Rational Irrationality and the Microfoundations of Political Failure

Models of inefficient political failure have been criticized forimplicitly assuming the irrationality of voters (Wittman, 1989,1995, 1999; Coate and Morris, 1995). Building on Caplan's (1999a,1999b) model of ``rational irrationality'', the current papermaintains that the assumption of voter irrationality is boththeoretically and empirically plausible. It then examinesmicrofoundational criticisms of four classes of political failuremodels: rent-seeking, pork-barrel politics, bureaucracy, andeconomic reform. In each of the four cases, incorporating simpleforms of privately costless irrationality makes it possibleto clearly derive the models' standard conclusions. Moreover, itfollows that efforts to mitigate political failures will besocially suboptimal, as most of the literature implicitlyassumes. It is a mistake to discount the empirical evidence forthese models on theoretical grounds.