The Psychology of Concentrated Interests and Diffuse Costs

The standard account of concentrated benefits and diffuse costs suggests that self-interested voters rationally allow themselves to be robbed a penny at a time. The cost of repealing each little wasteful subsidy is greater than the cost of organizing a political campaign against it. Citizens coolly accept the trade-off and focus on more important things – like capturing their own payments from the government.

I worry that the underlying psychology is more complicated than this.

People tend to avoid controversy and disagreement. A classic demonstration is the Asch Conformity Experiment. In the experiment, a test subject is asked to compare the length of one line to several others and determine which two are the same length. Before the test subject gives his answer, several other participants pretending to be test subjects give intentionally incorrect answers. A third of the time, the real test subject conforms to the answers of the fake participants and gives incorrect answers to simple and objectively obvious questions. Only about 25 percent of participants always refuse to conform and only give correct answers.

The Asch Experiment produces only weak (~35 percent) conformity to the group, and only under very strict circumstances (the test subject faces a unanimously incorrect group and has to disagree with them openly). But the Asch test asks an easy question, with an obvious answer that requires no specialized knowledge.

Questions about domestic policy do not have obvious answers. Voters often do not have have the kind of basic knowledge that they would need to participate meaningfully in politics. For example, Ilya Somin tells us that only 38 percent of Americans knew the Soviet Union was not a member of NATO in 1964, 57 percent did not know who Newt Gingrich was in 1994, and, most recently, 22% of Americans now believe that the recent Democratic health care bill has already been repealed. In order to form an intelligent position on domestic policy, people need more than a basic understanding of politics. They ought to have an understanding of the actual effects of policy – preferably an understanding of economics. But ignorance about economics is also common, even among those with a college education.

Political ignorance is rational. In a nation of 300 million people, few people can influence policy, so very few waste their time trying to understand it. If political questions do not have obvious answers for most people, the tendency to conform should be much stronger than in the Asch experiment. Organized interest groups (doctors, farmers, unions, soldiers, the poor, etc.) stand in for the fake test subjects. These groups make loud but false claims about how their narrow interests serve the greater good. The general public can either blindly accept the false claims of interested parties or antagonize them without knowing any reason that they should disagree.

In other words, people do not simply ignore wasteful subsidies just because it is in their self-interest. The passionate claims of interest groups encourage the rationally ignorant to conform to the self-interested beliefs of their neighbors in order avoid controversy over policies they can’t evaluate themselves. Conformity helps explains why even obviously stupid policies that support interest groups remain so popular. When Ezra Klein interviewed Department of Agriculture Secretary Tom Vilsack, Vilsack gave a number of absurd justifications for agricultural subsidies, including the moral importance of having rural communities:

There is a value system that’s important to support. If there’s not economic opportunity, we can’t utilize the resources of rural America. I think it’s a complicated discussion and it does start with the fact that these are good, hardworking people who feel underappreciated….

The military service piece of this is important. It’s a value system that instilled in them. But look: I grew up in a city. My parents would think there was something wrong with America if they knew I was secretary of agriculture. So I’ve seen both sides of this. And small-town folks in rural America don’t feel appreciated. They feel they do a great service for America. They send their children to the military not just because it’s an opportunity, but because they have a value system from the farm: They have to give something back to the land that sustains them.

Yet agricultural subsidies are overwhelmingly popular, despite the tiny number of people who benefit from them, and their clear costs. How many public policy battles are really different? Nobody wants to antagonize their neighbors. People have doctor neighbors, union neighbors, unemployed neighbors, and neighbors that belong to a thousand other little interest groups, and they politely adopt their neighbors’ nonsense as if it was their own.

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