Summary

Voters are ignorant and systematically biased in predictable ways: anti-market, anti-foreign, make-work, and pessimistic. Unlike rational ignorance (where random errors cancel out), these biases compound because voters share the same wrong beliefs. Rational irrationality explains why: when the personal cost of a false belief is near zero (one vote never decides an election), people indulge emotionally satisfying beliefs over accurate ones. Democracy doesn't fail because voters are selfish – it fails because they are sincerely wrong. The fix isn't more voting – it's economic education.

“A wise man learns more from a fool than a fool learns from a wise man.”

“Irrationality, like ignorance, is selective.”

“One vote has so small a probability of affecting electoral outcomes that a realistic egoist pays no attention to politics. He chooses to be rationally ignorant.”

Key Takeaways

Notes

Introduction

• “Irrationality, like ignorance, is selective”
• Irrational voter is empirically proven
• Human motivation → irrationality rational
• Irrationality is needed for a realistic view of democracy
• Built-in externality

1: Beyond the miracle of aggregation

• “One vote has so small a probability of affecting electoral outcomes that a realistic egoist pays no attention to politics. He chooses to be rationally ignorant”
• Wisdom of crowds
• Miracle of aggregation: “An almost completely ignorant electorate makes the same decision as a fully formed electorate”
• Systematic bias/error

2: Systematically biased beliefs about economics

• Systematic misunderstandings of government spending per sector
• Anti-market bias: underestimate ability to harmonize private greed, public interest
  • “The study of his own advantage… necessarily leads him to prefer that employment that is most advantageous to the society”
  • Prejudice against debt markets (loans)
  • Monopoly vs scarcity, wage fixing
• Anti-foreign bias: underestimate benefit of interaction with foreigners
  • Comparative advantage
• Make work bias: equate prosperity with employment, not production
  • Luddite mentality
• Pessimistic bias: prone to thinking conditions are getting worse
  • Loss aversion + lack of perspective

3: Survey of Americans on economy

• 2000: 6% of economists against free trade
• Disconnect between economists, Americans
• Layman-expert belief gap
  • <=20%: self-serving, ideological bias
  • 80%: experts’ greater knowledge
  • One explanation: time horizon
• Only thing economists more worried about: “business productivity growing too slowly”
• Miracle of aggregation is false

4: Failure of rational ignorance

• Bayes’ rule allows for rational yet biased or incorrect beliefs
• Asymmetric information
• Can be well-informed by using trusted resources, relying on party labels

5: Rational irrationality

• Conflicts of truth seeking:
  • Being rich (special interest money)
  • Being liked (conformism)
  • Religion / values (mix cognitive motive)
• Preferences vs beliefs, false beliefs
• Double think: holding two contradictory thoughts and believing both of them
• Rational irrationality: weighing emotional benefit of belief with cost of error
• Monetary bets force rationality

6: From irrationality to policy

• Voters are not selfish
• Belief gap: (by disagreement level)
  • Education: 50% (highest vs lowest)
  • Income: 36% (going up vs not)
  • Job security, being male: ~20%

7: irrationality, and the supply side of politics

• Politicians are masters of rhetoric
• Striking optimal balance between being right and being popular
• Delegation: lack of oversight = trust

8: Market fundamentalism vs the religion of democracy

• Religious fundamentalism
• Market fundamentalism
• Democratic fundamentalism
• Adverse selection problem
• Fixes for democracy:
  • Political literacy test to vote
  • ↓ efforts to increase voter turnout
  • More education
  • Change the curriculum*
  • More objective politicians, influencers
  • Economists should hammer home bias
• Steven Pinker: cognitive tools, most important, grasping the modern world, most unlike cognitive tools they are born with
  • Economics, evolutionary biology, probability and statistics