The Myth of the Rational Voter - Book Summary

Dive into the truth: The unseen biases disrupting our democracy

Living in the Western world, most of us are quick to affirm that democracy is the pinnacle of political and societal organization. It's a progression from aristocratic, dictatorial or other forms of authoritarian governance to a system that endorses freedom, justice and equality.

But currently, democracy seems to be floundering. Economies are stagnating, unemployment rates are soaring, and democratic governments appear to be struggling to meet the pressing challenges head-on.

What led us here? The answer lurks within the core of democracy itself.

In this engaging exploration, you'll uncover how common biases – particularly those related to economy – lead to ill-informed policies, thus hampering the smooth operation of our democracies. You'll grasp the obscure principles underpinning democratic political systems and why a little more faith in the free market could be beneficial.

Prepare yourself to learn

— how democracy is founded on a seemingly miraculous idea,

— why free trade harbours no losers, only winners, and

— how altruism can pose an unexpected hazard to the democratic setup.

Unveiling democracy's secret weapon: The miraculous balance of extremes

Democracy and its governance are widely hailed as some of the greatest triumphs of human civilization.

And at the heart of it lies a miraculous principle: aggregation. What is it, you ask? Well, it is the phenomena where the average answer from a group is strikingly accurate.

Imagine asking people to guess how many beans there are in a jar. Some will overshoot, others will undershoot. But if you take the average of all the guesses, the overestimations and underestimations often balance each other out, and the average comes astonishingly close to the actual number.

Now let's transfer this concept to politics. The average voter might not be the most informed, and their understanding of political matters might often fall short. However, in the democratic setup where everyone's opinion counts, these diverse opinions average out to something that's quite close to the truth. Thus, in a democracy, extreme or ill-informed views tend to neutralize each other, resulting in a more moderate and informed outcome.

This balance achieved between the extremes is what lends democracy its logical soundness. In an ideal democracy, mainstream ideas rise to the top, while the extremes nullify each other, courtesy of this miraculous phenomenon of aggregation.

This is the distinct advantage of democratic governments over dictatorships, where the reins are held by a select few whose perspectives often contrast starkly with the majority. A classic illustration is when the East German government erected the Berlin Wall in 1961, a move that was diametrically opposed to the general political sentiment of the East German populace. Had East Germany been a democracy, the miracle of aggregation would have effectively prevented such a wall from being constructed.

Thus, it's the miracle of aggregation that powers the smooth functioning of democracies. Yet, there are instances where democracies falter. So, let's explore why that happens.

Unmasking the bias that hinders the miracle of aggregation, and subsequently, our democracies

It's no secret that many democratic governments often enact policies that seem to run counter to the collective good — protectionism being a notorious example. In such instances, something is interfering with the operation of the miracle of aggregation.

One of the significant roadblocks is the prevalence of widespread bias, which can disrupt the effectiveness of the aggregation phenomenon. Because, at the end of the day, aggregation has one Achilles' heel: it only works when opinions are scattered across the spectrum.

Take the bean guessing game as an example. The average guess gets pretty close to the correct number because there are almost equal numbers of people overshooting and undershooting. But if the information available is skewed, the magic of aggregation falls apart.

Imagine a hypothetical society where it has been widely (but wrongly) circulated that people usually underestimate the number of beans in the jar. This misinformation would likely create a bias amongst future guessers who would then tend to guess higher than they normally would, thus skewing the average above the actual number.

Though hypothetical, such pervasive biases are quite real and their widespread acceptance has been substantiated by various surveys. For example, the 1996 Survey of Americans and Economists on the Economy (SAEE) posed a series of economic questions to diverse groups. One question was whether high foreign aid spending was a significant factor for the US economy's underperformance.

A staggering majority of common citizens believed that foreign aid spending was, at least to some extent, contributing to the nation's economic woes. However, the majority of the economists involved in the survey didn't see any connection.

In fact, across a broad range of political subjects, the average responses from the general public differed drastically from the average opinions of the economists. This suggests that widespread misconceptions and biases were swaying the views of the general population.

The common bias: distrust in the free market and underestimating its might

Having unveiled the impact of bias on democracy, it's time to delve into one of the most dominant biases that prevail: a deep-seated skepticism of the free market.

Yes, you heard right — the majority of people hold the belief that actions driven by profit are inherently evil and antisocial. Even discussing the fact that businesses aim to make profits can be considered controversial. To quote the renowned economist of the twentieth century, Joseph Schumpeter, it feels as if the free market is on trial, with the jury already having chosen the death sentence before the trial has even started.

This widespread mistrust of the free market stems primarily from misconceptions of market principles, leading people to significantly underestimate the capabilities of free markets.

A common misinterpretation is considering a company's revenue as its profits. From this viewpoint, the money a company makes by selling a product — the revenue — is directly converted into profits and handed over to the company's owners. No wonder this appears unethical — why should the already affluent individuals reap more wealth?

This perspective fails to distinguish between revenue and profit. The money earned serves as an incentive for the company's owners to produce items that consumers will purchase and that can be sold at affordable prices. Hence, the earned money is usually reinvested into developing larger, more efficient factories or hiring more workforce.

This misinterpretation of fundamental market principles causes many to underestimate the power of free markets. The reality, however, is that most free market operations function exceptionally well and contribute much more to society than generally perceived.

This misperception has fueled the spread of antimarket bias far and wide. But this isn't the only widespread bias out there; there's another highly influential bias that we will be exploring next.

The widespread misunderstanding about the perks of international trade

Having established the skepticism towards the free market, let's explore another pervasive bias: a common distrust towards international trade. Despite the fact that trade and exchange inherently benefits both buyer and seller, people often hold the belief that in international trade, only the exporting country gains.

Supporters of this view commonly cite statistics showing that the United States imports more goods than it exports. In their minds, this implies that the country is simply giving away money to other nations.

But this interpretation is profoundly misguided; in truth, good trade deals are a win-win situation. After all, if you can purchase something at a price cheaper than producing it yourself, you're on the winning side.

For example, within a household, if certain members excel in certain tasks, it only makes sense to divide chores accordingly. So, if your partner can cook meals faster than you, while you are more proficient in fixing the TV, you both can concentrate on what you do best.

By doing so, both of you get your tasks done faster and can enjoy the mutual benefits, like sharing a meal while watching your favorite TV show. In essence, you are trading services – and it's a wise move, as it would have taken each of you more time to do the other's task. Similarly, all participants in the market benefit from successful trades.

Despite these benefits, statistics demonstrate that the bias against foreign trade is quite prevalent. For example, in the 1996 SAEE, one of the questions posed to participants was whether trade agreements between the United States and other countries led to job creation in the United States.

The average response among common citizens indicated a belief that trade deals were more likely to cause job loss. Conversely, economists, by the same margin, believed that trade agreements were less likely to result in job loss.

The bias towards excessive concern over job preservation

Now that we've shed light on a few prevalent biases, there's one more that we need to address, and it often stirs intense emotions: the obsession with retaining jobs. A company deciding to cut jobs is guaranteed to spark public outrage. But is downsizing always as catastrophic as it appears?

The majority would say yes, and any major company declaring job cuts triggers a media frenzy — especially if the company is not on the brink of bankruptcy. At first glance, such reactions seem justified; how dare a company make job cuts when it doesn't absolutely need to?

But when viewed from a broader perspective, job cuts can actually be advantageous. While job loss can indeed spell significant hardship for an individual, at the macroeconomic level, it usually enables the workforce to be utilized more efficiently elsewhere.

Take for instance the revolution in farming due to technological advancement. Today, only a handful of people are needed to perform the farm work that was once done by many. Although such changes may be challenging for an individual farm or family, it inevitably liberates the workforce for other sectors of the economy.

Just think about how constrained the rapid growth of the technological sector would have been over the past several decades without the steady supply of workers released by the industrial revolution.

Or consider it on a smaller scale: if you install a dishwasher in your house. The person who used to wash dishes manually now has additional free time, which can be put to better use, like spending quality time with the children.

At this point, having unraveled several fundamental biases, it may appear that we have covered the most serious threats to democracy. However, as we will soon discover, the list doesn't end here.

The paradox: Lack of selfishness in voting can be harmful for democracy

While pervasive biases pose a challenge to democracy, they are not the only obstacles. Democracy is contending with other problems – and the next one might strike you as counterintuitive: people aren't self-centered enough.

Within democratic societies, this implies that individuals don't vote as selfishly as we might assume. It's reasonable to expect people to vote based purely on their self-interest; indeed, it's a common complaint that voters tend to focus solely on themselves, overlooking the broader context when casting their vote.

But the reality deviates quite significantly from this presumption. As it turns out, in a 1980 article, political psychologist David Sears debunked the idea of the selfish voter, demonstrating that the unemployed are only marginally more in favor of government-guaranteed employment, and the uninsured are only somewhat more inclined towards universal healthcare.

In fact, individuals' voting choices are driven by more profound reasons such as deep-seated emotional beliefs, partisan leanings, or thoughts on what's generally best for elements like the overall economy.

This mindset actually harms democracy because voting from a more self-centered viewpoint could yield superior outcomes. Imagine, for instance, if every voter was driven exclusively by personal gain. They would be extremely cautious about gathering information and voting for the party or candidate that promises to maximally meet their objectives.

The resulting outcome would be the election of politicians and parties that would likely act in the majority's interests, aligning perfectly with what most citizens desire. In essence, by being selfish, we would elect a government that best caters to the collective needs. Despite the conventional wisdom encouraging us to consider others, when it comes to voting, the most effective way to do so could be by focusing on one's own interests.

Emotional attachments in politics can undermine democracy

So far, we've learned that people are inherently biased and seldom vote solely based on self-interest. However, these aren't the only challenges democracy has to confront; they're amplified by the reasons individuals choose a specific candidate, party, or political ideology.

We've already touched on how prevalent biases can interfere with the miracle of aggregation – a crucial component of a functional democracy. Still, there are other significant influences at work, with emotional attachment to certain beliefs playing a particularly vital role in voter decisions.

Everyone holds certain convictions that we ardently wish to be true, regardless of the counter-evidence. For example, if you believe it's morally wrong to reduce taxes for the wealthy, you'll be deeply vested in maintaining this belief; if it proved incorrect, your entire worldview would be rattled.

In reality, individuals are so emotionally attached to such views that they'll fiercely dispute anyone who challenges them, even if the challengers' arguments are logically sound and rational.

Unless we come across a compelling counterargument that is too strong to dismiss, we're likely to fervently cling to our beliefs, dismissing other people's perspectives. Consequently, we vote for politicians who pledge to adhere to our emotionally charged beliefs and reject those who don't, regardless of the strength of their arguments or the viability of their ideas.

By now, it should be quite evident how various factors can negatively impact the voting process. However, one piece of the puzzle is still missing: in the end, our individual influence over the outcome of any election is strikingly small.

There's little incentive for voters to behave rationally

If our emotional connection to a belief is so strong, what could potentially sway us? Generally, we adjust our beliefs when they seem to inflict direct harm on us — such as when they lead to financial loss. Essentially, we're compelled to act rationally when our personal stakes are involved.

Consider this scenario — you own a store and staunchly believe that you should sell goods exclusively to individuals of a specific religious or political persuasion. You might derive satisfaction from living by your deeply-held beliefs, but concurrently, you're missing out on a wealth of potential customers. When this customer loss starts to significantly impact your revenues, you'll likely reassess your beliefs or at least reconsider their influence on your business strategy.

The issue is, during elections, voters rarely see how their votes can significantly impact their daily lives. In most democracies, millions cast their votes, making each vote's significance minimal. Even in neck-and-neck election scenarios that necessitate vote recounts — like what occurred in Florida during the 2000 US presidential election — the chances of a single vote swaying the outcome are virtually non-existent.

Consequently, since there's hardly any reason to believe that our individual votes will induce any change, there's also negligible incentive to behave rationally. After all, if the only catalyst to alter our beliefs is the possibility of personal harm, and if such a threat doesn't seem connected to voting, then there's little reason to reassess our beliefs when it comes to electoral politics. As a result, people continue to vote for the politician or party that aligns most closely with their emotionally-charged beliefs.

To put it simply, there's scant reason for individuals to cast their votes rationally; instead, it's far more comforting for them to adhere to their biases or emotions. Recognizing this truth is crucial, as our entire democratic structure is premised on the belief that the majority of voters are rational.

A final wrap-up

The central premise of this book is:

The functionality of democracy rests on the presumption that rational voters will make sound and informed choices. However, the reality starkly contrasts this assumption. Voters are far from rational. They harbor sweeping biases on economic matters, typically lack adequate information, and their voting decisions are more often governed by their emotions rather than by reasoned analysis.