Thursday, April 17, 2008

Happiness and "Economic Self-Interest"

I've been following the ongoing discussion between publius at Obsidian Wings and Megan McArdle (and their respective commenters) with some interest. The question at issue is why working class whites not only vote Republican in heavy numbers but also passionately support Republican economic policies even though those economic policies would seem to be against their self-interest. As Megan points out, this question also runs in the other direction: why do so many wealthy Democrats so passionately support Democrat economic policies.

For publius, the answer is that the resentment and anger stirred up in the culture wars boils over into economic policies such that the response becomes almost reflexive. In other words: if liberals like it, it must be bad and evil. (I note that publius does not believe this works both ways; he believes, perhaps correctly, that wealthy Democrats would have too little to gain on the margins to have an incentive to support Republican economic policies). By contrast, Megan believes that the apparently irrational support of Republican economic policies may not be irrational at all, but instead arises from the importance of property rights in small communities.

To a large extent, I think publius is on the right track. His explanation fits well with the concept of "pu-pu platter partisanship" that I've argued has come to characterize so much of our politics. Under this concept, American politics have gotten so polarized as to effectively reduce the number of factions capable of winning any given debate from nearly infinite to only two: Democrats and Republicans. True independents (who remain divided into a nearly infinite number of factions) are too few in number and too divided to have any real say in final outcomes. Moreover, research has shown that partisans actually derive pleasure from rationalizing inconsistencies in their belief systems; as long as working class Republican partisans maintain social issues as their top priority, psychology suggests that they will actually derive pleasure from reconciling their belief systems with apparently inconsistent Republican economic policy.

That said, there are two important things both publius and Megan seem to have missed. Although a comment that Megan picked up on starts to get at the more important of them. The first problem is that publius begins with the assumption that Democrat economic policy is necessarily better for working class whites than Republican economic policy; this assumption may or may not be true, but it's not an answer that should just be assumed.

However, even accepting for sake of argument that Democrat economic policy in fact creates more financial wealth for middle class whites, publius misses something critically important. He (and it would seem, Megan as well) assumes that economic self-interest is synonymous with financial wealth. But if we've learned anything from economics, and especially from Tyler Cowen and books like Freakanomics, it's that money is not everything to everybody - or even most people. People often rationally value things far above or far below their actual monetary value.

For instance, if you were offered $100 dollars for piece of jewelry worth $50 that happens to be a family heirloom, would it be irrational to refuse the offer? Of course not - there is a sentimental or moral value to the heirloom that far exceeds the $50 windfall you would otherwise receive for the heirloom. But if you looked purely at the financial aspect of the equation, it would appear to be an extremely irrational decision to refuse to sell the heirloom.

Turning back to politics, economic policy does not occur in a vacuum. Whatever else it is, it cannot be separated from the individual voter's personal values. The individual voter may, for instance, be a hardcore libertarian type who would find any government assistance to him to be morally repugnant. The extra few hundred dollars a year in income will be quite insufficient to overcome those moral values and suddenly support the Democrat economic policy.

Similarly, it is important to note that there has always been a sense of rugged individualism in much of the United States, even if that has not necessarily translated into support for libertarianism. That sense of individualism creates an attitude in a good number of people that unwanted help from the government will in fact inhibit their sense of self-worth and accomplishment.

It's important to realize that for many Americans (myself included to a large extent- or so I like to think), their economic self-interest and financial self-interest align only insofar as they are financially secure enough to have a roof over their head and food in their belly. After that, their economic self-interest places far more value on things like family, religion, leisure (e.g., hunting) or whatever else makes them truly happy and satisfied. For many people, knowing that everything you have is something you have actually achieved on your own is priceless in and of itself*; suddenly having the government artificially bump up your wage or give you an extra tax credit will actually cheapen that pride far more than it could ever repay.

In the end, perhaps the most frequently made false assumption we see in politics is that people value money over all else.

*To all the libertarian-haters out there, this sentence comes pretty close to defining what Ayn Rand defined as "selfishness" and why she thought selfishness was thus a virtue.