Sunday, July 29, 2007

NICHOLAS D. KRISTOF: The Voters Speak: Baaa!

Right now the pundit with perhaps the most outstanding record thinks Hillary Rodham Clinton has the best chance of becoming president, with Bill Richardson enjoying the best shot of becoming vice president.

That pundit is not a human but rather Intrade, a political betting Web site (www.intrade.com) that has regularly proven more accurate than polls and political experts alike. In the last presidential election, it called the winner accurately in each of the 50 states.

That’s a tribute to what is called “the wisdom of crowds,” the notion that the collective judgment of many people is typically more accurate than the judgment of even a very well-informed individual. If you collect a bunch of guesses about, say, the weight of an ox, the average estimate will be eerily accurate.

For the record, Intrade’s bets at this very early stage give Mrs. Clinton a 27 percent chance of becoming president, followed by Barack Obama and Rudy Guiliani, each at about 20 percent; Fred Thompson, 15 percent; and Mitt Romney, 8 percent.

Yet while crowds may be good at making predictions, they’re often lousy at recognizing their own self-interest. That problem is explored in the best political book this year: “The Myth of the Rational Voter: Why Democracies Choose Bad Policies.”

This book, by Bryan Caplan, an economist at George Mason University, does a remarkably thorough job of insulting the American voter. The cover portrays the electorate as a flock of sheep.

“Democracies frequently adopt and maintain policies harmful for most people,” Professor Caplan notes. There are various explanations for this — the power of special interests, public ignorance of details, and so on. But Mr. Caplan argues that those accounts fall short.

“This book develops an alternative story of how democracy fails,” he writes. “The central idea is that voters are worse than ignorant; they are, in a word, irrational — and vote accordingly.”

Mr. Caplan identifies four areas, all related to economics, of “systematic error” — where voters routinely prefer policies that are contrary to their interests.

The first is a suspicion of market outcomes and a desire to control markets. The most efficient way to address climate change would be a carbon tax that would build on the market mechanism, but that’s barely on the national agenda.

The second is an anti-foreign bias, a tendency to underestimate the benefits of interactions with foreigners. That leads to counterproductive curbs on trade.

The third is a neo-Luddite bias against productivity gains that come from downsizing or “creative destruction.”

The fourth is a pessimistic bias, a tendency to exaggerate economic problems.

Mr. Caplan focuses on economics, but there is also some evidence from research in psychology of other systematic errors — for example, that we habitually exaggerate military risks compared with, say, health risks. That might explain why we’re fighting a war in Iraq as opposed to a war on diabetes.

“I see neither well-functioning democracies nor democracies hijacked by special interests,” Mr. Caplan writes. “Instead, I see democracies that fall short because voters get the foolish policies they ask for.”

It’s true that nobody ever made money betting on the high level of campaign discourse. When George Smathers successfully ran for the Senate, legend has it (he denied it) that he took advantage of his constituents’ limited vocabulary by alleging that his opponent was “a shameless extrovert” who had “before his marriage, habitually practiced celibacy.”

Churchill was right about democracy being the worst form of government, except for all the others that have been tried. Yet we should be able to respond to evidence of democracy’s failings with something more than Churchillian resignation. So why not address the problem in our education system, by teaching basic economics and statistics in high schools?

Students usually now encounter statistics, if at all, in college. But simple statistics could easily be taught along with algebra in high school. Likewise, principles of economics could be taught in social studies classes.

This brief exposure wouldn’t solve the problems of democracy. But it might help just a bit in reducing systematic errors and biases.

Then we might emerge with crowds that are not only brilliant at judging the weight of an ox, but also wiser in setting national policy.

You are invited to comment on this column at Mr. Kristof’s blog, www.nytimes.com/ontheground.

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