“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” — Thomas Sowell
It has often been observed that it is good for pilots to sit at the front of the plane, because if they make a catastrophic mistake, they will be the first to hit the mountain. While this certainly does not prevent all plane crashes, it simply illustrates a true point: when people personally, immediately, and directly bear the costs of their actions and decisions, it heavily incentivizes them to be circumspect regarding whether their beliefs are true or false.
Sowell’s observation captures a fundamental feature of the modern state, especially bureaucracy. When decision-makers are insulated from the costs of their decisions, they become increasingly insulated from aspects of reality itself. But the same institutional logic extends to society at large. Mass democracy, reinforced by bureaucracy, inflationism, and transferism, creates an environment in which citizens are encouraged to embrace political beliefs that ordinary economic and social feedback would otherwise discipline. In turn, an intellectual marketplace emerges to satisfy that demand, rewarding politicians, journalists, academics, activists, and other opinion-makers who supply emotionally-satisfying narratives and rationalizations rather than uncomfortable truths.
In previous articles, I have explored the phenomenon of the infantilization of culture. Along similar lines, this article argues that certain institutional incentives in mass democracy, plus the nature of bureaucracy and the economic unrealities created by inflationism and transferism, systematically weaken the normal feedback mechanisms that discipline beliefs. Put more simply, modern democracy plus bureaucracy incentivizes unrealistic beliefs. Along these lines, Mises warned, “Where reason ceases to function the way to romanticism is open.” He also speaks to the role of unconstrained imagination, “The romantic is a daydreamer; he easily manages in imagination to disregard the laws of logic and of nature.”
Instead of retreading previous ground, this article seeks to explore why and how democracy and bureaucracy uniquely create especially powerful incentives for political unreality.
The State, Democracy, and Unreality
Within democracies, the paradox of voting entails that individual votes have an almost negligible chance of determining electoral outcomes, raising the question of why rational individuals vote at all, let alone expend the painstaking effort to be informed. This encourages rational ignorance. Voters have little incentive to acquire costly information about policy because their individual vote will not be decisive.
The larger the electorate, the less incentive any individual voter has to become informed, and the more governance must be delegated to permanent “experts.” When individual votes have effectively zero impact, the function of voting shifts from genuine preference expression to legitimation ritual, providing democratic cover for governance that is actually conducted by the permanent administrative apparatus.
Due to the disconnect between voting and outcome, the personal cost of holding wrong beliefs about policy is effectively zero, thus, holding incorrect or harmful beliefs is incentivized. Since wrong political beliefs cost nothing personally but provide psychological rewards, rational actors will systematically indulge cognitive biases in their political thinking. The weightlessness of individual votes does not merely produce ignorant voters, it creates structural incentives for irrational belief formation across the entire democratic electorate.
Politicians—especially in representative democracies—compete for votes by promising to use the coercive power of the state to provide benefits that their supporters could not otherwise obtain through voluntary exchange. Because the costs of these promises are dispersed, delayed, or shifted onto others, both politicians and voters can indulge the illusion that government can continually provide more than society has first produced. This allows people to live under the spell of what Frederic Bastiat called the “great fiction,”
Government is that great fiction, through which everybody endeavors to live at the expense of everybody else. (emphasis in original)
Inflationism and transferism reinforce this fiction by further separating consumption from production. Inflation obscures the costs of government through monetary debasement, while transferism disconnects benefits from the productive activity required to sustain them. In both cases, costs are shifted, delayed, or diffused, allowing political elites, favored interests, and voters alike to maintain beliefs that would be far more difficult to sustain under the direct discipline of the market.
With both voters and political representatives increasingly removed from the immediate consequences of their political decisions, each becomes a supplier and consumer of the other’s illusions. Further, a market is created and sustained to offer rationalizations. The result is a symbiotic relationship of unreality.
In For a New Liberty, Rothbard spoke about the nature of propaganda in a democracy,
. . .the only real difference between a democracy and a dictatorship on making war is that in the former more propaganda must be beamed at one’s subjects to engineer their approval. Intensive propaganda is necessary in any case—as we can see by the zealous opinion-moulding behavior of all modern warring States. But the democratic State must work harder and faster. And also the democratic State must be more hypocritical in using rhetoric designed to appeal to the values of the masses: justice, freedom, national interest, patriotism, world peace, etc. So in democratic States, the art of propagandizing their subjects must be a bit more sophisticated and refined. But this, as we have seen, is true of all governmental decisions, not just war or peace. For all governments—but especially democratic governments—must work hard at persuading their subjects that all of their deeds of oppression are really in their subjects’ best interests. (emphasis in original)
Modern mass democracy transforms propaganda from a top-down activity into a participatory market process. Since democratic states claim that, through the participation of the people, the state is authorized and legitimate, citizens must be convinced more subtly. This requires a more subtle and sophisticated form of propaganda than naked dictatorship. Modern mass democracy therefore creates conditions in which political myths are not simply imposed from above but are actively embraced, defended, and reproduced by the public itself. The result is a political culture in which unreality becomes self-reinforcing.
Bureaucracy and Unreality
In a modern democracy, it is important to remember that even though voting takes place, it takes place within a state system. In a coercive, territorial monopolist state, any voting takes place according to the state’s terms and according to the state’s allowed options. For example, the people cannot vote to dissolve the state system.
Further, the reality is that, whatever forms or structures states take, they are always ultimately aristocracies or oligarchies—the rule by a few. There is a tendency in democracies—voting notwithstanding—for political elites within the state to create and expand the permanent, non-electable sector of government called bureaucracy. This is precisely the story of the modern West and the United States, such that “democracy,” when used by many elites, has come to mean—not rule by the people or popular will—but maintenance of the state apparatus status quo without disruption.
Over time, and due in part to increased bureaucratization of the state—“taking the politics out of government”—the voting franchise expands, but more voters are brought in precisely as more functions are removed from electoral control. This was part of the story of the Progressive Era in the United States.
Describing this, Patrick Newman writes,
. . .there were new political “reforms,” beginning in the 1890s, that had ostensible democratic motivations but were really designed to reduce voter choice. . . They include changes in voter registration, the Australian secret ballot, the short ballot, women’s suffrage, political primaries and referendums, and the direct election of senators. . . .
The progressives openly praised the drop in voter turnout, since it allowed for “better” voting by more “knowledgeable” people and put planners and bureaucrats in greater control. As Thomas Leonard writes:
The progressive economists—or certainly the most outspoken among them—were not egalitarians and never entertained the notion that expertise could work through the people. They were frank elitists who applauded the Progressive Era drop in voter participation and openly advocated voter quality over voter quantity. Fewer voters among the lower classes was not a cost, it was a benefit of reform (Leonard 2016, 52).
Further, Newman continues,
. . .it was part of the general movement to take various elected positions out of politics because the “ignorant” masses did not know how to vote on certain issues, and protect the entrenched bureaucrats in those positions. Let the experts decide instead of the hoi polloi.
The Progressive Era did not merely expand suffrage while coincidentally expanding bureaucracy, it increasingly relocated decision-making from legislatures and localities into insulated administrative, judicial, financial, and technocratic institutions. In other words, democratic participation expanded formally while substantive governance became increasingly indirect, expert-driven, and centralized. Thus, during this period, we witness the simultaneous expansion of formal political participation and the contraction of meaningful democratic control. This process further disconnects both voters and bureaucrats from the consequences of their policies.
Of course, political elites within the administrative state are largely insulated from both market discipline and meaningful democratic accountability. As a result, they operate under far weaker feedback mechanisms than entrepreneurs or ordinary market participants. Their politically-favored clients or castes—those who are net beneficiaries of taxation and transferism—are likewise encouraged to think and act in ways increasingly detached from the disciplines of production, exchange, and economic reality.
As the permanent administrative state expands and more decisions are delegated to unelected bureaucracies, the connection between public opinion and public policy weakens. Voters therefore have diminishing incentives to form careful, reality-constrained political judgments, since an ever-smaller portion of government is genuinely subject to democratic control.
In such an environment, voting and political expression become increasingly expressive or virtue signaling. Individuals accumulate social and moral capital by affirming the beliefs, values, and aspirations of their preferred in-group, largely independent of whether those beliefs accurately describe reality. The demand for identity-affirming beliefs, in turn, creates a market for politicians, journalists, academics, activists, and other entrepreneurs of opinion who compete to supply satisfying rationalizations. Thus, moral character increasingly becomes identified with one’s political wish list or demands. To be a “good person” is to demand the right policies, regardless of whether those policies are grounded in reality or produce good results.
Conclusion
Prior market-capitalist production and capital investment plus the institution of the state and the conditions described above allow state elites, state clients, and many subjects to live in a sense of unreality for an unspecified amount of time. Reality eventually disciplines societies. Inflation, debt crises, shortages, or failed wars, for example, eventually impose costs, but it does a much poorer job disciplining individual political beliefs, whether citizens or bureaucrats.
Modern democracy and bureaucracy progressively separate decision-makers from the costs and feedback generated by their decisions. Democracy separates voters from decisive responsibility, bureaucracy separates administrators from profit and loss, inflation separates spending from visible taxation, transferism separates consumption from production, and media and intellectuals separate narratives from empirical accountability. All this tends toward and encourages living in unreality which might be called mental moral hazard.
