Objectives. Economic models of politics typically make two assumptions about voters: first, their motives are egocentric, not sociotropic; second, their beliefs are rational, not subject to systematic bias. Political scientists have presented strong evidence against the first assumption (Mansbridge, 1990), but have become increasingly willing to accept the second (Page & Shapiro, 1992; Marcus & Han-son, 1993). This article tests these two assumptions, then explores the tests' broader implications. Methods. I use the Survey of Americans & Economists on the Economy to test for egocentricity of motivation & rationality of belief. Results. Both standard assumptions fail for the case where the economic approach would seemingly be most relevant: economic beliefs. Conclusions. This is not necessarily cause for greater optimism about the efficiency of democracy: sociotropic voters with biased economic beliefs are more likely to produce severe political failures than are selfish voters with rational expectations. 6 Tables, 30 References. Adapted from the source document.
The paper presents a model of 'rational irrationality' to explain why political and religious beliefs are marked not only by low information (as the notion of rational ignorance highlights), but also by systematic bias and high certainty. Being irrational – i.e., deviating from rational expectations – is modeled as normal good. The reason that irrationality in politics and religion is so pronounced is that the private repercussions of error are virtually nonexistant. The consumption of irrationality can be efficient, but it will usually not be when the private and the social cost of irrationality differ – for example, in elections.
Models of inefficient political failure have been criticized for implicitly assuming the irrationality of voters (Wittman, 1989, 1995, 1999; Coate & Morris, 1995). Building on Caplan's (1999a, 1999b) model of "rational irrationality," the current paper maintains that the assumption of voter irrationality is both theoretically & empirically plausible. It then examines microfoundational criticisms of four classes of political failure models: rent-seeking, pork-barrel politics, bureaucracy, & economic reform. In each of the four cases, incorporating simple forms of privately costless irrationality makes it possible to clearly derive the models' standard conclusions. Moreover, it follows that efforts to mitigate political failures will be socially suboptimal, as most of the literature implicitly assumes. It is a mistake to discount the empirical evidence for these models on theoretical grounds. 3 Diagrams, 62 References. Adapted from the source document.
Much of the public finance literature argues that local governments behave competitively due to residents' ease of exit & entry. The model presented here challenges this widespread conclusion. Though it is costless to relocate to another locality, the presence of tax capitalization makes it impossible for landowners to avoid monopolistic pricing of public services by moving; landowners can only choose between paying the tax directly, or paying it indirectly in the form of a lower sale value for their housing if they exit. In consequence, the only real check on local governments comes through imperfectly functioning electoral channels. 26 References. Adapted from the source document.
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