly, that sounds to me like 
a pretty good description of 

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government programs ranging from
our new healthcare system. 

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It's all free to recycling 
programs which conserve on 

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everything except time, which is
the one resource that is truly 

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non renewable. 
I've seen people waste 10 

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minutes and $0.50 worth of gas 
to recycle to plastic soft drink

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bottles and a cardboard box 
worth a total of a nickel. 

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But since recycling gives us 
free resources, it must be worth

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it. 
A number of recent books, Brian 

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Kaplan's Myth of the Rational 
Voter, Elia Salmons, Democracy 

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and Political Ignorance, have 
made this point. 

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But for some reason, advocates 
for liberty don't close the 

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circle very well in debates. 
Here's the fact people do a poor

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job of acquiring information and
using it to make decisions in 

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the way that the rational choice
model predicts. 

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Here's the conclusion. 
This has implications for the 

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capacity of consumers to benefit
from markets, because consumers 

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are people. 
But the conclusion also has to 

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be that voters have the same 
problem. 

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Unless you think people are dumb
in the supermarket but 

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miraculously smart in the voting
booth, it's the same person. 

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Why are voters even Dumber than 
consumers? 

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Consider this A consumer who 
buys a bad television, or pays 

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too much for a coffee maker, or 
gets ripped off on an 

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investment, is stuck with bad TV
or loses her own money on the 

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coffee maker or the dumb stock 
buy. 

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It happens, but you learn from 
your mistake. 

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This is called market feedback 
and make a better decision next 

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time around. 
Voters, on the other hand, have 

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even less information, have no 
way of getting accurate 

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information, and know that their
choices won't determine the 

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outcome anyway. 
This is one of the great 

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contradictions of statism. 
They'll always say, look, if 

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you're suspected of a crime and 
you have nothing to hide, hide 

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nothing. 
Also, the government actively 

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classifieds millions and 
millions of documents. 

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If you ever try to look into 
those, you are suspected to be a

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terrorist. 
So governments explicitly brag 

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about restricting information 
from the population under the 

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guise of helping that same 
population. 

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Bunker continues. 
If I spend months learning about

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the candidates and then cast my 
vote for president, it has 

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absolutely 0 pack impact on the 
outcome. 

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Not small mind you. 
Zero. 

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I still vote, of course I'm a 
good citizen, but I vote for the

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candidate who makes me feel 
good. 

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As Jason Brennan has pointed out
in Ethics of Voting, this breaks

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the connection between civic 
commitment, voting, and 

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desirable outcomes. 
Good government, ignorant, 

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irrational voters don't just 
make themselves worse off. 

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They can harm everyone. 
People choose badly, but they 

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choose worse as voters than they
do as consumers. 

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So unless you believe in 
suspending democracy, that's a 

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pretty powerful argument for 
markets. 

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So one thing that I want to 
reiterate is This is why I more 

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or less believe that democracy 
or getting people involved in 

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politics and the masses need to,
you know, start reading more. 

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They need to start voting, they 
need to start showing up at town

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halls is simply this rational 
ignorance aspect. 

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So even though a very small 
portion of Americans are 

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involved in agriculture, it's 
probably a good thing because 

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they are able to produce, 
through the division of Labor, a

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great deal of food for the rest 
of us to eat. 

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So the fact that I am totally 
ignorant about planes and 

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computers and agriculture and 
ceiling fans and microphones 

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doesn't mean I'm not able to 
benefit from them. 

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There's other experts who are in
those fields. 

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And even if people took all the 
time in the world to get totally

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informed about the candidates 
and the policies, future 

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legislation, proposed 
legislation, historical 

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legislation, economics, history,
philosophy, logic, the schooling

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system, the healthcare system, 
if they spend thousands and 

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thousands of hours, they only 
get a one in 10 million vote. 

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And you know, allegedly the 
votes are counted. 

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Michael Munger actually followed
up on this article from the 

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American Institute for Economic 
Research. 

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She says the reason I wanted to 
restate my earlier claims is 

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that a big part of the argument 
was simply mistaken. 

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My naive and frankly arrogant 
claim before was that people 

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simply did not understand the 
public choice counter arguments 

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to rational democratic choice. 
In my defense, the textbook 

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version of the market failure 
argument goes like this. 

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Markets on their own fail to 
achieve Pareto optimal results. 

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Therefore the state can in 
principle do better. 

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Therefore, the state should be 
entrusted with deciding when and

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where to overrule the outcomes 
that markets would produce 

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because literally everyone will 
be better off and Pareto 

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improvements are ethically 
uncontroversial. 

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I do not know if this is a claim
that is made by market failure 

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advocates. 
Literally everyone will be 

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better off. 
I think their claim is that, 

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well, it'll hurt the 1% and Jeff
Bezos and Warren Buffett, but 

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it'll help the masses, Munger 
continues. 

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As many have pointed out, this 
comparison of markets as they 

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are with the action of the state
in principle is poor logic. 

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It begs the empirical question 
of whether actual politics as 

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they are, will be better for 
everyone that actual markets as 

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they are the public choice 
counter arguments unites 2 lines

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of reasoning 1. 
Bureaucrats lack the information

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they would need to identify the 
allocation of resources that 

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would in principle improve on 
the market allocation. 

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By definition, market failures 
are settings where prices do not

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accurately reflect the 
opportunity cost of resources. 

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But then bureaucrats don't have 
prices as a guide, and the 

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government has a knowledge 
problem, just like markets, and 

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actually for the same reason 
reason #2 politicians lack the 

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incentives they would need to 
implement the allocation of 

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resources that would in 
principle improve on the market 

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allocation. 
Given the confusion and 

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intentional misinformation the 
party heaps on voters, the 

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choice between the right policy 
assuming problem one doesn't 

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exist, and that political 
leaders know the right policy 

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and the policy that will get me 
reelected creates reasons for 

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politicians to act badly. 
So, number one, they don't have 

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access to the right information 
to even if by some miracle they 

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did have access to the right 
information, they don't have the

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incentive to make sure the right
policy is implemented. 

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And of course, right policy is 
so vague that that's why we need

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a free market and everything, 
because we need the freedom to 

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disassociate with bad actors. 
But just look at the logic that 

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is laid out with the market 
failure argument. 

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They're saying people 
voluntarily, through mutually 

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beneficial voluntary exchanges, 
yield on ideal results. 

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Well, imperfect people ever 
since Eve ate that apple, humans

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have been imperfect, and they're
claiming that the existence of 

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imperfection justifies a state 
coercively intervening. 

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A third party gets to coercively
intervene even when consenting 

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adults are engaged in mutually 
beneficial voluntary exchanges. 

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It is simply like saying 
Arizonans are imperfect people. 

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Okay. 
That's correct. 

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And therefore Nebraskans have 
the right to coercively rule 

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over Arizonans. 
The immediate question is, well,

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aren't Nebraskans also 
imperfect? 

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00:13:35,670 --> 00:13:38,710
And even if they were, by some 
miracle of Nebraskans were 

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perfect, why does this group 
have a right to coercively rule 

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over the other group? 
The It's all absolute nonsense 

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and just a rationalization for 
domestic imperialists who 

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believe all 330 million 
Americans should have to bow 

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down to Washington, DC, Munger 
continues. 

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Now I have tried for years to do
research illustrating the 

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problems of government failure 
as a primary problem for policy 

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debate and democracy. 
The 2015 paper with William 

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Cleach, The Anatomy of 
Government Failure, was the most

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extensive version of this work, 
and I think it's still 

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important. 
But I've come to realize that I 

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was the naive 1. 
The advocates for government 

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action and direct planning of 
the economy understood the 

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problem long ago. 
One of the first to understand 

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it, this was the British 
economist Arthur Pigu in 1920 

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said the following. 
In any industry where there was 

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reason to believe that the free 
play of selfinterest will cause 

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an amount of resources to be 
invested different from the 

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amount of that is required in 
the best interest of the 

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national dividend, there was 
prima facia case for public 

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intervention. 
The case, however, cannot be 

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more than a prima facia. 1 Until
we have considered the 

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qualifications which government 
agencies may be expected to 

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possess for intervening 
advantageously, it is not 

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sufficient to contrast the 
imperfect adjustments of 

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unfettered private enterprise 
with the best adjustment that 

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economists in their studies 
can't imagine. 

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So, in other words, what he's 
saying If we're making a genuine

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comparison, we have to do ideal 
market versus ideal politics, or

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the reality of a free market and
the reality of what politicians 

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yield 4 We cannot expect that 
any public authority will 

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attain, or will even 
wholeheartedly seek that ideal. 

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Such authorities are liable 
alike to ignorance, to 

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selection, pressure into 
personal corruption by private 

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interest, a loud voice, part of 
their constituents, if organized

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for votes, may easily outweigh 
the whole. 

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The objection to public 
intervention in industry applies

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both to intervention through 
control of private companies and

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to intervention through direct 
public operation. 

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Folks, it's all there. 
Ignorance, The knowledge 

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problem, interest groups, 
Corruption. 

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Voting blocks, the incentive 
problem. 

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Pigu was actually a founding 
father of the public choice 

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movement. 
But then what the heck? 

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If progressives understood that 
the politics of democracy meant 

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that market processes were no 
worse and might be better than 

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elections, why did they favor 
expanding government? 

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The answer is that progressives 
did not do not favor democracy, 

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at least not majoritarian 
democracy. 

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They favor the suppression of 
individual discretion in favor 

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of centralized planning, 
government control and direction

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of resources, and the 
suppression of individual 

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discretion. 
This is such a vitally important

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00:17:00,610 --> 00:17:03,690
point because the progressives 
will say it's vitally important 

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that we fight for you to get one
vote every four years between 

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two lying politicians. 
But if you want to get a job, 

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you need to get an occupational 
license. 

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If you want to start a business,
well, you got to get tons of 

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business licenses. 
And if you want to spend your 

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money a certain way, well, we're
going to have tariffs on certain

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00:17:21,920 --> 00:17:24,720
countries just to protect 
domestic workers. 

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00:17:24,720 --> 00:17:27,079
And we're going to forcibly 
confiscate a large portion of 

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00:17:27,079 --> 00:17:29,880
that income and give it to other
people, even though you've 

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00:17:29,880 --> 00:17:33,480
worked for it and we're 
exploiting your surplus value in

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00:17:33,480 --> 00:17:36,000
this case. 
So this sentence is vitally 

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00:17:36,000 --> 00:17:38,480
important. 
Progressives favor the 

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00:17:38,480 --> 00:17:42,760
suppression of individual 
discretion in favor of coerced 

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00:17:42,960 --> 00:17:46,800
centralized planning, government
control and direction of 

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00:17:46,800 --> 00:17:49,840
resources, and the suppression 
of individual discretion. 

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00:17:50,320 --> 00:17:52,200
It's the progressive social 
contract. 

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00:17:52,640 --> 00:17:56,080
Government experts know what 
voters should want and would 

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00:17:56,080 --> 00:17:59,360
want if they were correctly 
informed and had altruistic 

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00:17:59,360 --> 00:18:02,080
motives. 
Real voters fall short of this 

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00:18:02,080 --> 00:18:04,640
ideal, of course. 
But that's why voters should 

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00:18:04,640 --> 00:18:09,810
want to give up their own power 
to make free, wrong choices in 

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00:18:09,810 --> 00:18:12,810
favor of a priesthood of 
technocrats who will run things.

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00:18:13,330 --> 00:18:16,450
Pigu was not alone. 
Everyone in the progressive 

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00:18:16,450 --> 00:18:19,610
movement fully recognized the 
problem with populist movements 

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00:18:19,690 --> 00:18:23,490
on the left or right. 
Paternalism is their preferred 

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00:18:23,490 --> 00:18:28,730
alternative to actual agnostic 
politics, and the reason was 

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00:18:28,730 --> 00:18:32,050
government failure, not market 
failure. 

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00:18:32,570 --> 00:18:35,730
I will link to Michael Mongers. 
Excellent work in the 

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00:18:35,730 --> 00:18:37,450
description. 
Thank you for watching Keith 

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00:18:37,450 --> 00:18:39,210
Knight. 
Don't tread on anyone in the 

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Libertarian Institute.