Apathy the only rational response to election campaigns

As people across the Middle East engage in life-and-death struggles for democracy, most Canadians who are not political insiders are audibly groaning at the thought of yet another election.

This essay on the economics of voting is divided into three parts and examines some of the counterintuitive incentives that can make elections so frustrating.

Why is it rational to vote irrationally?

REGINA, SK, Apr. 8, 2011/ Troy Media/ – Some commentators try to explain the apathy about this election as a function of “election fatigue,” as voters face their fourth federal election in seven years. Others blame the First-Past-the-Post system and call for proportional representation.

On the other hand, the works of two great political economists suggest that perhaps apathy is a sign of rational voters responding to the incentives that elections give them, and, if anything, it is amazing that anyone bothers to vote at all.

It’s rational to be apathetic

In his 1957 Economic Theory of Democracy , Anthony Downs coined the term “rational ignorance.” Rational people (meaning people who wish to maximize their own welfare) will ignore a decision when the effort required to become informed is greater than the value of making the right decision. For example, say you are choosing between two cars and you know that one will be $1,000 cheaper to maintain than the other one. If it will cost $2,000 for a consultant to tell you which one is cheaper, the rational thing to do is just buy one and take your chances.

The same logic applies to elections. You can spend from now ’til the election studying party platforms, the likely results of the policies promised therein and the character of the candidates promising to implement them.

Nevertheless, for the cost of that information gathering, your one-in-14-million vote will make no discernable difference to the election result. The government you will end up with is the same government you would have ended up with if you had not voted. Becoming informed about the election might be noble, but it is not rational.

Voters do not completely ignore politics; most do vote, and many hold very strong views on policy matters. Downs’ Brtheory might have a grain of truth, but it cannot be the whole story.

In the Myth of the Rational Voter , Bryan Caplan argues voters do hold political views, often strong ones. Yet, Caplan argues that rational voters often hold irrational views about public policy. Normally, rational behaviour means holding rational views, for example plumbers have an incentive to think rationally about plumbing or they will be out of a job.

As voters, however, people discover there is a psychological cost to discarding beliefs they may share with family and friends or have held for a long time, even when confronted with evidence that contradicts those beliefs. Rational voters realise that the electoral system offers no reward to themselves personally for doing so. Voters who vote for bad policies end up with the same government as everyone else anyway, so the path to maximum welfare is to blissfully retain whatever beliefs are most comforting.

Unlike voters, professional economists do have an incentive to be rational about economic policy questions, just as plumbers have an incentive to be rational about plumbing. Caplan presents a set of surveys on economic policy in which he compares the results for professional economists with those of the public. Even after allowing for differences in gender, income and political views, formal training in economics leads to quite different views on economic policy questions. Economists are more in favour of trade with foreigners, more optimistic about our economic progress, more sceptical of “make work” policies and more optimistic about the benefits of markets.

An incentive to be rational

The point is not that economists are smarter than the public; because they make their living studying economics, they have an incentive to be rational about the subject, whereas the average voter does not.

When each individual has little incentive to spend time absorbing complex policy prescriptions and rationally sorting through them, it should not be surprising that politicians resort to sound bites, gimmicks and the kinds of political mediocrity for which the same individuals generally despise them. It is nobody’s fault in particular, but it makes perfect sense. The only reasonable conclusion from all this is that we should not hand politicians governed by this tragicomical process so much money and power in the first place, but, for now, I offer this column, the first of three, as a philosophical balm for election frustration.

The dominance of the great by the small at election time

Let’s move on to the work of Mancur Olson, another great political economist, to explain another counterintuitive feature of election dynamics: Why it is that, in a democracy, relatively small groups seem to persistently secure illustrious privileges from the political process at the expense of the wider voting and taxpaying public.

As an example of such privilege, a Frontier Centre for Public Policy access-to-information request last year found that, from 1982 to 2009, Industry Canada paid out $18-billion in loans and subsidies that might be called corporate welfare to 21,766 recipients.

The privileged few

These recipients included companies from the huge (Bombardier) to the tiny (an ice cream parlour in Nepean, Ontario). Of course, it is not necessary to single out Industry Canada grantees. Canada’s policy of supply management in the dairy industry or the monopolization of essential public services by public sector unions would serve just as well, but for simplicity, let us focus on corporate welfare.

In civics class, students learn that democracy is a way for the majority to ensure that governments serve its interests. However, when groups much smaller than the voting public at large are able, at election time, to win very acute privileges at the expense of the wider voting and taxpaying public, something is surely wrong.

In his Logic of Collective Action , Olson goes about explaining why such policies are the perfectly logical result of the electoral process. In pages of mathematical proof, Olson shows that when it comes to lobbying for benefits from the political process, smaller groups (for example, a single industry) have several advantages over larger groups (for example, the wider voting public).

For any group to secure a benefit from the electoral process, it has to lobby to define the terms of the debate and to create a cause that voters will back, or at least not vote against.

This means establishing the cause, informing group members about it and persuading them to contribute to its promotion. To mobilize almost 24 million voters with varied interests to vote for the cause (for example, an end to corporate welfare) is nearly impossible, but for smaller groups with more-concentrated interests (such as Industry Canada grantees), it is much easier. For example, there exists a large body of dubious, industry-funded research into the benefits of government grants to business.

The direct beneficiaries of policies such as corporate welfare have a much easier challenge precisely because of their smaller numbers. In the first place, it is easier for a smaller group to navigate the practicalities of organizing itself. In the second place, if the group succeeds, each member’s share of the benefit is bigger than the cost to each member of the public who pays for it.

This makes it easier to persuade each member of a smaller group to contribute to the promotion of the group’s cause. In the Industry Canada example, the $18-billion is funded by approximately 24 million voters (at $750s each), but shared by only 21,766 recipients (about $827,000 each). The total costs and benefits paid and received by the groups are equal, but individual recipients are more motivated to act than are the individual payers.

These dynamics led Olson to conclude, “Where small groups with common interests are concerned, then, there is a systematic tendency for ‘exploitation’ of the great by the small!” (Olson’s emphasis)

Undemocratic but logical

It becomes easier to see why politicians, when faced with such dynamics, would favour smaller groups over larger in their campaigning. The large, disorganized majority has fewer clear buttons to push than does the smaller but more organized minorities. Electoral candidates’ usual response is the seemingly undemocratic (but perfectly logical) practice of concentrating benefits on the latter group and dispersing the costs on to the former, as in the Industry Canada example.

As with the previous column in this series, the inherent difficulties identified in the electoral process might seem depressing and, to some, even offensive. As with the previous column, the only escape route is to stop giving politicians so much money and power in the first place, but for now, I offer in my third column another philosophical balm for election frustration.

The inevitable frustration of voting systems

As noted above, political economists Downs and Caplan argue that voters are rational to not vote because the cost (time and effort) of becoming informed about voting is greater than the difference their individual vote will make to an election outcome. The logical, if depressing, conclusion is that voters find themselves paralysed as a group. Everybody wishes that everybody else would make the effort to become informed, but nobody has an incentive to do so.

Would you buy a used-car from these people?

Now, let’s turn to simple economics to suggest why politicians are sometimes compared with used car salesmen and why they tend to make such frivolous gestures as piano performances and selling novelty eyebrows on the campaign trail.

Consider the rational response of politicians to such a situation by using the economic theory of asymmetrical information. Asymmetrical information occurs when people on one side of a transaction have less information than the other side about the product on offer.

The classic case of asymmetrical information taught to first year economics students is used-car sales, and it goes something like this: There are several used cars on offer, and to the buyer they look the same. However, the car salesman knows that some have hidden faults and others do not. The good ones are worth $10,000, and the bad ones are worth only $5,000. Not knowing which is which, the buyer is prepared to pay only $7,500 for any car, knowing that over a lifetime of car purchases, their good and bad deals will balance out.

The problem is that car salesmen who really do have cars worth $10,000 find it very hard to convince buyers to pay their true value. In other words, there is a missing market for good cars. This no-man’s land of missing consumer information is where used-car salesmen have to operate, trying to convince buyers that, unlike all the others, they are the good guys. That simple dynamic probably explains why car salesmen are sometimes maligned for being sleazy and opportunistic.

But what of electoral candidates? The fundamental problem with the used-car scenario is that the consumer does not have enough information to make a proper decision about what he or she is buying. Because voters as a group lack the incentive to become fully informed about voting choices, they fit the profile of used-car buyers who do not know exactly what is really on offer. Electoral candidates, because they tend to be passionately involved in politics and face sizeable rewards for being elected, tend to know more about what they are offering than their buyers do.

If you accept the analogy, then there must be a missing market for good, honest campaigning on public policies. Candidates have little opportunity to develop good policies or sell them to the public just as used-car salesmen have little opportunity to sell the good cars. Like the rational car buyer, the rational voter decides that the good ones just do not exist.

In the world of used cars, salesmen attempt to solve the problem of signalling that they are trustworthy by investing in flashy showrooms, advertising, branding and personality. By doing so, they are sometimes able to convince buyers that, unlike all the others, they can be trusted and their cars really are the good ones. If they are successful, they get the full price for good cars. However, it is a murky process at the best of times because salesmen with bad cars can also send these signals.

To extend the analogy one more time, actions such as the Conservative leader playing John Lennon’s Imagine on the piano while sitting beside a little girl (see, he’s got a human side) and the Liberal leader selling stick-on eyebrows, which are supposed to resemble his own, (see, he can laugh at himself) are just examples of signalling in a market where the buyer cannot or will not scrutinize the actual product on offer. Actions such as these might seem far removed from the business of running better government, but they are the perfectly logical reaction to the dynamics of the elections we have.

David Seymour is a Senior Policy Analyst at the Frontier Centre (www.fcpp.org).