Abstract
This paper discusses Bryan Caplan’s “rational irrationality” theory. In particular, it shows that this theory neglects the impact of social construction of information in the beliefs formation process. Conversely, Kuran and Sunstein’s competing theory which explains the beliefs formation process through information and reputation cascades mechanisms takes into account this influence (Kuran and Sunstein in Stanford Law Rev 51: 683–768, 1999). Besides, this theory keeps the rational ignorance assumption into the analysis and emphasizes the role of activist interest groups who strategically use voters’ ignorance. In this way it provides an economic theory of irrational beliefs formation based on sound political epistemology.
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Notes
Caplan (2007).
Survey of Americans and Economists on the Economy (1996).
These refer in particular to a special issue of Critical Review in 2008. I present here the main striking critics.
Concerning the existence of controversies among economists, Gauss (2008) highlights that the empirical study that Caplan refers to does not sufficiently take into account the contradicting view that exist among economists on several topics. Indeed, Alston et al.’s (1992) analysis suggests that the training period of an economist affects the formation of its ideas and opinions during its career. They also show that opinions of economists are different for surveys conducted in 1976 and in 1990.
Bennett and Friedman (2008) notice that Caplan’s theory is logical only if one assumes that voters know their beliefs are false. Nevertheless, they underline that Caplan does not provide any empirical evidence that voters deliberately adopt irrational beliefs. Besides, he does not provide empirical evidence that emotion and ideology affects voters’ beliefs.
Brady et al. (1995) have developed a similar argument by integrating cognitive dissonance theory into public choice analysis of competition among pressure groups. Cognitive dissonance phenomenon may be used by activist groups in order to generate collective fears. Contrary to Kuran and Sunstein, these authors do not analyze collective belief formation processes and their effects on public policy.
Zeckhauser and Viscusi (1990) have also treated this issue.
Viscusi and Hamilton (1999) have also analyzed the issue of irrational risks policy (notably the superfund program established in 1980) and have shown the impact of risks perception bias and political factors on public policies. These authors have shown that these policies have reflected judgment errors because public decision makers were subject to citizen pressure who held erroneous judgments about risks.
Superfund is the federal government's program to clean up the nation's uncontrolled hazardous waste sites.
A study of Allen (1987) comparing the ranking of environmental problems by U.S. citizens and EPA experts, showed different evaluation by these two actors. The more important risk for the public is that of toxic waste sites whereas EPA experts do not consider it dangerous. For Viscusi (1998), this erroneous perception of risks is attributable to the wide media coverage related to the “Love Canal” story.
Simon (1982) was the first scholar who developed the concept of limited rationality.
Kuran and Sunstein extend the analysis of Slovic (2000) related to the social amplification of risks. Although Slovic is aware of the importance of interdependence of individuals in risk perception, he does not explain social mechanisms leading to such biased perception. For Kuran and Sunstein, it is reputational and informational cascades mechanisms throughout.
It is clear that the reversal of cascades may result from the action of such an expert. Nevertheless, one may argue that erroneous beliefs might persist over time if one takes into account the existence of a feedback mechanism between the level of one’s beliefs and his search for new information, or his sensitivity to new information. The stronger the beliefs of an individual, the less value this will attribute to new information. For a true believer, the value of a new piece of information would be zero. Such feedback processes would be worth taking into account when one analyzes the conditions of the cascades process reversal.
Cao and Hirshleifer (1997) showed that learning through the observation of the behavior of predecessors reduces incentives to acquire more information.
Kuran (1995).
It may explain, for example, consumption behavior in order to increase statutes.
Hung and Plott (2001) have demonstrated the existence reputation cascades through laboratory experiments.
Such an idea seems validated by Morris (2001) who has shown that reputation effects lead to a loss of information for which the social value is high.
The reader may refer to http://www.oism.org/pproject/.
A study from the Business Media Institute has analyzed 205 messages on TV devoted to climate change issues, diffused between July 1, 2007 and December 31, 2007 by leading U.S. channels. It has shown first, that the number of interventions by proponents of the alarmist’s thesis is higher than that its opponents. On average the ratio is 13 proponents against 1 opponent for all of the channels. Second, it has emphasized that scientists represent only 15% of the personality consulted. (http://businessandmedia.org/specialreports/2008/GlobalWarmingCensored).
Austen-Smith (1987) models the joint influence of voters and interest groups on policy outcomes. He shows that policies converge towards the preferences of the median voter and diverge from the latter when voters’ ignorance increases.
Jaeck and Bougi (2010) have formalized the dynamics of environmental regulation based on this assumption of an irrational beliefs formation through cascades effects. They determine in particular under what conditions one may observe a persistence of command and control instruments and cycles between command and control and incentives-based instruments. Their reasoning may also be extended to the analysis of inefficient economic policies persistence.
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Acknowledgments
I thank the participants of the Public Choice meeting held in Monterey, CA (March 11–14, 2010) for their helpful comments on an earlier draft of this paper. I am particularly grateful to Sebastian Coll Martin and two anonymous referees for their valuable comments and suggestions. Finally, I thank Anjali Nadig and Leo Wood for their helpful technical assistance.
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Jaeck, L. Information and political failures: to what extent does rational ignorance explain irrational beliefs formation?. Const Polit Econ 22, 287–301 (2011). https://doi.org/10.1007/s10602-011-9108-x
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DOI: https://doi.org/10.1007/s10602-011-9108-x