New Economist

Why we are ruled by fools

Bryan Caplan at EconLog has an answer to Brad DeLong's constant refrain "Why Oh Why Are We Ruled by These Fools?" (see for example here and here). It is that:

...democratic rule by fools is perfectly normal. Or to be more accurate, in a democracy our rulers are older versions of the popular kids from high school. The only difference is that politicians are champions in the Olympics of popularity contests. They are painfully weak on substance, but have an amazing ability to make people like them. And if they have to choose between being right and being popular, they don't think twice. They're Olympians; their overriding priority is winning.

In the end politicians who deliver the right policies, irrespective of whether they are popular, are likely to be less succesful than those who promise voters they will pursue popular policies (though the case of death penalties outside the US is an interesting counterfactual). Bryan concludes:

We're ruled by fools election after election because the majority habitually prefers affable fools to disagreeable pedants.

Maybe so. But surely competition plays some part in the political process, weeding out the worst of these 'affable fools'? A new NBER working paper by Timothy Besley, Torsten Persson and Daniel Sturm, Political Competition and Economic Performance: Theory and Evidence from the United States, finds that it does:

One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance economic performance and uses the United States as a testing ground for the model's implications. It finds statistically robust evidence that political competition has quantitatively important effects on state income growth, state policies, and the quality of Governors.

Some Sunday reading

There's plenty of interesting new articles online. Here are a few:

Fortune has a piece by Clay Chandler on Disney's plans for China: Mickey Mao. "The Magic Kingdom meets the Middle Kingdom, as Disney sets its sights on China. But for new chief Robert Iger, who has been leading the charge, wishing on a red star could be a risky strategy.''

Timothy Garton Ash and Timothy Snyder write about Ukraine's Orange Revolution in the latest New York Review of Books. This issue also has a good piece on A New Lebanon? by Max Rodenbeck.

In Taking Faith Seriously, Mike Gecan writes in The Boston Review about how contempt for religion is costing Democrats more than votes.

Robyn Meredith chronicles the emergence of a new wave of offshoring bound for Asia in The Next Wave of Offshoring in the Far Eastern Economic Review. (Hat tip to Prudent Investor).

Slate.com has two pieces on Saul Bellow. Clive James, Dave Eggers, and other novelists and critics remember an American master. And Elisabeth Sifton recounts editing Saul Bellow.

Today's The Sunday Times prints extracts from biographer Anthony Seldon's book Blair. The article, entitled The long goodbye, argues that "Blair has wasted his first two terms through caution and incoherence. Retirement is on hold while he seeks glory in a third".

Meanwhile in the Sunday Times Magazine Christine Toomey's report, Ailing and isolated, explains how "46 years on, Cuba's communist regime lies in tatters amid increasing poverty and corruption. One day Castro will be gone - but the future could be even more frightening."

Writing in Observer Magazine, Tim Adams journeys into the hearts, and minds, of Middle England: this green and pleasant land.

Finally, the New Yorker has a thoughtful review by John Cassidy of Jeffrey Sachs new book The end of poverty.

Do good economists make bad politicians?

Stumbling and Mumbling argues good economists make bad politicians. His bottom line is, quoting Harvey Mansfield: “There is almost no such thing as a suave economist.” ...Hence economists’ poor record in politics. Chris gives five possible reasons why:

1. Economics is the study of trade-offs, of costs. ...Politicians, of course, hate the idea of trade-offs and costs.

2. Economists love counter-intuitive ideas. ...This leads to us stressing paradoxical notions – like the notion that outsourcing can be a good thing. Good politicians, by contrast, prefer sound-bites that corroborate the public’s prejudices.

3. Economists are like photographers - we love simple models. In particular ...we’ve loved models that yield bold, controversial but testable predictions.

4. Economists start from assumptions – or better still axioms – and see where they lead. ...Sometimes, though, they can lead to trouble.

5. Economists have a simple, brutal view of human nature – everyone’s rational (though not knowledgeable) and out for themselves. This makes us comfortable with conflict and argument, and uncomfortable about building alliances.

His points are valid. Most economists are by nature spectical, analytical and counter-intuitive. We are much more comfortable being critics than cheerleaders. That makes it difficult to advocate second-best solutions or simple minded policies. But while economists may not be natural politicians (with some notable exceptions), they are a vital part of any team of political advisers.

When everyone else is telling the Prime Minister his latest brainwave is brilliant, someone has to point out the likely costs, examine the evidence base and - where appropriate - give reasons for caution or propose better alternatives. Economists are well suited by both temperament and training to that role. It will never make us popular, but it does contribute to the greater good.