From Friedman to Wittman: The Transformation of Chicago Political Economy

Donald Wittman's "Why Democracies Produce Efficient Results," argues that the "markets work, democracy fails" outlook typical of many economists rests on bad economics. After summarizing Wittman's main arguments, I maintain that Wittman too hastily accepts the assumption of voter rationality. There is an extensive body of empirical evidence showing that systematically biased beliefs about politically-relevant topics—especially economics—are widespread. Chicago political economy would have developed in a more productive direction if it had treated rational expectations as an empirical hypothesis, and modeled irrationality as a normal good.