Rational Irrationality and the Microfoundations of Political Failure

Models of inefficient political failure have been criticized for implicitly assuming the irrationality of voters. (Wittman 1999, 1995, 1989; Coate and Morris 1995) Building on Caplan's (1999a, 1999b) model of "rational irrationality," the current paper maintains that the assumption of voter irrationality is both theoretically and empirically plausible. It then examines microfoundational criticisms of four classes of political failure models: rentseeking, pork-barrel politics, bureaucracy, and economic reform. In each of the four cases, incorporating simple forms of privately costless irrationality makes it possible to clearly derive the models' standard conclusions. Moreover, it follows that efforts to mitigate political failures will be socially suboptimal, as most of the literature implicitly assumes. It is a mistake to discount the empirical evidence for these models on theoretical grounds. For discussion and useful suggestions I would like to thank Don Boudreaux, Tyler Cowen, David Levy, Pete Boettke, Jim Schneider, Geoffrey Brennan, Bill Dougan, Bill Dickens, Mitch Mitchell, Ed Lopez, J.C. Bradbury, Todd Zywicki, David Bernstein, Robin Hanson, Dan Klein, Alex Tabarrok, Nicky Tynan, Timur Kuran, Ron Heiner, Roger Congleton, Fab Rojas, Charles Rowley, Gordon Tullock, an anonymous referee, seminar participants at George Mason, participants at the Public Choice Outreach seminar and the Public Choice Society meetings, participants at the Workshop in Economics and the Law, and members of my Armchair Economists’ listserv. Gisele Silva and Eric Crampton provided excellent research assistance. Particular thanks are owed to the Kaiser Family Foundation for creating and sharing the data for the Survey of Americans and Economists on the Economy. The standard disclaimer applies.