In theory, democracy is a bulwark againstsocially harmful policies. In practice, however,democracies frequently adopt and maintain policiesthat are damaging. How can this paradox beexplained?
The influence of special interests and voterignorance are two leading explanations. I offeran alternative story of how and why democracyfails. The central idea is that voters are worsethan ignorant; they are, in a word, irrational—andthey vote accordingly. Despite their lack ofknowledge, voters are not humble agnostics;instead, they confidently embrace a long list ofmisconceptions.
Economic policy is the primary activity of themodern state. And if there is one thing that thepublic deeply misunderstands, it is economics.People do not grasp the “invisible hand” of themarket, with its ability to harmonize privategreed and the public interest. I call this anti‐marketbias. They underestimate the benefits ofinteraction with foreigners. I call this anti‐foreignbias. They equate prosperity not with production,but with employment. I call this make‐workbias. Finally, they are overly prone to think thateconomic conditions are bad and getting worse.I call this pessimistic bias.
In the minds of many, Winston Churchill’sfamous aphorism cuts the conversation short:“Democracy is the worst form of government,except all those other forms that have been triedfrom time to time.” But this saying overlooks thefact that governments vary in scope as well asform. In democracies the main alternative tomajority rule is not dictatorship, but markets. Abetter understanding of voter irrationality advisesus to rely less on democracy and more on themarket.