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In his introduction, Professor Cowen says that the U.S. has

10-20 years before a “tipping point.”

I don’t see anything like that time frame. I am not arguing. It is a

serious question and it would be great if he iscorrect.

I would appreciate any explanation as to how things will hold together that long?

I understand that the question is kind of asking to prove a negative so

here is my perspective. I would love to be wrong about it as well.

Mankind’s first attempt at guaranteeing retirement, health care, financial

security, housing, employment, and sustained economic growth has gone badly

awry. The attempts at sustained economic growth have already created and

are maintaining our current economic difficulties.

The creation of the Euro allowed a number of European countries to sustain

very destructive economic policies. While most of the media attention is

focused on debt issues, the underlying structural problems are really what

will bring the continent down. Europe’s recession/depression will likely

trigger China and Japan’s underlying structural problems and a

recession/depression in those countries.

Obviously, if all that takes place, the U.S. and the rest of the world will

follow. My assumption has been that the Fed, ECB, BOJ, and Chinese

authorities would “quantitatively ease” things to get past the U.S.

elections. I am no longer sure that it will last even that long.

My number would be 6 – 18 months, not 10-15 years.

I would strongly prefer to be wrong, so any help in

straightening out my thinking would be greatly appreciated.

John Bailey

Hoover Institution publication Policy Review just printed its last issue this month (2/2013). That’s one less conservative SSCI journal cited in the Klein and Chiang article. Will any of the remaining conservative academic journals (such as ANAMNESIS, Academic Questions, First Things or Modern Age) ever obtain SSCI?

Diedre McCloskey writes in her essay, Adam Smith, The Last of the Former Virtue Ethicists, “The point is worth stressing here because Smith’s definite five virtues, and his emphasis on the joint cultivation of the five by the impartial spectator, puts him solidly in the older tradition of virtue ethics” (Page 56) McCloskey gave information on different primary virtues depending on social and religious background. She neglected to fully define what exactly a virtue ethicist is and this definition was assumed. My interpretation of the definition is an approach to logical principles or ethics from a moral analysis. Smith certainly takes this approach in Theory of Moral Sentiments however it may not be enough to fully define him as a virtue ethicist.

McCloskey briefly talked about Adam Smith’s view on utilitarianism and she stated that he opposed the concept it is unsure as to whether this is relevant because all virtue ethicists oppose utilitarianism or if it is specific to Smith.

The trouble that virtue ethics has is when analytic philosophers explore ethics; because their analysis is on a completely different spectrum than that of a moral philosopher. The main claim differs when they claim that it is essential to differentiate between the cognitive life and the values in life. In virtue ethics, McCloskey says incorporating the ethical objects of the self, of others, and of the transcendent is how one can conclude to an accurate interpretation of the virtue ethics. This is the most prominent and important reason why Smith is included in the former virtue ethicists. Smith’s contribution was the impartial spectator. This is not just the opinion of McCloskey but she says Smith believed this was his largest contribution as well. She says “The spectator is formed at first by upbringing and social pressure but at last evolves into a conscience—what was much later to be called ‘inner direction.’” (Page 52) The impartial spectator is more than just a conscience; this contribution from Smith was first introduced in Theory of Moral Sentiments and was a major part of why Smith is recognized as a virtue ethicist. The economist specializes in prudence whereas the theologian specializes in love, Smith incorporates both virtues and concludes with an all encompassed concept of the impartial spectator.

Smith’s five main virtues are courage, temperance, justice, prudence, and benevolence. The last section of McCloskey’s paper explains why Smith decided to not include hope and/or faith and most significantly, love. These virtues had a different connotation in that era and they were specifically used when speaking in religious terms. Smith never asserted his religious position in his novels and that is why it was so important when McCloskey concluded with this idea. He tried to not identify or affiliate with any religious concepts it seemed and maybe one of the best quotes of the paper is on page 68, McCloskey says “Adam Smith’s error was the error, and the glory, of the Enlightenment, trying to liberate us from transcendence”. It was not specific to Smith deciding to not delve into love, hope, and faith it was a characteristic of the time.

McCloskey’s analysis on why Smith is included as a former virtue is significant but definitely debatable. I would include Smith as a virtue ethicist because of his contribution with the impartial spectator but if you compare his work with the work of the other virtue ethicists such as, Aristotle or Plato the argument may not carry as much validity.

I hope to add to, and hopefully not just echo, what Erik has already pointed out.

It would seem that Smith’s use of the “invisible hand” allegory in both The Theory of Moral Sentiments and The Wealth of Nations is used to illustrate the edict of nature and society that direct economic activity. Whereas, in the History of Astronomy the “invisible hand” is used to explain the unexplainable— the events that are beyond the natural laws of the secular world. On the surface, the “invisible hand” reference takes on a slightly different connotation in the three Smith pieces mention above. In The Wealth of Nations it can be interpreted as the natural laws that manage markets and society; in The Theory of Moral Sentiments it can be seen as a divine set of universal rules directing a just and virtuous society; and, in the History of Astronomy it can take on the role of a divine authority overriding these rules and laws. I believe, as I deem Erik does, that the latter use of the “invisible hand” also shows up in The Theory of Moral Sentiments and The Wealth of Nations. Consider the following few lines from The Theory of Moral Sentiments: “The rich…only consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life…had the earth been divided into equal portions among all its inhabitants…”. Although “selfishness and rapacity” would seem to be characteristics that would not direct society in the way of justice or virtues, the industrious individual’s “natural” penchant to serve his own interest ultimately benefits society—the mean may not appear agreeable, but the end is. Is this “natural” penchant toward “selfishness and rapacity” not assumed to be put in place by a precocious, divine authority? It certainly can be interpreted that way. If we except that the “invisible hand” is the work of a higher authority, who has directed the butcher and the brewer to act in their own self interest, and who has provided society with nature ethics and virtues to govern themselves, and who makes it “lightening” and “thunder”, then the metaphor is consistent in all three of Smith’s works referenced above. Since this heavenly intention or intervention is not observable, Smith does not bother with a speculative explanation, simply calling it the “invisible hand”.

This article was originally a Presidential Address to the Scottish Economic Society. Macfie chooses Adam Smith’s Theory of Moral Sentiments as his source because is deals with the subjects selfishness, evil and sin that are ignored in other economic and ethical texts. The article wanders a bit but his basic argument is that Smith shows us that a market society is not just efficient but that it also leads to ethically good results. Free competition, which is essential to a market economy, is morally approved of by humans because we enjoy competing with one another within a set of fair and just rules. Under these conditions, free competition turns economic self-interest into the positive economic virtue of prudence.

In order to prevent the self-interest of individuals from turning into destructive selfishness, there needs to be checks on it. The rules that govern our economic interactions are one such check. Other checks on self-interest include the general rules of morality, the impartial spectator, and the invisible hand. A final external check on self-interest is the state, which is tasked by Adam Smith with prescribing defense, justice, and other tasks too large for private individuals to undertake. The state, however, is unable to direct morals because it is too far removed from individual situations. In order to compensate for this inability, Smith introduces an internal check on self-interest, “the man in the breast.”

Macfie feels that Smith did not take the idea of the man in the breast to its logical conclusions. Macfie criticizes Smith’s man in the breast for not calling mankind to act and his example seems to be aimed at Smith statement that a man can fulfill nearly all the rules of justice merely by sitting still and doing nothing. I think that Macfie’s criticism is unfair and inaccurate. Smith clearly thought that man had a duty to act in certain situations; he even devotes a section in TMS to the sense of duty. Smith did not think that inaction was a violation of commutative justice but rather was a violation of the general rules of morality. Despite what I feel to be a mistake at the end of Macfie’s article, he does raise some very interesting and relevant points about the moral justification of free enterprise.

Robert Coase explores a side of Adam Smith that was obscured by time and overshadowed by Wealth of Nations. While Coase summarizes The Theory of Moral Sentiments effectively, one of the most interesting parts of his article is his refutation of prior conjecture that Smith believed in an individual god. Because Smith is not explicit when it comes to this matter, we must glean from his readings his religious beliefs. Coase and Viner both recognize the fact that Smith uses some religious allusions in his work (“Nature”, “the Great Director of Nature”, “Architect of the Universe” [538]). Where they differ, however, is in the conclusions that they draw from this wording. Viner myopically concludes that this infers Smith as a deist; Coase widens his view to a quote from WN, in which Smith attempts to devise the source of a process unbeknown to him. This quote, along with Smith’s fervent rejection of casuistry in TMS, indicates that Coase’s theorem is more plausible in this case.

The ramifications of this realization are two-fold. Smith was unsure about a process that he was curious about, yet he did not speculate in his tome as to the origin of Nature. The genius of Adam Smith is presupposed; therefore it is not quite a stretch to believe that if he had lived longer, or had access to modern science, that a singular deity would have been replaced with “evolution” or “natural selection.” The second observation is that Smith understood to whom he was addressing TMS. His curiosity of the mechanisms of the universe did not lead him to publish anything rash or inappropriate. Had he proclaimed himself as a non-believer, he would have been marginalized as an academic, as well as a social being. By avoiding controversy on a subject he could not support with facts, Smith unknowingly insured his relevance today.

Another interesting piece of Coase’s article is the attention given to the reduction of the effect of the impartial spectator on individuals. Mutual sympathy is pleasurable to enter into, when our sentiments are in line with another’s. However, self love is also pleasurable. Because of this, there is a balancing act between self love and sympathy. When there is too much self love, an individual has the unfortunate chance of falling into self-deception, which is a distortion of reality. Benevolence, therefore, has to overcome self-interest when outcomes are already distorted by self-deception.

This theme is particularly relevant today. In a society in which instant gratification is a norm, it is difficult to avoid the trap of overwhelming self-interest. People are surrounded by individuals that drive their self-deception by reaffirming their self-interest as actual beneficence. Institutions have shifted the responsibilities of the individual, who best knows how to care for his self, onto others who can only hold a weak benevolence to the distant principal.

Coase recognized the magnitude of TMS, and was able to connect it with key passages in WN, in order to construct a smoother interpretation of seemingly divergent ideas. The Coase paper has laid the foundation for modern Smithian scholars, by thoroughly exploring the congruence in TMS and WN.

The article by Professor Otteson is quite perceptive in its suggestion that non-commercial activities of human life, such as developing morality or language, have many parallels to the commercial marketplace. But Professor Otteson’s article does leave me a bit discomfited.

I can best explain my discomfort by examining Professor Otteson’s four groups of characteristics that are found in all markets: (1) a problem to be resolved, (2) rules that define the marketplace, (3) currency, and (4) unintended result. In the commercial marketplace all of these items can be readily identified. People tend to (1) want higher standards of living, (2) develop contracts and rules for private property and commercial transactions, (3) trade goods and services, and (4) develop a smoothly functioning marketplace. Professor Otteson suggests that the parallel in the marketplace of morals is that people will (1) want mutual sympathy, (2) develop standards for moral judgment, (3) exchange personal sentiments and judgments, and (4) develop commonly shared rules of behavior.

My concern is in part three of both systems. In the commercial marketplace, Professor Otteson suggests that the currency consists of the actual goods and services being traded. Were that to be true then we would be stuck with a barter economy, which is quite inefficient and ineffective. We are not limited in the commercial marketplace that way because we have a separate form of currency. We may call it the dollar, the pound, or the euro, but whatever we call it, we can count on its being a numeraire. The dollar allows us to purchase whatever we want in the commercial marketplace and the recipient of those dollars can in turn purchase whatever she wants. In this manner, the numeraire performs a marvelous function of smoothing the marketplace and making it unnecessary to identify trades of actual goods and services.

Were it only the case that such a numeraire existed for morals. The marketplace for morals would then be as efficient as the commercial marketplace. We would know exactly the value of showing esteem for highly accomplished people, the value of certain punishments for lawbreakers, and the relative values of behaviors that may or may not be socially acceptable. But that numeraire is missing. We do not have such an accurate guide. We do our best by generating general rules of behavior that get accepted or not depending on how others feel about it.

I would find Professor Otteson’s analogy far more satisfying were he to explore whether a numeraire analogy exists in non-commercial marketplaces.

People believing firmly in free market and voluntary exchange efficiency (just missed some fluctuations in Q.16 and negative externalities in Q17) are wrong and “Unenlightened”.

People believing after USSR economy TOTAL failure and China transition to market economy that voluntary transactions are inefficient and only Gosplan could succeed to organize it are right and enlightened? Are you sure Q16-17 really helpful?

BTW, conservatives actually able to count negative externalities.

Q14: say Farmer A hired 5 immigrants from the country w/o tradition to respect property and human life, dignity etc. Let Farmer A saved for a Seazon $100K his costs (taxation, salary) and shared part of $100K among his product consumers. So, public wealth increased $100K. OK, now, close to the end of the Seazon (game almost over, last move of the gamer could be very unpleasant) this immigrant workers grabbed and killed farmer B and raped farmers’ C daughter and escaped to Mexico.

Public losses counted say $5 million at least. So, conservatives actually count negative externalities, some libertarians so stubbornly ignore (Caplan vs. Friedman):

http://econlog.econlib.org/archives/2008/06/milton_friedman_10.html

I was intrigued by your title, but the first line of the abstract is very disconcerting: “A sample of 299 U.S. economics professors, presumably random, responded to our survey…” In survey research, one can never merely presume that a survey sample is random. The implication in your abstract is that your sample has not been assessed for its representativeness of the population of all economists, either in terms of observable characteristics or selection on unobservables. This left me wondering whether I would learn anything useful about the population of interest, or only your sample of respondents, whatever subset of that population they may be. The abstract suggests the latter, so I decided my scarce time would be best spent reading something else.

Dear Chris,

What a splendid, persuasive piece! I like especially that you have gone over Emma’s evidence so closely.

Regards,

Deirdre McCloskey

The Adam Smith Problem has beset philosophers and economists since the time of the man who is its source. What is the best way to integrate the insights of the Wealth of Nations with the ethical theory of the Theory of Moral Sentiments? While consensus has not yet been reached authors still try to resolve the tension. Vernon Smith, the father of experimental economics, attempted to resolve the problem by making an appeal to Adam Smith’s description of the propensity to truck, barter, and exchange.

The propensity that Vernon Smith points to is certainly a component of Adam’s system, but in attempting to resolve the Adam Smith Problem by simply highlighting this propensity seems to ask forces other questions into focus. Assuming that Adam Smith had a singular vision of human nature in some sense, where does the individual’s propensity to exchange emerge? According to David Hume reason is a slave to the passions, which Adam Smith would have been familiar with as it affected the development of his own moral theory. Here a problem arises, if the propensity to exchange is simply the result of an innate principle of action, as Vernon Smith implies, then one needs to determine if this action falls under ethical scrutiny or not. If Adam Smith does not consider natural and uncontrolled actions of the individual, e.g. sneezing, twitching, worthy of ethical consideration as they fall outside of the realm of the individual’s control and thereby are incapable of being done in sympathy with the Impartial Spectator, then how does one square a natural principle with ethical analysis? Perhaps if Vernon Smith had described the propensity to exchange as some type of irreducible good then we could see that it could then serve as a reason for action that would first be described by and ethical system, i.e. it would be fitting to discuss in the Theory of Moral Sentiments, and then followed by sound advice on instantiating the good in ones affairs, i.e. the Wealth of Nations would give advice on making it a reality. The point of all this is to say that while Vernon Smith seems to be making a contribution to solving the Adam Smith Question, we are left with further questions that need to be answered.

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Undoubtedly Adam Smith is one of the most influential thinkers of the modern Western Tradition. As a result many philosophers engage in critical reflection of Smith’s numerous contributions. A tension, however, arises when examining Smith’s entire corpus. The divide for many philosophers becomes apparent when comparing The Wealth of Nations to The Theory of Moral Sentiments. What did Smith see as the connection, if any, between these works? Lindgren’s piece provides an important first-step in connecting Wealth of Nations with The Theory of Moral Sentiments by investigating how Adam Smith understood the role of inquiry. While Lindgren does not attempt to unite his conclusions on inquiry with Smith’s Wealth of Nations and Theory of Moral Sentiments, it provides sufficient ground for further reflection on the matter.

Non-specialists might wonder why starting how the notion of inquiry can serve as a suitable place for beginning philosophical reflection. Starting with inquiry provides a framework to see how Smith literally sees the world. Is Smith an adherent to a philosophically realistic view of the world or does he follow the nominalism and skepticism of others like Hume? For Lindgren the answer is clear. Smith’s epistemology does not fit into the metaphysical realist position and is more in line with the skeptical views of Hume. Breaking from the earlier tradition of metaphysical realism Smith’s model of inquiry will not focus on determining some type of abstract form of a thing, instead he will understand the world as somewhat incomprehensible to the individual. For Smith the individual is not capable of aligning his knowledge of the world with things that actually exist in the world as would be the case for metaphysicians. A consequence of this is that Lindgren sees Smith’s philosophy of language as the basis for his model of inquiry. While Lindgren provides a sound argument that language served as Smith’s model of inquiry he does not challenge and further test Smith’s notion.

Fundamentally the question that Lindgren avoids asking is what is the relationship between convention and nature in a grammar and its application to human inquiry. Lindgren seems to disregard many of the contributions of modern linguistics by simply affirming Smith’s view that grammatical rules “are dependent upon the aesthetic temperament of the community.” Certainly there is some truth to that, but modern linguistics and cognitive science would make the claim that grammar has a part that exists by convention—especially prescriptive grammars dictating forms of written communication—but it would also point out that the actual wiring of the human brains creates limits on the types of grammar possible. Limiting the type of grammars possible in the hardware of the brain in turn creates limits on the type of socially possible grammars. So does knowing that grammars have inherent and theoretically universal limits sufficient to undermine parts of Smith’s model of language? Starting here and saying there are some types of universal constraints that emerge in the human brain seems to seriously impact the analysis of Lindgren and in turn the applicability of Smith’s application of language to inquiry. If constraints naturally emerge on the structure of language then there could be a tendency for languages to form in a particular way. If languages form in a particular way then is Smith’s understanding of the experience of learning a language correct? Lindgren needs to provide a tougher critique of Smith’s model and see if it is still applicable. This author believes that Smith’s view of language could best be described as quaint, but not able to sustain rigorous scrutiny.

The article provides a compelling case against the notion of separating positive and normative science in economics. High’s two examples address the concepts of coercion and property – both of which are commonly used in economic analysis, and both utterly empty without ethical content.

The force of the piece is that High does not argue that economics ought not to ignore ethics, rather it cannot. The economist must take an ethical position when they talk about trade, because trade cannot occur without ownership, and ownership cannot be defined without ethics.

Echo is right to suggest that High seems to be back pedaling when he ends his article with the suggestion that economists can remain value free. Certainly an economist can choose from a variety of ethical positions when they begin to do analysis, High chooses to differentiate between coercion and freedom by way of natural rights, but value-free analysis is not among the choice set. Perhaps High meant to say economics does not dictate any particular moral stance. Maybe so, but the important point remains that by beginning to do economic analysis, one has already chosen an ethical stand.

In an 1819 lecture, Constant calls on his listeners to realize that there is a fundamental difference between what people of antiquity considered liberty and what the concept means for the modern person. For the former, liberty consists of taking full advantage of collective political rights; liberty to the latter is the conducting of his private affairs without interference. He argues that the liberty of the moderns must be carefully guarded and not forgotten for the sake of political rights. In the course of his argument, Constant also defends the French Revolution as beginning with the right perspective on liberty but later confusing the liberty of ancients with that of moderns, which contributed to the disastrous results. Surprisingly, he praises Rousseau as a lover of liberty who was led into error by the confusion over ancient liberty as opposed to modern liberty.

Constant offers a point-by-point comparison of the two concepts of liberty that is very illuminating. His main concern is that people would unwisely sacrifice modern liberty as the ancients often did, when in a modern nation, political rights are much less significant and valuable than in a small city-state. His contention that political rights used to be the more valuable of the two in ancient times because people were limited in their economic activity is one of his most striking points. It most clearly highlights the rationale behind people trying to acquire political power at the cost of personal and economic freedoms but also leads to a slightly conflicting message. Constant asserts that private activity is more important and valuable than public activity in modern society yet urges people not to ignore the political process. He anticipates the concept of the rationally ignorant voter by noting that many people will prefer to attend to matters that benefit them most and argues for citizens to be informed and watchful instead.

It is worth noting that Constant often seems to be sanctioning the liberty of the ancients, where the society had the moral authority to control people’s private behavior, as morally acceptable for that time and the particular conditions. It weakens his argument, since his own concept of modern liberty could become dated in the same way unless it were justified by something other than the current political and economic systems being too large and complex for it to be otherwise.

Boettke’s article provides a fairly thorough historical and conceptual critique of the current state of equilibrium theory in economics. He explains how Keynesian and laissez faire economists have both mistakenly allowed their attraction to abstract modeling to get in the way of an accurate study of economic action. His appraisal of Coase and Friedman is particularly interesting. He notes that despite the positive contributions of each, their works have been used by mainstream economics to widen the gap between economic theory and economic reality.

Boettke rightly points out that Friedman opened the door for false assumptions in economic modeling, and that Coase inadvertently contributed to mathematical unreality in economics with his theories about the zero-transaction cost world. The critique is well known and still seemingly ignored by much of mainstream economics. After the latest economic crisis in the US, the debate has continued in much the same mode despite the admission by many that the models are far detached from reality.

It is also worth noting that Boettke’s criticisms might also apply to the way economics has treated property for these last five decades. In a way strikingly similar to Boettke’s description of how economic theory and human action have parted ways through a series of divorces between fundamental truths and convenient assumptions, property has lost its meaning in economic theory. Because property with its older normative content makes modeling difficult, it has been pushed aside and replaced with institutionless interaction between individuals.

In the excerpts from letters Bentham wrote to Smith, Bentham takes to task Smith’s belief that rates of interest should be capped to prevent usury. Approaching his former teacher with repeatedly expressed respect, Bentham uses many of Smith’s own beliefs and arguments to attempt to persuade Smith to recant his defense of usury laws. In pointing out that capping interest chokes off financing possibilities for projectors, Bentham’s pleas to Smith are a brilliant early defense of what we now call entrepreneurs.

Smith never revised the section of Wealth of Nations that covers usury or his views on projectors; though one historical account shows that Smith essentially admitted in private that Bentham was correct. In the editor’s preface Dan Klein says he fancies the idea that Smith’s awareness of his own cultural status in Scottish society and desire to protect it prevented him from attacking usury. Klein also speculates that “Smith was telling Bentham that we do not want to unbridle ambition and proud genius, because of the frightful hazards of unleashing them in the governmental realm.”

If Smith understood the value and importance of the projector (entrepreneur), why couldn’t he have revised Wealth of Nations to defend the projector—even if he maintained his defense of usury laws? Smith could have used his influence to carve out a legitimate place for projectors, and their projects, and left the task of going after usury laws to Bentham and others (as ultimately happened). Klein notes that some have considered Bentham’s essay the “beginning of the modern world.” If the defense of the projector is of this great importance, and Smith realized it, why would he leave his censure of projectors intact in the final version of Wealth of Nations? Despite Klein’s defense, it still makes sense to ask whether Smith had a sufficient enough understanding of the importance of projectors for economic growth and human betterment.

Caplan offers a balanced and even favorable description of Wittman’s argument in “Why Democracies Produce Efficient Results” (1989). Wittman objects to most of the public choice literature because it assumes extreme voter stupidity. Instead of assuming voters are ignorant, critics of the government are actually assuming that voters are systematically biased in their beliefs. Wittmann also points out that voters are not as gullible as public choice theorists assume. They use parties like brand labels, which make the voting problem much easier than it might appear. Wittman is also skeptical about complaints of a lack of political competition. He points out that very few unpopular policies persevere because unpopular policies lose votes. Furthermore, incumbents are reelected because they are better than the competition. Wittman finally points out that democracy lowers negotiation and transfer costs.

Caplan perceptively points out that Wittman’s position is valid, but not sound. While his assumptions lead to his conclusion that democracy is efficient, he commits a fatal flaw by assuming that voters are rational. Caplan’s work in economic beliefs and the systematic bias that exists among non-economists and the less educated weakens the validity of this assumption. Caplan’s theory of rational irrationality, that people are more irrationality when the cost goes down, seems to be the nail in the coffin for Wittman’s theory. Rational public opinion is in fact a public good. Adam Smith had it right when he asserted that perverse policies were the result of systematically biased beliefs.

The most important message from this article is that empirical testing is necessary for good theory. We cannot assume that voters are rational without testing if that is really the case. Economists must move beyond blackboards and untested behavioral assumptions if we are to make any real progress in our field. Caplan is a brilliant example of this philosophy.

Caplan evaluates the claims made by Wittman concerning the structure of democracy. The primary focus of Caplan’s comment is Wittman’s assumption of voter rationality. In Wittman’s mind a key element in his argument for the efficiency of democracies is that voters are rational. On this point Caplan suggests that his model of rational irrationality can better explain typical political behavior seen in a citizenry. The point for Caplan that Wittman needs to explain is how one can consistently fail to find systematic bias in the opinions of citizens. An excellent example of “irrational behavior” is voters who question the efficiency of the market system which would be irrational under Wittman’s model. So the concern becomes one of whether voters can be considered truly irrational. It seems that Caplan’s is, in fact, the stronger one as it is in best accord with human nature as perhaps even Adam Smith and figures of the Scottish Enlightenment would see it. That is, in the model of rational irrationality the individual adjusts his behavior based, at least in part, on the actions of the others in his society. As Caplan aptly suggests people will consume higher amounts of irrationality when the costs are lower and so the individual would permit certain bad policies when the total costs for accepting the policy is low. In a similar way Smith’s theory of virtue ethics has the individual gradually align himself with the impartial spectator. Gradual development is the slow path forward for the individual to achieve the appropriate moral state while accepting presently bad conditions and this model can and should be seen in the greater society as well. The point here then is that democracy even with rationally irrational voters can allow for certain bads while gradually progressing towards some potential better state.

Davis’ study demonstrates the staying power of institutions and conventions even when many people have come to disapprove of them. It seems to reveal the sense within the economics discipline that engagement in public policy discourse is at best not a priority and at worst somewhat disparaged. Davis claims that the bias of academic economics can only be adjusted from within the profession since the convention is not one subject to democratic or market pressures. The government subsidies of education, which perpetuate insulation from market pressures in particular, may have been at the root of the problem. If the academic profession treated students more like consumers, it is conceivable that the incentive to falsify preferences would not have been so widespread. Economists would have had incentive to adjust to students’ preferences, which would certainly have included a public policy approach to economics for some. Perhaps the effect of student preferences could have a smaller, delayed effect in the current academic system, as economists become more cynical about their discipline’s usefulness.