Michael: Most of us believe democracy's biggest flaw is corruption or politicians ignoring the people. What if the real problem is the exact opposite? That democracy works perfectly, and gives us the terrible policies we, the voters, actually ask for. Kevin: Whoa, that's a bold claim. You're saying the problem isn't that the system is broken, but that it's working too well? That feels completely backward. Michael: It is, and it’s the core question at the heart of Bryan Caplan's incredibly provocative book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies. Kevin: And Caplan isn't just a pundit; he's an economics professor at George Mason University. I remember when this book came out, it made huge waves. The New York Times even called it “the best political book of the year,” largely because it’s built on some pretty solid, and frankly, surprising, survey data. Michael: Exactly. And it starts with a puzzle that should bother all of us. Think about a policy like protectionism—tariffs and import quotas. For centuries, economists have almost universally agreed that it’s a bad idea. It’s like economic gravity. It makes almost everyone poorer. Kevin: Right, we get cheaper goods from other countries, they get our money to buy our goods, everyone benefits. That’s the standard story. Michael: Yet, protectionism is consistently popular with voters. Why? Why do we, in a democracy, repeatedly vote for policies that demonstrably harm us? That’s the paradox Caplan sets out to solve.

Kevin: Okay, but isn't the simple answer just voter ignorance? People are busy. They have jobs, kids, lives to live. They don't have time to become experts on trade policy. It's not malice, it's just a lack of information. Michael: That's the classic explanation, and it’s part of the story. But Caplan argues it's not enough. In fact, there's a theory called the "Miracle of Aggregation" that suggests democracy should work fine even if most people are ignorant. Kevin: The Miracle of Aggregation? That sounds a little too convenient. Michael: It's a fascinating idea. The classic example is from over a century ago, when the scientist Francis Galton saw a contest at a county fair to guess the weight of an ox. Nearly 800 people participated—butchers, farmers, regular folks. No single person was an expert. Kevin: And let me guess, they were all wildly wrong. Michael: Individually, yes. But Galton took all 787 guesses, averaged them, and found the collective guess was 1,197 pounds. The actual weight of the ox? 1,198 pounds. They were off by a single pound. The crowd, in aggregate, was smarter than any individual in it. Kevin: Wow. Okay, so how does that apply to voting? Michael: The theory is that as long as voters' errors are random—some people are too optimistic, some too pessimistic, but on average they cancel out—the small number of informed voters will tip the election to the correct outcome. The noise cancels, and the signal gets through. Kevin: That makes a certain amount of sense. But what if the errors aren't random? What if most people are systematically wrong in the same direction? Michael: And that is the exact point where Caplan’s big idea comes in. He argues the problem isn't a lack of information, it's a preference for misinformation. He calls it Rational Irrationality. Kevin: Hold on, 'rational irrationality' sounds like a complete contradiction. How can you be rational and irrational at the same time? Break that down for me. Michael: It's about the price of being wrong. In most areas of our lives, being irrational has a direct cost. If you irrationally believe you can fly and jump off a roof, the cost is very high, and very personal. So you have a strong incentive to be rational about gravity. Kevin: Okay, I’m with you so far. Don't jump off roofs. Got it. Michael: But what's the personal cost of holding a wrong belief about, say, the economic effects of immigration? If you vote based on that belief, what is the probability that your single vote will change the outcome of a national election? It’s practically zero. The cost of being wrong is effectively free. Kevin: Ah, I see. So because my vote doesn't matter statistically, I can afford to believe whatever I want without any personal consequence. Michael: Precisely. And since it's free, we "consume" the beliefs that feel good, that flatter our worldview, that fit our ideology, or that give us a sense of belonging to our tribe. We indulge in irrationality because it's emotionally satisfying and carries no personal price tag. Kevin: So it's 'rational' to be 'irrational' because there's no personal downside. That's a mind-bender. Can you give me a non-political example? Michael: Absolutely. Imagine you're at a party, and you confidently declare, "I am sure it's going to rain tomorrow." You might genuinely believe it. But then I say, "Really? Want to bet $100 on it?" Kevin: (Laughs) Suddenly, I’m a lot less sure. I’m pulling out my phone to check three different weather apps. Michael: Exactly! The moment a personal cost is introduced—the risk of losing $100—your standby rationality kicks in. You suddenly have a powerful incentive to find the truth. In the voting booth, there's no bet. You can believe that tariffs create prosperity or that immigrants are ruining the economy, and it costs you nothing personally, even if the collective result of everyone believing that is disastrous.

Michael: And this rational irrationality isn't just random noise. Caplan argues it leads to very specific, systematic errors in how we think about the economy. He identifies four of them. Kevin: Like the four horsemen of the economic apocalypse? Michael: That's a perfect way to put it! The first horseman is Antimarket Bias. This is a deep-seated tendency to underestimate the economic benefits of the market mechanism. It’s a suspicion of the profit motive. Kevin: Right, like when a company posts record profits, the immediate public reaction is often, "They must be ripping us off!" The thought isn't, "Wow, they must be creating a ton of value that people are willing to pay for." Michael: Exactly. People tend to see profit as a transfer—something taken from the consumer or worker—rather than as an incentive that drives innovation, efficiency, and coordination. The second horseman is Antiforeign Bias. This is a tendency to underestimate the benefits of interacting with foreigners. Kevin: The fear of "them" taking "our" jobs. Michael: Precisely. Trade is often framed as a war or a race, where if another country is winning, we must be losing. To counter this, there's a brilliant analogy about "growing automobiles in Iowa." Kevin: Growing cars? What are you talking about? Michael: Imagine there are two ways to produce cars in America. One is to build them in a factory in Detroit. The other is to grow wheat in Iowa, load it onto ships, send it to Japan, and have the ships come back full of Toyotas. The economic logic is identical. Trading wheat for cars is just a very efficient technology for turning wheat into cars. But we see the factory as "ours" and the trade as "theirs." Kevin: That's a fantastic analogy. It completely reframes trade from a competition to just another, more efficient, form of production technology. Okay, what's the third horseman? Michael: The Make-Work Bias. This is the tendency to underestimate the benefits of conserving labor. We see job creation as the goal, rather than production. We think saving labor—becoming more efficient—is a danger, not a sign of progress. Kevin: This one feels very intuitive. The fear of automation, the fear of downsizing. People see a headline about a company laying off 500 workers and think it's a tragedy, not a sign that we can now produce the same output with fewer people, freeing them up to do other things. Michael: Exactly. Think about agriculture. In 1800, it took about 95% of the American population to feed the country. Today it's less than 3%. If we had a "farm jobs" program to "save" all those jobs, we'd have no one left to be doctors, engineers, or podcast hosts. The progress came from eliminating that work, not preserving it. Kevin: A powerful point. And the final horseman? Michael: Pessimistic Bias. A tendency to believe economic conditions are bad and getting worse, even when objective data shows long-term progress. People have a "rosy past" bias and tend to overstate present problems. Caplan tells a personal story about being a kid during the 80s and hearing constant antidrug propaganda that predicted a dystopian future of a degenerate workforce. It never materialized. Kevin: It's the "things were better in my day" fallacy, scaled up to the entire economy. We focus on the negative headlines and forget the massive improvements in living standards over decades.

Michael: So let's connect the dots. If voters are systematically biased in these four ways, and democracy is a system designed to give voters what they want... you start to see the terrifying conclusion Caplan is building towards. Kevin: Which is what? That we should just get rid of democracy and let a council of economists run everything? That sounds pretty elitist. Michael: He knows it sounds that way, and he tackles it head-on. He's not arguing for a dictatorship. He says democracy is clearly better than totalitarianism. But he argues that the more relevant comparison is between democracy and markets. This is where he critiques what he calls "Democratic Fundamentalism." Kevin: That's a term that's definitely going to ruffle some feathers. What does he mean by that? Michael: He defines it as the unexamined, almost religious faith that democracy is inherently good and that "the cure for the ills of democracy is more democracy." It’s the belief that the process itself is sacred, regardless of the results it produces. Kevin: So it’s a refusal to even consider that another system, like the market, might produce better outcomes in certain areas? Michael: Exactly. And he gives a perfect, real-world example of this clash: the controversy over the Policy Analysis Market, or PAM, back in 2003. Kevin: The "Terrorism Futures Market"! I remember that. The Pentagon wanted to create a betting market to predict terrorist attacks, and the public outcry was immediate and overwhelming. It was shut down in a day. Michael: It was. Senators called it "repugnant" and a waste of taxpayer money. The media had a field day. But here's the thing: prediction markets like PAM have a stunningly good track record. They often outperform intelligence experts. It was a market-based idea, grounded in evidence, designed to save lives. Kevin: But it just felt wrong to a lot of people. Betting on death and destruction. Michael: And that feeling, that emotional, gut-level rejection of a market solution in favor of our traditional, more "dignified" institutions—even if they're less effective—is what Caplan would call democratic fundamentalism in action. It was a clash between our faith in familiar processes and a potentially superior, but uncomfortable, alternative.

Michael: So, the core of Caplan's argument is that the problem isn't that democracy is failing to listen to us. The problem is that it is listening, and we, the voters, are often demanding policies based on feel-good biases rather than sound reasoning. The individual cost of our irrationality is zero, but the collective cost is enormous. Kevin: It's a chilling thought. It really shifts the blame from 'them'—the politicians and the special interests—to 'us.' And it forces you to ask a really uncomfortable question: if we can't trust ourselves to vote rationally on complex issues, what's the alternative? Michael: And that's the big takeaway. Caplan isn't anti-democracy, but he's pro-realism. He argues we should be more humble about what democracy can achieve and more open to letting markets handle things where they excel. His ultimate prescription is for us to try and vaccinate our own minds against these common economic misconceptions. Kevin: A tough but important message. It really makes you think about your own beliefs and where they come from. We'd love to hear what our listeners think about this one. Does this resonate with your experience, or do you think Caplan is missing a huge piece of the puzzle? Let us know what you think. Michael: This is Aibrary, signing off.