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Rational Ignorance

Marginalism is an application of the basic idea of calculus, and though calculus was invented a century before Adam Smith, it was a century after Smith when economists realized its significance. This "marginalist revolution" greatly clarified economic theory. The better understanding of their theory has prompted economists to search for new areas in which to use it. We conclude this section with a visit to an area that economists have explored fairly recently.

A person purchasing a new car usually spends time learning about various makes of cars and shopping for prices. The more effort spent in these activities, the more one's knowledge about cars and their prices increases. Because time is limited, and spending time searching for information means that one cannot use that time for other purposes, there is a limit on how much knowledge is worthwhile to gain. After some amount of reading, talking to friends and acquaintances, and visiting automobile dealers, a person finds that the extra benefit of another hour spent on these activities is less than the value of that hour spent in other pursuits. When one judges that this point has been reached, one stops searching and makes a decision.

The amount of time people spend obtaining information differs from product to product. They will spend less time learning about the bicycle they give their child than they will learning about a new car, less time deciding which brand of soup to buy than in deciding which house to purchase, and less time deciding which brand of dog food is best for Rover than in finding a college for their first-born. The larger the purchase, the larger the potential benefit of a few hours spent learning about the purchase.

The government has many policies that involve major sums of money. For example, a major weapons system in the defense department can cost $50 billion. This amounts to about $200 for every person in the United States, or $1000 for a family of five. Yet few people spend much time studying these policies. A reason is that to understand them requires many hours of study, and the probability that an understanding of them will change them in any way is very small. Thus, for most citizens the benefit of learning about a program that does not directly affect them is small, the cost is large, and they end up not knowing much about the program. Economists say that these poorly informed citizens are rationally ignorant.

Rational ignorance is pervasive and necessary. There is vastly more to know than any one person can possibly know. To survive and prosper in the world, one must seek that knowledge that will be personally beneficial. Most people would consider someone a bit odd who was not planning to buy a car but who still went from dealer to dealer trying to learn all he could about car prices in the name of intellectual curiosity. The behavior of most citizens suggests that they also consider odd the seeking of in-depth knowledge about the pros and cons of a specific government policy if that knowledge does not directly benefit the person who gets it. The cost-benefit reasoning that leads to the idea of rational ignorance implies that people will be better informed about the choices they make in the marketplace than about those they make in the voting booth.

A look at costs and benefits not only explains why few citizens understand the subtleties of most government policies, but it also explains why about one half of the eligible voters in the United States do not vote. The probability that one's vote will be the crucial vote that decides an important election is small. Even if one's vote is the crucial vote that breaks the tie, one may not like the outcome--many people regret the way they voted when they compare actual performance with campaign promises. Given these small benefits compared to the costs of time and transportation that voting entails, it is not surprising that many people who are eligible to vote do not. What is surprising is that the percentage of people voting is not even smaller. It seems likely that there are other benefits to voting that have not yet been mentioned.

Politics is in many ways a spectator sport, with all the excitement and drama of football or baseball. Voting may be enjoyable in the same way as watching and cheering on a favorite ball team. Indeed, voting against a politician one does not like is enjoyable, even if it does not result in his defeat. Another explanation for voting is that people have a sense of public duty. They want to be good citizens, and voting may seem important regardless of its effect--the act of voting itself can be important as a symbolic act. One other possibility is that people may overestimate the importance of their vote and the probability that theirs will be the ballot that decides an election.

In contrast to elections in the United States, elections in the old Communist-bloc nations were predictable. There was no doubt about who would win. Yet, these countries reported impressive percentages--sometimes more than 99%, of their citizens voted. Anyone who understands how to reason in terms of costs and benefits should be able to explain the implications of very high participation rates in meaningless elections.

Keep the rationally ignorant voter in mind when interpreting polls that ask citizens their opinions about complex public issues. The idea that voters are rationally ignorant also has implications for how governments work.

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Copyright Robert Schenk