Bryan Caplan, professor of economics at George Mason University in the United States, might well have had the current Australian election campaign in mind when he wrote his recently published book The Myth of the Rational Voter.
According to the review in The Economist last month, Prof Caplan argues that politics does not follow the principles of the “wisdom of crowds” because ignorant voters do not vote randomly. Instead, he identifies four biases that prompt voters systematically to demand policies that make them worse off. The reviewer summarised them thus:
First, people do not understand how the pursuit of private profits often yields public benefits: they have an anti-market bias. Second, they underestimate the benefits of interactions with foreigners: they have an anti-foreign bias. Third, they equate prosperity with employment rather than production: Mr Caplan calls this the “make-work bias”. Finally, they tend to think economic conditions are worse than they are, a bias towards pessimism.
That the modern Australian Labor Party subscribes to this kind of thesis is shown with the decision announced today that in government it would have the competition watchdog launch an inquiry into the prices charged by supermarkets.
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This initiative by Opposition Leader Kevin Rudd panders perfectly to Prof Caplan’s principles of an anti-market bias and the bias towards pessimism and is sure to be electorally popular for that reason. But should there end up being a Labor Government it can be anticipated with considerable certainty that an Australian Competition and Consumer Commission investigation will result in no change to supermarket pricing strategies at all.
As evidence, go back and study the history of the prices surveillance authority. Neither its introduction by the Labor Government of 1984 with a similar fanfare to Mr Rudd’s nor its abolition in 1995 after John Howard became Prime Minister had the slightest impact on the actual inflation rate.
But then for politicians that is not the point. They are guided by very rational principles – that their first duty is to be elected and their second is to be re-elected.