Irrational Political Economy

Are voters rational?

Direct Democracy in Switzerland. Source: Wikipedia.

It’s primary season in my home in New Hampshire right now, and it’s impossible to get through dinner without receiving a phone call from a political polling organization. Every candidate is trying to get a feel for the state, where our opinions and moods lie, and what we think is important.

Some see this whole process as irrational, a leftover artifact of a bygone era, where uninformed voters select self-interested politicians who manipulate and deceive their constituents into favoring policies that allow the pols to dish out favors to big donors. By this view, the process is inherently corrupt. But if our system were so deeply flawed, how has it managed to adapt and persist for almost 230 years, through invasion and civil war and global strife?

Some would say that we’ve never seen these sorts of trials before—global deflation, geopolitical chaos, and a complex economic system. By this reckoning, disaster is just around the corner. But that’s akin to saying it’s different this time. And it’s hard to see that our current problems are greater than those of the Depression or Civil War or the political corruption of the Robber Baron era. How did we manage to survive those crises?

The answer lies in the adaptability of our system. Having three co-equal branches of government—with varying levels of accountability and interest—allows us to change, gradually, as our circumstances and challenges change. At the same time, there was a certain genius to the founding era—a center of white-hot political energy that was ready to try something new: the “American Experiment.” Something awakened in the minds and spirits of the people then that changed the way the world thinks.

Growth of democracy over time. Source: Wikipedia

So I’m glad to take the calls and tell the pollsters—or robo-pollsters—what I’m thinking. I’m following the horse-race like everyone, but I won’t move to Canada or Ireland if my preferred candidate loses. It’s easy to find faults with the system. As Winston Churchill said, democracy is the worst form of government, except all those other forms that have been tried.

Douglas R. Tengdin, CFA

Chief Investment Officer

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