Buchanan on Economic Ignorance

Majoritarian democracy tends to result in milder governments than monarchies or dictatorships. But it is not without its perils, as James Buchanan pointed out in his paper “Predictability: The Criterion of Monetary Constitutions,” specifically on p. 416 of the first volume of his collected works, The Logical Foundations of Constitutional Liberty:

We should never lose sight of the fact that the average man knows little of economics and, worse than this, he does not know how little he does know.

That the median voter apparently has even less intellectual humility than a typical economist is unsettling. It also explains the persistence of many harmful economic policies, ranging from trade and immigration restrictions to minimum wage laws to price controls. Politicians win by giving the median voter what he wants. If he wants policies that make economists shake their heads, politicians will deliver them or lose their jobs to others who will.

As Buchanan would argue, the solution lies in institutional change. The current rules of the political game consistently give certain results. This is why reform is always difficult, and why the last two presidents have behaved so similarly despite belonging to different political parties. A political system that accounts for voters’ systematic cognitive biases would greatly reduce the harm caused by widespread economic ignorance.

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