From Friedman to Wittman: The Transformation of Chicago Political Economy
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Donald Wittman’s “Why Democracies Produce Efficient Results,” argues that the “markets work, democracy fails” outlook typical of many economists rests on bad economics. After summarizing Wittman’s main arguments, I maintain that Wittman too hastily accepts the assumption of voter rationality. There is an extensive body of empirical evidence showing that systematically biased beliefs about politically-relevant topics—especially economics—are widespread. Chicago political economy would have developed in a more productive direction if it had treated rational expectations as an empirical hypothesis, and modeled irrationality as a normal good.
Response to this article by Donald Wittman: Reply to Caplan: On the Methodology of Testing for Voter Irrationality (EJW, April 2005).