An Economic Theory of Democracy: The Process of Becoming Informed

by Anthony Downs

Reaction against economic theory: Information is attainable only at a cost. Ratioanl decison-makers acquire only a limited amount of information before making choices and all reporting is biased because the reporter must select only some of extant facts to pass on to his audience, therefore, a rational citizen keeps properly well-informed by exposinh himself to a particular set of information sources has chosen for the purpose.

The Role of Information in Decision-Making:

To be rational, a man must know what his goals are, the alternative ways of reaching them, and the probable consequences of choosing each alternative. Rationally deciding how to vote goes as follows: gather all relevant information to each issue for which political decisions have been made, select information that will be used in voting, for each issue, analyze the facts selected to arrive at specific factual conclusions about possible alternative policies, appraising the consequences of every likely policy in light of relevant goals, coordinating these appraisals of each issue into a net evaluation of each party in the election, making a voting decision based on comparing the evaluation, actually voting. Voters delegate these steps to someone other than the voter: time is a scarce resource to be used for assimilating data. The fewer costs the voter performs himself, the fewer costs he bears directly and it allows him to make use of economies of scale and the expert knowledge of specialists.

The Process of Becoming Informed:

From among many sources of information, he must select only a few to tap. The object of his choice is creation of a system of information acquisition which provides him with data that are both chosen by means of selection principles in accord with his own and comprehensive enough to enable him to make the decisions he faces. A rational person makes selections that provide versions of events that closely approximate the versions they would formulate themselves were they expert. A man's selection principles are rational if application of them provides him with information that is useful for making decisions which will bring about the state he most prefers: no one suits all men. Necessarily hypothetical and subject to great error.

The Quantity of Information It Is Rational To Acquire:

Some people acquire information as an end itself. An information seeker invests resources into procuring data until the margin return from information equals its marginal cost. At that point, he makes a decision. The disparity between real behavior and the procedures in the model to appear striking since few people behave in the manner described, but assumes these are implicit assumptions even if casual observation fails to confirm it.

The Need For Focusing Attention:

Any differences between the way one party would run the government and the differences between the way the other would is relevant, including trivial ones in administering obscure agencies. It is not possible to know which ones are revelant with knowing what all of them are. The cost of discovering the latter is prohibitive to the average voter. Voters need a device to know how to avoid the staggering difficulty of comprehending everything the government does and everything its opponents would have done differently. Areas of decision where opposition parties contest the policies of the incumbents; areas of decision in which the presently governing party changed the government's method of reacting to or handling a situation; areas of decision in which the situations to which the government must react are markedly different from those extant under preceding governments. If voters focus on these three areas, they will be rational.

Characterisitcs of a Rational Information System:

Every rational citizen constructs for his political usage a system of information acquisition that consists of a limited number of information sources, a part of whose data output he selects to use in political decision-making. He must rely on a rather crude process of trial and error to construct this system. The data reporters are identifiable with his own yet also broad enough to report anything of significance in differential areas. It provides him with enough information about each issue for his decisions, given his desire to invest in information. It possesses sufficient internal plurality so that its parts can be used as checks upon each other's accuracy and deviation. Creating this system absorbs scarce resources, the cost of which must be balanced against the returns from the information obtained.

Summary:

Decision-making is a process which consumes time and other scare resources; hence economy must be practiced in determining how many resources shall be employed in it. The prinicples of selection they employ depend upon the end for which information is a means, but some principles are inherant inevery report; so all information is biased. Information used by one citizen is gathered, transmitted, and analyzed by others: if the user is to know what his information really means in terms of decision-making, he must be sure others have the same principles of selection. Each citizen decides how much information to acquire by utilizing the basic marginal cost-return principle of economics: marginal return from information is computed by weighing the importance of making a right instead of a wrong decision, to his value is applied the probablility that the bit of information being considered will be useful in making this decision. Much of this is a transferable cost, but the time for assimilation is a nontransferable one. The decision-maker continues to acquire information until the marginal return equals the marginal cost.

An Economic Theory of Democracy

by Anthony Downs

The concept of Rationality in Economic Theory:

Simplification of complex behavior necessary for fielding predicitons because decisions made at random fail to fall into patterns. Assumes conscious rationality prevails in human thought. If a theorist knows what a man or starw wishes in the end, he can calculate the most reasonable way for a decision-maker to reach his goals and assumes the rational decision-maker will follow this path. Economists assume a single goal so that one efficient way to attain it may be found: firms maximize profits, individuals maximize utility.

Rational men always make decisions when confronted with alternatives by ranking all in front of him in a transitive manner and picks the same highest result every time. Avoid the conclusion that every man's behavior is rationanl because it is aimed at some end and the returns must have outweighted the costs. Psychological considerations of why men pick what they do is irrelveant to economics. The whole personality of the individual is neflected. Models cannot reflect real-world behavior. To avoid becoming primary-group sociology, economists assume men orient their behavior chiefly toward the outer world.

Irrationality and the Basic Function of Political Rationality:

People tend to behave in ways they think is rational. How can a political scientist distinguish between one who makes mistakes and one who is irrational? Weakened argumment as these cannot be proven experimentally. Tie the aim of behavior to a goal: if a man intends to gain politcal power, is he acting rationally? The cost of information leads some to make errors. Bracket off what it can and cannot do. Rational behavior needs a predictable social order.

The Structure of the Model:

Downs assumes that every government seeks to maximize political support. Constraints exist not as socially constructed expressions of public will but as politically expedient rules both parties possess an interest in following. Predictive model illuminates how an efficient government would behave.

MAPSS Lecture Notes: Rational Choice

What Rational Choice Isn't:

There are four major criticisms, or at least frequent ones, levied at the rational choice perspective by other social science disciplines: It is empirically implausible, that is it is not a thinly accurate prediction of how people behave. Rational choice cannot avoid charges of being so simplistic as it is little more than psychological reductivism. Some of the loudest proponents of rational choice happen to be free market champions, drawing suspicion in some quarters. And, finally, the same old crowd looking for ethnocentrism everywhere finds another witch to burn here.

The Roots of Rational Choice:

Rational choice took up the Enlightenment's challenge to try and understand the world around us. The social behaviors, structures, and phenomena existing around us arose from reasons comprehensible to human thought. Agentic understanding of the world where individual decisions of individual men and women create the world we inhabit. If the historical narrative is to shows a mirror to the past and representd the complexity of what we see, then rational choice uses a magnifying glass to see past myths and macronarratives to illuminate the altering microdynamics among men and women and how they order their incentives. Inspired by Newtonian motion, rational choicers erected a positivist model of social behavior that sought laws explaining behaviors that provided observers a form of predictive control. People are individually complex, but an informed observer can gauge their actions because institutions shape the choices available for their behavior. The goal of rational choice is to describe facts to allow a greater deal of individual freedom.

Rational choice is not laissez-faire, but many of its proponents can convincingly argue that men are smart enough to beat any regulatory regime. If one can incentivize properly and provide the right kind of information, then one can create a framework to aid people in making descisons.

A Rational View of Society:

Rational agents employ instrumental reasoning to select the best means for attaining their ends. Individual behavior, then, is purposeful or goal-oriented. It does not necessarily follow that people will pursue rational ends, only that the processes they follow for attaining them will be rational. Means are determined by a rational cost/benefit calculus. Agents always possess limited information and imperfect rationality. Rationalisty applied to the means to an end means an agent to is living in such a way, to the best of his knowledge, that is using the least possible input of his scarce resources per unit of valued output. We are not the mindless automatons of caricacature nor omniscient beings. Rational choice focuses on men and women forced to act with limited information and imperfect ratioanlity and an imperfect capacity to see the consequences of their actions.

Individuals are rational in that they are constrained utility seekers and logical and self-correcting in the means they employ are sensitive to changing incentives and constraints or improved information. To measure behavior, rational choicers have to exaggerate certain elements that provide traction as empircally numbered or accurate descriptions. In this sense, it is a generalizing, abstract, and stipulating perspective. Alterations in individual behavior are understood as reactions to evolving incentives and constraints, improved information and millions of other decisions.

Methodological Assumptions:

Rational choicers assign individuals agency in decision-making. The choices available exist only in contexts and any examination of the past requires serious historical work. Supra-individualism, that is groups, are combinational bodies or fictious entities reificated by privileged individuals to compel others to limit the choices available for action. Units of analysis, of course, can be larger than the individual and usually are for any ambitious scholar. One can gain predictive control by treating supra-individual actors as is if they were individual agents giving purposeful action to aims.

Postivie Implications:

There exists a methodology to allow one to create a world to maximize opportunities for rational cooperation through the use of intelligently-designed institutional schemes where private vices lead to public benefits and the aggregate welfare is improved as if by an invisible hand. It follows that thinkers can identify and remove any political, social, or economic impediments that make utility-promoting behaviors more difficult to pursue.

Negative Implications:

We are better positions to recognize where rationality breaks down and point out schemes where even the best designed institutional schemes will not lead to the best outcomes. Rational choice helps overcome issues like freerinding on public goods by devising rational institutions to secure the best outcome for all. It also helps understand the nature of collective action better, that is, why groups do not spontaneously appear.

Inventives and Constraints:

We can think of social problems through inventives and constraints, for instance, we can use the Leviathan model of a new sovereign authority to implement institutions. Or we can leave a small footprint through bottom up methodsm such as enhancing private liabilities so as to remedy destructive social behavior. You can create a new institutional scheme to solve political disputes or create new laws or tax breaks to easier secure justice. Informal sanctioning and norms can also be better understood as the product of rational action.

Methodological Preferences:

Emperical as well as formal, that is the use of mathematics to test abstract models. Its databases include quantifiable data .