Wow, from reading just one sentence from Bryan's book, I haven't been able to think of hardly anything else the last couple days (good thing I didn't read more or I probably wouldn't be able to sleep!!). To recap the sentence in question:
“I see neither well-functioning democracies nor democracies hijacked by special interests,” Mr. Caplan writes. “Instead, I see democracies that fall short because voters get the foolish policies they ask for.”
so, here I go again:
First, what has been the policy trend since world war II? To my reading of history it has been increasing trade, freer and freer flows of capital, tons of private sector innovation. I don't think this just happened in a vacuum, we lowered tariffs and capital account restrictions, we subsidized R&D, allowed (after a fashion) large changes in the composition of the economy. America has almost completely remade itself in the last 50 years, hasn't it? So maybe, just maybe, (a) people in general don't ask for foolish policies or (b) our political elites have done a fantastic job giving the people what they need while pretending to give them what they want. I'd also say that from my point of view, organized interests have done more to block this liberalizing, modernizing process than have the irrational average joes of the world.
Second and more subtly, how do we know the "foolish policies" asked for by the public are really foolish? Here I refer to the economic theory of the second best, the oft ignored bete noir of reformists. Simply put, if the polity contains multiple economic distortions, there is no way to guarantee that removing or reducing one or even a subset of them will raise welfare.
We now return you to your regularly scheduled programming.