Uncovering Rational Irrationalities
Bryan Caplan posits that people treat irrationality as a consumption good, in that they choose to buy it when its cheap. Irrationality is cheap when holding wrong opinions is unlikely to have negative impact on our lives, such as when we are opining about things we have no control over (eg politics). Since opinions on these things can make us feel good, there is value to buying them, and so bias is rife.
A few years back, I noticed a striking example of this in my own thought processes. I have long been a libertarian, and I realized an alternative way to look at why governments perform poorly, which gave a strange new idea about how they could be made to do a better one. Coming up with this solution made me suddenly see all the problems with conventional libertarianism – the views which I had but recently held. And not just small problems – I went from thinking that if only enough people could be converted, or a state taken over, a stable libertarian government could be created, to thinking that it would never happen, and if it did would quickly devolve back into big government.
Despite my purported values of objectivity, my subconscious had sneakily purchased some irrationality. The irrationality was cheap, as erroneous political beliefs have little impact on my life, and it was valuable, as it gave me hope that the society I find most appealing might someday exist. It was only when that value disappeared, because I saw an alternate way for the society to come about, that I was able to rationally examine the belief.
This suggests some techniques for reducing bias. If it is important to you that something be true, imagine an alternative which gets you the same positive feeling, and see if the first thing is still believable. Or imagine yourself in a position where your opinions on grand social issues actually matter. One of the great things about betting markets is that make many types of opinions matter, thus forcing people to more carefully consider them. If the blowhard at the bar really thinks Iraq is such a mess, ask him to place a bet. If he won’t, everyone (including, most importantly, himself) knows that he doesn’t really believe it. If he does bet, he’ll quickly learn whether he is overconfident about his judgment.
On the other hand, perhaps it is best for our mental health that not all of these attics be subjected to the light of critical examination. There is some value to illusions – particularly those our subconscious sees as cheap at the price.
Glad you enjoyed the piece. I think modular ocean platforms may actually be doable, but we'll find out. I agree that increasing jurisdictional competition is important - that's why the internet is great (increases geographic mobility), and why federalism is so important, as you mention.
School vouchers only affects one small area, it doesn't really address the general problems with government.
Any decrease in immigration friction will help, but I feel that the costs to immigration are so high already that it's going to be tough for the market to be very efficient. That's why I think ocean/space are so important - it seems easier to build modular ocean cities than to eliminate all the costs of moving (new house, new job, new friends)
There is already a fair amount of international corporate tax competition, because capital is fiarly mobile. But the more the better.
Patri,
Thanks for the link to your essay (in progress?) on dynamic geography. I found it to be inspiring and illuminating on the central (so to speak) problem of fighting off big government.
I don't see modular oceanic platforms coming any time soon, although I hope I am wrong. But it does bring up a good way of thinking about the root of the problem, the lack of jurisdictional competition and the frictional barriers to free movement to other jurisdictions. It seems to me that a (the?) key goal for libertarians (be they anarcho-capitalists or minarchists) ought to be to find ways to increase jurisdictional competition.
Some thoughts on jurisdictional competition follow. First off I think it is important to realize that one doesn't need for "everyone" to credibly be mobile, a large enough margin of (ideally vocal) migrants can act as price setters for jurisdictional policies.
Universal school vouchers, ideally with the privatisation of government owned educational businesses (i.e. schools), especially in urban settings where the ability to change school jurisdiction is severely constrained by income. The suburbs have some degree of competition, and surely that explains at least part of their (suburban K-12 schools) relative lack of mediocrity.
Repealing the 17th amendment. (Good luck!) The rationale behind this move is to increase the relative power of the states, as opposed to the central control of the federal government. Competition between the states ought to be a libertarian mantra in the US, noting the need to disassociate from the old code phrase of state's rights that used to mean racism.
Increased immigration into the US, especially of high skill, high wage workers from quasi(?)-socialist countries like Sweden, France, Germany, Italy etc. To the extent we can lure such persons, again ideally vocally and visibly, the more likely their former countries will be to ratchet down (it is not impossible for it to work both ways, just trickier to have a ratchet down effect than ratchet up effect of increased government) marginal income tax rates in those countries. This in turn would tend to act as a ceiling on such taxes in the US. Those countries facing severe Social Security and Medicare/Medicaid problems (regardless of their country's particular name for such things) simply can't afford to lose the younger generation, especially the high wage earners, and expect to continue their Ponzi-like schemes intact. Thus they will likely be the first to ratchet down their tax rates, and government size, in response to jurisdictional competition for highly productive citizens.
Race to the top in liberty (often misframed as race to the bottom) in international corporate tax competition. This simply reduces government revenues, at least as a first order proposition. The incidence of such taxes is such that this also ought to raise incomes and lower real prices (same thing?), thus temporarily giving wind to the tax cutters mill if they can leverage it to other tax sectors.
Avoidance of international governance wherever it tries to rear its ugly head. That said, formal "regional labor movement liberalization agreements" such as that occurring in the EU are quite helpful I should think. Witness Sarcozy campaigning in London for the votes of expatriates fleeing France's draconian and self-destructive socialist-style governance. The US and Canada ought to try to come up with something similar, although if the economic left in either country understood the implications I'd guess they'd oppose it. But it seems worth a try to get it on the agenda anyway.