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Special Interests, Universal Appeal
Democracy is the theory that the common people know what they want and deserve to get it good and hard.
H.L. Mencken
My colleague Bryan Caplan explains today in the Wall Street Journal.
When special interests talk, politicians listen and the rest of us suffer. But why do politicians listen? Social scientists' favorite explanation is that special interests pay close attention to their pet issues and the rest of us do not. So when politicians decide where to stand, the safer path is to satisfy knowledgeable insiders at the expense of the oblivious public.
This explanation is appealing, but it neglects one glaring fact. "Special-interest" legislation is popular.
Keeping foreign products out is popular. Since 1976, ... Americans who "sympathize more with those who want to eliminate tariffs" are seriously outnumbered by "those who think such tariffs are necessary." Handouts for farmers are popular. A 2004 ... Poll found that 58% agree that "government needs to subsidize farming to make sure there will always be a good supply of food." In 2006, ... over 80% of Americans want to raise the minimum wage. ... These results are not isolated. It is hard to find any "special interest" policies that most Americans oppose.
Clearly, there is something very wrong with the view that the steel industry, farm lobby and labor unions thwart the will of the majority. The public does not pay close attention to politics, but that hardly seems to be the problem. The policies that prevail are basically the policies that the public approves. ... To succeed, special interests only need to persuade politicians to swim with the current of public opinion.
Why would the majority favor policies that hurt the majority? ... The majority favors these policies because the average person underestimates the social benefits of the free market, especially for international and labor markets. In a phrase, the public suffers from anti-market bias.
Thoma excerpts more.
Posted by Alex Tabarrok on May 12, 2007 at 07:50 AM in Political Science | Permalink
Comments
Home run.
People, including the 'intellectual elite' at Warwick or Harvard, have trouble understanding the fundamental lessons of economics.
Economists now have a solid grasp of how the social world works and what steps we need to take to improve it. Unfortunately, we are not nearly as good at telling why some ideas fail to filter through to voters and policy makers.
Understanding public perceptions of economics and loosely branded 'economic policy' is a vastly under-researched area, and many academic economists seem to have taken science's definition as 'disinterested study' too close to heart. While I agree that in many cases reform runs into vested interests, it is usually economic illiteracy that allows these very interests to make a persuasive, if in reality flawed, case to voters and policy makers.
If our aim is not only to understand the world but also to make it better, we need to take a step back and redirect some of our energies away from understanding and towards explaining. And to do this we first need to grasp what the public biases are, why they are so persistent in the face of mounting evidence - and, most importantly, what we can do to overcome them.
Posted by: datacharmer at May 12, 2007 7:57:15 AM
Strikeout. Or weak grounder at best.
To succeed, special interests only need to persuade politicians to swim with the current of public opinion.
This is nonsense. Ever heard of advertising? It works.
The "special interests" are very effective at promoting their ideas to the general public. In addition, politicians who support them, and rely on them for financial support, are very good at framing the arguments to sound like the policies are beneficial. Look how many people think that they are likely to be affected by estate taxes.
People's ideas about economic policy don't just fall from the sky. Tey are shaped by what thay read and hear. All the "special interests" Caplan complains of are very effective at advocacy. To ignore this aspect is foolish.
Further, the "economic illiteracy" that the way-too-smug Caplan insists on ascribing to the public may be simple self-interest. Why shouldn't workers oppose free trade if it may cost them their jobs? This is not a "bias." It would be idiotic of them to do otherwise. Suppose I could prove that cutting Caplan's salary by 50% would increase GDP. Would he cheerfuly go along, or would he suddenly become an "economic illiterate" and oppose a broadly benficial policy?
Posted by: Bernard Yomtov at May 12, 2007 9:04:30 AM
Is this anti-market bias inherent or do special interest groups indoctrinate the public to suit their needs?
Either way, people are sheep.
Posted by: Chairman Mao at May 12, 2007 9:30:00 AM
"Suppose I could prove that cutting Caplan's salary by 50% would increase GDP. Would he cheerfuly go along, or would he suddenly become an "economic illiterate" and oppose a broadly benficial policy?"
A good question. And since Caplan constantly advocates that education should not be subsidized by the state, and should in fact be taxed, and that there should be no such thing as a public school -- all of which being policies that would slash his salary or eliminate it all together -- it seems like you have your good answer. Yup. He would.
Posted by: ryan at May 12, 2007 9:50:36 AM
"Is this anti-market bias inherent or do special interest groups indoctrinate the public to suit their needs?"
Scroll down six posts. Or if you prefer, here's the permalink:
http://www.marginalrevolution.com/marginalrevolution/2007/05/evolution_and_m.html
Posted by: J at May 12, 2007 10:04:33 AM
Chairman Mao is on to something when he says that people are sheep. Economic ignorance is part of the problem (but how to explain someone like Brad DeLong, who loves government and is not an economic illiterate?), but there is more to it than that. Most people think that government is necessary, if for no other reason than to provide basic infrastructure, including law, roads, defense, etc. Is this only because of economic ignorance, or is it because they've been brainwashed in public schools and think that democracy is something other than the advance auction sale of stolen goods Mencken knew it was?
What we need is Caplan + la Boettie/Flynn.
Economic interest explains part of the problem. It's rather ironic that a professor who explains anti-market bias so well teaches at a state university, and presumably is interested in having the state continue to cut his paychecks.
Posted by: Bill Stepp at May 12, 2007 10:23:56 AM
Assuming the bias is inherent, people can go either way on many issues. Special interests represent the establishment opinion and the maximum extent that it can manipulate the masses. The majority is whoever has the money to control it.
Posted by: Chairman Mao at May 12, 2007 10:32:55 AM
Bill Stepp,
Economic interest can't really explain the problem Caplan's identifying at all. Isn't that the whole point? It's a bit odd to say with Bernard Yomotov that people support protectionism in general (as opposed to just for their specific cases) out of economic interest, unless one does not believe that society in general would be better off with free trade. If most people would be better off with free trade, then economic interest could, at most, lead people to be ignorant about free trade, not whole-heartedly opposed to it.
Posted by: ryan at May 12, 2007 10:47:28 AM
I'm always surprised we have as free of a market as we do.
Economics is counter-intuitive and hard to learn. Our naive ideas about economics and fairness hurt us here. Jealousy and hatred of the rich is a pretty universal human trait. We are evolutionarily built to live in a small scale tribal society, not the massive impersonal society we find ourselves in.
Posted by: jim at May 12, 2007 10:52:34 AM
Ryan,
I did not intend to say that people support protectionism in general. Rather my point was, as you say, that they do so when they fear that they will be negatively affected, regardless of the impact on the economy as a whole. I do not consider this attitude to be irrational, or economically illiterate. Quite the contrary. They are pursuing their own economic self-interest.
it seems like you have your good answer. Yup. He would.
I don't think so. He could do his bit by resigning from his state-funded job. And did he actually attend public schools?
Posted by: Bernard Yomtov at May 12, 2007 11:28:13 AM
I, too, was surprised that we have as free a market as we do. Supporting a free market requires accepting some counter-intuitive notions. But so does supporting a science. There was a time not too long ago (from a hisotrical perspective) when ideas like "freedom of religion" and "evolution" were impossible for most of our ancestors to conceive. Even Russians living under communism didn't support the idea of a free press. These ideas were not only foreign, but they challenged existing power structures that had zero use for them. Yet here we are.
I believe that markets are a product of social evolution. But we won't get there without educational support for ideas that. It's not far-fetched. Even when I was a kid in public school, I remember a teacher saying "the legislature can't legislate morality," and being quite disturbed as an adult to see Congress actually trying to do so. Educating liberalism is within reach.
Posted by: M. Hodak at May 12, 2007 11:46:14 AM
I'm inclined to agree with Jim and M. Hodak. Zero-sum thinking comes naturally to people (Billy and Sally can't both sit in the front seat of the car; the more the parents spend on no. 1 son's education, the less they'll be able to save for no. 2 son; etc.). Understanding the principles of economics requires a level of abstract thinking that simply may be beyond the abilities of most people, at least without sustained effort.
Posted by: jp at May 12, 2007 12:50:53 PM
I don't know why Caplan identifies tariffs as "special interest" legislation but not their alternatives. Import-competing industries will form special interests in favor of tariffs, while exporting industries and industries that rely on imported goods will form special interests opposing tariffs. The distribution of opinions in favor of free trade or protection probably reflects the fact that exposure to trade does not affect everyone uniformly.
Posted by: Keith at May 12, 2007 1:06:59 PM
In order for relatively free markets to produce a positive outcome for each of us individually and collectively, we only need to understand that as consumers low prices are better than high prices, and that as workers high prices for our labor are better than low prices.
As such, very little intelligence or education is required for relatively free markets to produce a positive sum game for individuals and for society both. The process of rationally allocating scarce resources is essentially automatic in a relatively free market.
We don't need to understand how to wire a house electrically to own a house with electricity, nor do we even have to understand electricity to get electricity. Same with software, popsicles, peanuts etc., we don't need to know where the least scarce rubber, wood, graphite, and labor is in order to come up with a remarkably cheap pencil.
At the same time we don't need to understand why prices act to allocate resources amazingly well, or even understand that it is the price mechanism that does so, we merely have to go with the flow and act in our own best interests by buying (goods and services)low and selling (our labor) high.
But that same rational specialization of knowledge that allows us to make nice living writing software, wiring homes for electricity, or teaching Ricardo's difficult idea, turns into a royal disaster when it comes to government allocating resources. Our ignorance is still rational, it doesn't make sense for all of us to learn how to make a pencil for example or even to leanr anything at all about political candidates or vote at all.
We can not understand Ricardo's difficult idea, and if we are in a relatively free market economy our ignorance not only doesn't hurt us, it helps us in the sense that we devote more time to specialization that increases our productivity. But when we have a government that can short circuit the market, and we are in effect that government in a democracy, then our rational specialization becomes a disaster.
Posted by: happyjuggler0 at May 12, 2007 1:32:02 PM
The last paragraph in my post should start off If we can not....
Posted by: happyjuggler0 at May 12, 2007 1:39:47 PM
Some people are confusing rational ignorance and irrationality.
Posted by: Patrick R. Sullivan at May 12, 2007 2:43:51 PM
Bernard Yomotov,
Sure, it's rational for people to support protectionism in their particular industry. But that's completely not the subject of the article. The question isn't why farmers support farm subsidies, but why most voters do too. That's not self-interest. It's not even ignorance about economics -- people vote systematically in a non-market fashion.
Posted by: ryan at May 12, 2007 3:04:07 PM
I suspect a lot of this is just political coalition building, which affects voters as well as politicians. Many people choose their party affiliation based on wedge issues like abortion, gay rights, and wars. Many of those people then acquire views about economics by osmosis from their party's favorite media outlets and blogs. Thus we get rural southerners in favor of estate tax cuts and rich new yorkers opposed to free trade agreements.
There are a lot of people in this country who will oppose something just because the Wall Street Journal editorial page favors it.
Posted by: DK at May 12, 2007 3:37:13 PM
Trying to get the American public to understand economics isn't going to work: it's too hard. Once upon a time, though, we understood freedom pretty well; that's been lost. And if freedom is valued, you get a free market. When I was young, the standard kid's response to a complaint from another kid about some action was, "hey, it's a free country." Kids don't say that any more. And they're right. I don't smoke (any more), and I enjoy smoke-free public places. But I fear that we've paid a very high price for getting them. Almost everyone's starting point today is "if something harms someone, let's ban it."
Posted by: Alan Gunn at May 12, 2007 3:52:41 PM
Just look at how the question is framed:
'A 2004 ... Poll found that 58% agree that "government needs to subsidize farming to make sure there will always be a good supply of food."'
Who doesn't want "a good supply of food"? Frame any special interest issue in terms like these and of course they will all seem "universally appealing."
Posted by: fustercluck at May 12, 2007 4:14:52 PM
One of my biggest pet peeves is polling methods. Those poll questions are single-sentence questions, typically posed with a positive "defense" of the question, and no discussion of the consequences. If the farm subsidy question were posed like: "would you be willing to pay $X more for food, and hurt farmers in poor countries, to pay for subsidies to American agricultural corporations?", most people would answer No.
Other polls construct questions in much the same way, which is why you'll get 50% of people to agree to virtually anything if you ask it right - and this is why polls suck as a means of figuring out policy preferences.
Also, most ordinary people don't spend lots of time thinking about public policy questions, so often the first chance they have to think at all about these questions is when they're asked by a pollster. Unless they're crusty curmudgeons or policy wonks, they'll answer Yes to anything that sounds "nice" and "reasonable" - and that sounds like it wouldn't hurt them.
Posted by: Foobarista at May 12, 2007 4:23:48 PM
Are you sure that Caplan is not just recycling the work of
John Kenneth Galbraith and just substituting the word public
whenever Galbraith said private interest?
Have you checked his office to see if he has the complete works of Galbraith hidden there?
Posted by: spencer at May 12, 2007 5:43:47 PM
Ryan,
But people don't frame their attitudes just on the basis of their immediate situation. If you think protectionism in a specific case will help your town, or a family member, you may well favor it. Similarly if you see no immediate benefit, but fear your job will be next you may favor protection.
Try telling someone that a policy threatens the factory in his town (even though he doesn't work there) but might create more jobs a thousand miles away, and reduce the price of blue jeans by fifty cents. What do you think his reaction will be? You can spout about comparative advantage all you want, but whether he understands it or not you're not going to convince the guy. And guess what? He's right. It's not worth it to him.
Posted by: Bernard Yomtov at May 12, 2007 5:51:30 PM
The natural thing is to cluster together for warmth and support. The unnatural thing is to strike out on ones own. Plus, the overwhelming majority are mediocre, know deep down that they're mediocre and given the opportunity couldn't hack it on their own. Ergo the almost instinctual distrust of the free market and individual enterprise.
Posted by: ricpic at May 12, 2007 6:53:03 PM
The author certainly has a point; the originality of his argument is weak though. As an undergraduate political science student, one of the first basic features of political economy that you learn is the so-called 'concentration of cost' v. 'dispersion of costs' paradigm. That is essentially what the author describes. Tyler Cowen commented on it in an earlier posts. For a better explanation of anti-market bias follow this link, which was previously posted on MR.
Posted by: Wright at May 13, 2007 11:34:57 AM
