if i had a penny for each time i've been told "a free market could only work if people were perfectly rational" i'd have about three pounds. that's altogether too much.
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it gets things back to front. one of the biggest virtues of a free market is its robustness and anti-fragility. all it needs are plain old *approximately rational* people to give constantly improving results.
a key reason: on a free market gains from choosing well and costs of choosing badly apply in large part to the chooser. he's well incentivised to consider carefully. this is v different to the incentives that choosers face under repdem voting contests.
important thing to keep in mind: the lower the personal cost of choosing badly, the less likely the chooser will be to be both well-informed and rational in their choice.
repdem makes the expected personal cost of choosing badly on society-wide matters of policy /extremely low/. this guarantees sub-optimal policy. to put it generously.
let's define 'voting wrong' as casting a vote that would end up undermining the voters values, on net, if it were politically decisive
in repdem, at least in a national election, the cost to an individual of voting wrong is so small that it can be treated as costless. this is because there's such a tiny chance of that vote being politically decisive.
enter rational ignorance and rational irrationality
rational ignorance means the voter is not well-informed about who or what he's voting for because it wouldn't be a smart use of his time to do that research given the negligible cost of voting wrong
rational ignorance means the voter is not well-informed about who or what he's voting for because it wouldn't be a smart use of his time to do that research given the negligible cost of voting wrong
rational irrationality: he votes in a way that's instrumentally rational and epistemically irrational.
often this will mean voting in the way that gives him the best 'gut feeling', even if a sober analysis of the policy package would reveal that it was against his values on net.
often this will mean voting in the way that gives him the best 'gut feeling', even if a sober analysis of the policy package would reveal that it was against his values on net.
so the voter acts like he knows on some level that it's fine to just indulge his feelings when he votes. political marketing offices understand this: propaganda is overwhelmingly aimed at feelings, rather than (for instance) conveying careful economic analysis of proposed policy.
tldr; the free market doesn't need perfectly rational actors, the approximately rational ones that actually exist will do just fine.
a surefire way to make those actors *less* rational and well-informed is to have them make choices via the voting competitions of repdem
a surefire way to make those actors *less* rational and well-informed is to have them make choices via the voting competitions of repdem
(@bryan_caplan coined rational irrationality in his book The Myth of The Rational Voter)
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