Tuesday, October 15, 2013

Why the GOP Should Embrace the Beauty of Human Irrationality

There is the often criticized assumption in economics about the rationality of individuals. In theoretical economics, people are generally assumed to be perfectly rational which entails a number of caveats. The assumption does have great value in the field of economics but it tends to be bastardized when used as a pro-free market talking point for politicians. Politicians fail to mention the conditional assumption when they mention the rationality of market participants. The political notion of rationality seems to more closely adheres to the idea of personal responsibility for the cause/effect relationship of one's actions. However, the two different definitions of rationality are often confused because the political definition is never clearly stated. This confusion leads to petty arguments and frustration.

The beauty of the free market and America's economic/political system is its creativity. Advocates of the free market often cite America's leadership in innovation as the ideal of an economic system. The Randian uprising in the past decade in American politics stems from the wish to protect America's economy from developing an incentive structure that halts innovation. Unfortunately, the free market political movement has moved away from its core strength toward an anti-welfare message. The shift in message doesn't change the root of the movement at the grass roots level. People are attracted to the idea of America as a nation of dreamers and idealist who strike oil where everyone else has failed. The strength of the free market message is not in the idea of individual rationality but in individual irrationality. Steve Jobs did not make a rational decision by dropping out of college in order to sit in on random courses and eventually take a job with Atari. Many people have taken similar paths in life and ended with much less desirable outcomes than if they had received a college degree. However, we hear about the one that helped build an international empire that has sales rivaling the GDP of entire nations. We celebrate his decision despite the fact that it was irrational in the face of overwhelming statistics about his probability of success. Americans are a romantic people who worship the trailblazer and not the everyday foot soldier.

 Republicans should embrace the romantic version of the free market by praising the irrational confidence and passion of Americans who attempt to innovate by starting new businesses or applying for patents. The current free market philosophy of the Republican party comes off as a form of paternalism where people need to take responsibility for their lot in life. A shift toward policy objectives centered on patent/copyright reform, deregulation that favors new business formation, and state level changes to professional licensing laws would help to significantly improve the party's public image. The free market can be a great source of hope and inspiration but the current strategy of the GOP has made it seem like a punishing environment that advocates Social Darwinism. The support of the people can be won if the message is focused on the creativity of society instead of its jealousy of the rich.

No comments:

Post a Comment