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January 18, 2012

Don’t Trust Your Instincts

Simple answers are so satisfying: Green jobs will fix the economy. Stimulus will create jobs. Charity helps people more than commerce. Everyone should vote.

Well, all those instinctive solutions are wrong. As Friedrich Hayek pointed out in “The Fatal Conceit,” it’s a problem that in our complex, extended economy, we rely on instincts developed during our ancestors’ existence in small bands. In those old days, everyone knew everyone else, so affairs could be micromanaged. Today, we live in a global economy where strangers deal with each other. The rules need to be different.

Hayek said: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Simple answers are so satisfying: Green jobs will fix the economy. Stimulus will create jobs. Charity helps people more than commerce. Everyone should vote.

Well, all those instinctive solutions are wrong. As Friedrich Hayek pointed out in “The Fatal Conceit,” it’s a problem that in our complex, extended economy, we rely on instincts developed during our ancestors’ existence in small bands. In those old days, everyone knew everyone else, so affairs could be micromanaged. Today, we live in a global economy where strangers deal with each other. The rules need to be different.

Hayek said: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

You might think people have begun to understand this. Opinion polls show Americans are very dissatisfied with government. Congress has only a 12 percent approval rating. Good. People should be suspicious of what Congress would design. Central planners failed in the Soviet Union and Cuba and America’s public schools and at the post office.

Despite all that failure, however, whenever a crisis hits, the natural instinct is to say, “Government must do something.”

Look at this piece of instinctual wisdom: Everyone should vote. In the last big election, only 90 million people voted out of more than 200 million eligible voters. That’s terrible, we’re told. But it’s not terrible because a lot of people are ignorant. When I asked people to identify pictures of Mitt Romney and Newt Gingrich, almost half couldn’t.

This is one reason I say those “get out the vote” drives are dumb. I take heat for saying that, but Bryan Caplan agrees. He’s a professor of economics at George Mason University and author of “The Myth of the Rational Voter: Why Democracies Choose Bad Policies.”

“A lot of bad policies … pass by popular demand,” Caplan told me. “In order to do the right thing, you have to know something.”

The “informed citizen” is the ideal of democratic societies, but Caplan points out that average citizens have no incentive to become informed, while special interests do. The rest of us have lives. We are busy with things other than politics. That’s why our democratic government inflates the price of sugar through trade restrictions, even though American sugar consumers far outnumber American sugar producers.

Caplan has a radical proposal for citizens: Be honest. If you know nothing about a subject, don’t have an opinion about it. “And don’t reward or penalize candidates for their position on an issue you don’t understand.”

Political life differs from private life. If you vote for a candidate while ignorant about issues, you’ll pay no more than a tiny fraction of the price of your ignorance. Not so in your private affairs. If you’re dumb when you buy a car, you get stuck with a bad car. You get punished right away.

“And you may look back and say, ‘I’m not going to do that again.’ … It’s not so much that voters are dumb. Even smart people act dumb when they vote. I know an engineer who is very clever. … But his views on economics (are) ridiculous.”

It’s not what people don’t know that gets them into trouble. It’s what they know that isn’t so.

“A very common view is that foreign aid is actually the largest item in the budget,” Caplan said. “It’s about 1 percent.”

Actually, even less. Medicare, Social Security, the military and interest on the debt make up over half the budget. But surveys show that people believe foreign aid and welfare are the biggest items.

So, you ignorant people, please stay home on Election Day. And those of you who do vote, please resist the instinctive urge to give our tribal elders more power.

If Americans keep voting for politicians who want to pass more laws and spend more money, the result will not be a country with fewer problems, but a country that’s governed by piecemeal socialism. Or corporatism. We can debate the meaning of those words, but there’s no doubt that such central planning leaves us less prosperous and less free.

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