13.11.14

BETTER TO HAVE SAID "BOUNDED RATIONALITY"?

A famous economist (I want to say Harold Demsetz, inform me if it was someone else) once remarked that a world with free steel would look very different from a world with costly steel.  The remark, whoever made it, was about the kind of blackboard economics in which inputs other than information have prices, and markets allocate resources, or governments correct inefficiencies, in Pareto-efficient (under competitive conditions) or Pareto-improving (with Wise Government) ways.

The most charitable interpretation of MIT's Jonathan Gruber talking shop about the selling of health insurance reform might come from Cafe Hayek's Don Boudreaux.
Precisely because the typical voter is not stupid, the typical voter understands that his or her vote will not determine the outcome of any election.  The typical voter, therefore, spends his or her scarce time gathering information about matters over which he or she does exercise meaningful control.
And thus, a candidate gains little, or a bill debated in Congress, gains little, by more precise explication of what it does or doesn't accomplish.
So Jonathan Gruber simply admits that the very process that people on the left romanticize and celebrate – democratic politics – isn’t what it’s cracked up to be.  Of course, libertarians and public-choice scholars say the same.  The difference between the Jonathan Grubers of the world and the Russ Robertses and Bryan Caplans of the world is that the former believe that politics is still commendable as long as good, smart people (such as Gruber) are performing deceptions necessary to trick voters into supporting policies that good, smart people somehow divine are best for the masses, while the latter believe that the very need to deceive rationally ignorant (indeed, rationally irrational) voters is itself a major flaw in politics – a flaw that makes politics far less reliable and admirable than competitive, private markets.
Now, create a Committee of (like-minded) Wise Experts to Advise on Legislation, and David Friedman explains what comes next.
What happens if each of those experts feels entitled, even obligated, to lie just a little, to shade his conclusions to strengthen the support they provide for what he believes is the right conclusion? Each of them then interprets the work of all the others as providing more support for that conclusion than it really does. The result might be that they end up biasing their results in support of the wrong conclusion—which each of them believes is right on the basis of the lies of all the others.
And they get caught on tape yukking it up at a conference -- sharing an in-joke? -- and that sets off commentators who disagree with the law and the mind-set that led to the law.
To the liberal mind, there is no distinction between academic intelligence and moral intelligence, between what we might call “learnedness” and “wisdom.” In fact, they correspond. The more one learns, the “better” a person one becomes. Since Obama is “perhaps the smartest guy ever to become president” (per presidential historian Michael Beschloss), he must also be virtuous. Since the people who crafted Obamacare had excellent credentials and prestigious tenured positions, Obamacare must be not just smart policy, but good.
At Marginal Revolution, Tyler Cowen, no fan of Professor Gruber the policy wonk, hopes that participants at academic conferences continue to spout, even foolish things.
Criticisms of Gruber are not criticisms of a policy, and it is policy we should focus upon and indeed there is still a great deal of health care policy we need to figure out.  It’s hardly news that intellectuals who hold political power, even as advisors, very often do not speak the truth.  If anything, I feel sorry for Gruber that he has subsequently felt the need to so overcompensate by actively voicing such ex post cynicism, it is perhaps the sign of a soul not at rest.
In isolation, perhaps. There is, however, ample evidence that court intellectuals for Democrats design policies from a mind-set of Omniscient Expertise, whether For Your Own Good (voters are ignorant) or as Efficient Division of Labor (voters are boundedly rational and experts have objectively better information sets), that court intellectuals for Democrats often come across as snobbish and condescending (I watch MSNBC so you don't have to), and that Democrats enact policies that oft run afoul of the Law of Unintended Consequences.

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