Rational Expectations

In my previous post, I discussed both the morality and rationality of voting, particularly as it pertained to Ron Paul. The conclusion was that there was no moral obligation to vote nor one not to vote. The rationality of voting is an entirely different consideration. This calculation boils down to the following factors: (i) the importance(payoff) of the best candidate winning, (ii) the probability that your vote will change the outcome.

Tom Woods’ characterization of the problem as an easy choice between prime rib vs gruel is not correct because he is assuming away the resolution of the public good problem of recognizing the “best candidate.” If everyone recognized the actual best candidate as the best candidate, then perhaps an argument could be made for the rationality of voting; but then we would also be treading on a doctrine that would have to view voting/democracy as an efficient selection mechanism for collective action/public policy.

I doubt Woods would accept such a view of Democracy and voting. So he is really restricting his “best candidate” recognition argument to a subset of us enlightened libertarians. But this immediately lead us the problem of (ii), the likelihood that the enlightened libertarian vote could change the outcome.

As a side problem, I noted that the uncertainty introduced by the principal-agent problem of Political Parties reduces the expected payoff of the best candidate winning.

Perhaps my greatest critique of Paul is his association with the GOP agency. To me, trying to change the ideology of a party that is so throughly statist is a tremendous waste of resources. If the goal is to actually change the policy and not the party, then it would be more rational to actually run as an independent or third party. Yes, I understand the barrier of entry problem, but this problem doesn’t apply to Paul any longer. He has the name recognition and the resources to overcome the ballot qualification problem and the debate inclusion problem. Typically Paul dismisses such a suggestion with an appeal to the generalized problem: yes, most politicians would be buried by the barrier of entry problem, but Paul has likely eclipsed this limiting constraint.

A discussion of the rationality of an independent run is a separate question, but I think a discussion of the relative rationality of an independent run vs trying to convert Santorum/Gingrich/Romney/Bush voters lends itself to an easy comparative call. All we have to is examine the voting statistics from last night’s Iowa Caucus. Among registered Republicans, Paul was just an also-ran. It was the inclusion of independents and democratic voters, captured overwhelmingly by Paul, that enabled him to be competitive within the so-called “top tier.”

The Iowa Caucus also served the purpose of once again demonstrating the miscalculation of the so-called “Paleo Strategy.” Santorum, like Huckabbe 4 years earlier, was able to rise methodically from obscurity by dominating the “evangelical epicenters” of Iowa. Paul’s best county again was Jefferson County, a haven for alternative religions such as Transcendental Meditation. As the saying goes, “ball don’t lie…”