Market Based Control

The New Yorker magazine recently carried a review by Louis Menand of a book by an economist, Bryan Caplan, “The Myth of the Rational Voter: Why Democracies Choose Bad Policies” (2006), a book which argues that most people are acting “irrationally” when it comes to certain questions of public policy.  

There is a nice response to Caplan in a letter to the magazine by Christopher and Miranda Meyer of Lexington, Mass:

“Louis Menand neatly refutes Bryan Caplan’s argument that greater levels of voter participation are harmful, but he could have gone farther (Books, July 9th and 16th).  Traditional economists insist that the failure of behavior to conform to their models is the fault of individuals, and that actions whose benefits escape the economic calculus are “irrational”.  But understanding why people behave as they do teaches us more than declaring them wrong does.  The thinking of most economists is limited by what they choose to measure – tangible economic value.  They set about maximizing value, commonly expressed as gross domestic product, by optimizing resource allocation.  Economists call this the “science of scarcity” but what if GDP is not scarce?  Menand suggests that people value choice, in addition to goods and services.   Perhaps justice, stability, diversity, and other social intangibles are, like choice, very scarce indeed, and highly valued. South Africans can feel the intangible return on their investment in Truth and Reconciliation, even if economists value only the costs.  People vote because they feel that democracy plays a role in delivering these “uneconomic” valuables.”