The Perils of Pure Democaracy

June 26, 2016
Posted by Jay Livingston

In yesterday’s post on the Brexit vote, I wondered aloud about the wisdom of using a referendum to decide on specific policies. A commenter characterized my views as “the quintessential liberal view – elitist, snobbish, dismissive of democracy.”

I had thought that my reservations about direct democracy were more on the conservative side, something along the lines of Edmund Burke (1729 - 1797), much beloved among American conservatives. (“In the twentieth century, he became widely regarded as the philosophical founder of modern conservatism.” Wikipedia) Burke was elitist and snobbish, and he favored decisions by elected representatives, not the masses, even when a representative’s decision contradicted the views of those who elected him. As Burke says to a hypothetical constituent of such a representative,  “Your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.”

As for “elitist, snobbish, dismissive of democracy,” the phrase also describes another icon of American conservatism, William F. Buckley, Jr.

Hamilton and Madison also favored a republic, with laws made by representatives, rather than what Madison calls “pure democracy.” Federalist #10 emphasizes this idea, though more to thwart the tyranny of the majority than to provide a buffer against bad judgment. Madison has a point. Suppose that a majority of the members of a community, a university for example, want to prevent conservatives from giving talks on campus.

Pure democracy would give us stronger gun control (including an outright ban on assault weapons), much more government spending on infrastructure, higher taxes on the wealthy (especially on capital gains), Senate hearings and a vote on Supreme Court nominee Merrick Garland.

But would we really want public opinion to determine these matters? Would we want a referendum on whether we return to the gold standard? Nearly all economists say it’s a bad idea. But it sounds good. After all the gold standard is, well, the gold standard of economic policies. And if something is the gold standard, that means it’s the best in its category. It’s easy to imagine a majority of the people being convinced of its virtues.

Maybe the 2008 bank bailout is a better analogy to Brexit. The bailout was a controversial matter. Simply put, the government would be giving a ton of money to the people who tanked the economy. Still, most economists as well as the Wall Street elites, thought it was necessary. The quintessentially democratic, non-elitist way to decide the matter would have been a referendum.

In March of that year, a poll showed that 60% of Americans opposed a bailout.

Maybe a referendum wouldn’t have been such a great idea even though it may have seemed like on at the time.

A Good Idea at the Time

June 25, 2016
Posted by Jay Livingston

The pound was down 10% making anything imported to the UK more expensive. Global markets tumbled, including those in the UK. Some Leave supporters were ecstatic.

But some seemed to be having buyer’s remorse. Google searches for “What happens if we leave the EU?” and “What is the EU?” tripled. (WaPo) They seemed to be waking up the morning after wondering just what it was they had done the night before.

All I could think of was Steve McQueen’s famous line in “The Magnificent Seven.”  McQueen plays Vin, one of the seven gunslingers who come to the aid of Mexican peasants who are being constantly raided by a group of bandits led by Calvera. At one point, Calvera captures the seven. He cannot understand why they would sign on to help a bunch of Mexican peasants.

CALVERA: The thing I don’t understand is why a man like you took the job in the first place. . .  Tell me why. VIN: Fella I once knew in El Paso, one day he took all his clothes off and jumped in a mess of cactus. I asked him the same question, why? He said it seemed to be a good idea at the time.*

The vote to leave appears to be one of those impulsive decisions, the ones that seem like a good idea at the time. Many Leave voters – at least the ones who got a few seconds of airtime on American radio – were thinking in terms of personal complaints, not national policy. They reminded me of the woman I rented a flat from in London a decade ago. “There’s no Brits in London any more,” she said. and she was not happy about it.  

Voting often has a strong emotional component. The advantage of representative democracy over direct democracy is that we give the job of turning sentiments into actual policy to our representatives. Presumably, they have to think through more of the implications.**

I suppose what a democracy needs is a mechanism that allows people to express their political emotions and have it appear that those emotions have become policy while at the same time leaving real policy to those who will craft it more slowly and soberly.

The Leave vote does not automatically change the UK’s position. As a Financial Times post explains, the vote is technically a non-binding advisory. It’s possible that parliament will decide to act against the advisory. In any case, the process of leaving will take two years, and perhaps during that period, UK voters may rethink the Brexit,*** even it seemed like a good idea at the time.

As Calvera says to Vin in that same scene, “Only a crazy man makes the same mistake twice.”

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* The video clip is here . I didn’t embed it because the way McQueen delivers the line doesn’t capture the feeling I think is appropriate. He’s serious, almost somber. I would prefer him laugh it off and say in effect, “Yeah, I guess it was stupid, but what can you do?” I also think that “seemed like a good idea” sounds better than “seemed to be a good idea.”

** My knowledge of political thought is slender. But surely one or more of The Federalist Papers must have considered this problem – how to keep the passions of the majority from inflaming the process of running a government.

*** On “Planet Money,” the American hosts asked British economist Tim Harford, “Any chance for a do-over? Two out of three?” Said Harford, “I think it’s unlikely.”

Blame Canada Culture

June 23, 2016
Posted by Jay Livingston

Culture as a concept has always fascinated me –all those different groups with their different ways of thinking and reacting. But I’ve also grown skeptical of culture as an explanation for things we don’t like – especially when the explanation invokes the general culture for a problem that is more specific.

Here, for example, is Ramesh Ponnuru writing earlier this month at Bloomberg

Trump’s success in the presidential race so far reflects a cultural rot: It would once have been impossible for someone like him to win the nomination. But it also deepens that rot. If we elevate a man we know to be cruel, impulsive, insecure, vain and dishonest to the most powerful position in our country, that choice helps to define our own character and shape our expectations for one another. It also means that our political debate will be dumber, nastier and more content-free.

Is our culture in fact rotten? Ponnuru offers no evidence that it’s any more rotten than it was in the past. Instead, he offers this circular logic.

• Why is Trump winning in the primaries? Because of cultural rot.
• How do you know there’s cultural rot? Because Trump is winning. 

The other problem is that Ponnuru is blaming the entire culture for the actions of the Trump voters and supporters. At least I think he is. In much of the article he talks about “conservatives” who support Trump. But when he says “if we elevate . ..” and “our own character,” he seems to be casting a wider net. By “we” Ponnuru might mean conservatives or Republicans, but he never mentions  “conservative culture” or “Republican culture,” so I get the sense he means American culture.

But cultures don’t vote; people do. So political scientists rarely talk about cultural rot. Instead, they ask who are these people who support Trump — what age, gender, race, region, economic position, policy views, etc. But if, like Ponnuru, you are a conservative* and a Republican, you probably don’t want to say that a lot of the people who have been voting for your side all these years are morally rotten. And you don’t want to blame your party for those voters’ rotten choices. Instead, you’re like the parent whose kid is arrested and who says, “He’s a good kid, he just got swept up by the wrong crowd.” So you take a “Blame Canada” strategy and say that all these Trump voters got swept up by the cultural rot that is at large in the US.

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* Ponnuru focuses on another factor dear to conservatives – character. He cites JFK, Gingrich, and Bill Clinton for their infidelities. But supporting Trump is worse, he says, because “the public had no way of knowing about most of their vices before voting for them. (Nixon’s swearing on the Watergate tapes, while not the focus of public concern, was scandalous.)” Yes, that’s right. The worst character flaw Ponnuru can find in Nixon is his swearing.

Imagine There’s a $5 Discount. It’s Easy If You Try. . . .

June 21, 2016
Posted by Jay Livingston

Reading Robert H. Frank’s new book Luck and Success, I came across this allusion to the famous Kahneman and Tversky finding about “framing.”

It is common . . . for someone to be willing to drive across town to save $10 on a $20 clock radio, but unwilling to do so to save $10 on a $1,000 television set.

Is it common? Do we really have data on crosstown driving to save $10? The research that I assume Frank is alluding to is a 1981 study by Daniel Kahneman and Amos Tversky (pdf here). Here are the two scenarios that Kahneman and Tversky presented to their subjects.

A.  Imagine that you are about to purchase a jacket for $125 and a calculator for $15. The calculator salesman informs you that the calculator you wish to buy is on sale for $10 at the other branch of the store, located 20 minutes drive away. Would you make the trip to the other store? B. Imagine that you are about to purchase a calculator for $125 and a jacket for $15. The calculator salesman informs you that the calculator you wish to buy is on sale for $120 at the other branch of the store, located 20 minutes drive away. Would you make the trip to the other store?

The two are really the same: would you drive 20 minutes to save $5 on a calculator? But when the discount was on a $15 calculator, 68% of the subject said they would make the 20 minute trip. When the $5 savings applied to the $125 calculator, only 29% said they’d make the trip.

The study is famous even outside behavioral economics, and rightly so. It points up one of the many ways that we are not perfectly rational when we think about money. But whenever I read about this result, I wonder: how many of those people actually did drive to the other store? The answer of course is none. There was no actual store, no $125 calculator, no $15 jacket. The subjects were asked to “imagine.” They were thinking about an abstract calculator and an abstract 20-minute drive, not real ones.*

But if they really did want a jacket and a calculator, would 60 of the 90 people really have driven the 20 minutes to save $5 on a $15 calculator? One of the things we have long known in social research is that what people say they would do is not always what they actually will do. And even if these subjects were accurate about what they would do, their thinking might be including real-world factors beyond just the two in the Kahneman-Tversky abstract scenario (20 minutes, $5). Maybe they were thinking that they might be over by that other mall later in the week, or that if they didn’t buy the $15 calculator right now, they could always come back to this same store and get it.

It’s surprising that social scientists who cite this study take the “would do” response at face value, surprising because another well-known topic in behavioral economics is the discrepancy between what people say they will do and what they actually do. People say that they will start exercising regularly, or save more of their income, or start that diet on Monday. Then Monday comes, and everyone else at the table is having dessert, and well, you know how it is.

In the absence of data on behavior, I prefer to think that these results tell us not so much what people will do. They tell us what people think a rational person in that situation would do. What’s interesting then is that their ideas about abstract economic rationality are themselves not so rational.

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* I had the same reaction to another Kahneman study, the one involving “Linda,” an imaginary bank teller. (My post about that one, nearly four years ago, is here ). What I said of the Linda problem might also apply to the jacket-and-calculator problem: “It’s like some clever riddle or a joke – something with little relevance outside its own small universe. You’re never going to be having a real drink in a real bar and see, walking in through the door, an Irishman, a rabbi, and a panda.”