The California Disease: Democracy and Magical Thinking

Many political observers have commented on the disconnect between what people want their government to do, and how much they are willing to pay their government to do it. Nowhere is this phenomenon clearer than in the case of California. The story starts in 1911, when California adopted a form of direct democracy, involving an initiative-referendum process. On this system, just about any proposed change to the law can be brought to a vote by the public with enough initial support. In 1973, using the initiative system, a wave of populist sentiment brought about proposition 13, which has forced property taxes to stay at, or below the level of inflation, reducing them by about 57% of their previous level. I won't go into the many problems Prop 13 has caused since its adoption, because I'd just be summarizing the Wikipedia entry.

This law is seen as the "political third rail" in California -- it is political suicide for anyone who wants to overturn it, because nobody wants higher taxes, and yet it cries out to be overturned, since it makes funding the state increasingly difficult as time goes on. Any sizable tax increase is going to require massive political willpower (involving a 2/3 majority in the state legislature) or another ballot initiative, neither of which are going to happen. Essentially, people want more for less. This is what I refer to as "magical thinking" on the part of voters in this context -- the idea that lower taxes don't have to cause a decrease in services.I could cite some psychological research here, but I don't think I need to. It's essentially a truism accepted by just about every academic and non-academic alike, that given the direct choice between paying two amounts -- one smaller and one larger -- for some product or service, people will choose to pay less. And the result of direct democracy like California's appears to be just that -- people want lower taxes, without a corresponding decrease in the services that those taxes provide.

There could be a few causes for this. One apparent cause is that Americans generally seem to think that over 50% of their tax money is "wasted". If that were true, it would make sense to think that the best way to increase what a person gets for the amount of tax money they pay is to reduce waste, and that paying more taxes would just mean that more of them are wasted. However, this belief is probably less of an explanation than a phenomenon in need of explanation itself. As Tom Schaller over at FiveThirtyEight points out, this belief is completely divorced from facts, and can't possible be true. So why do people subscribe to it?

I think the root cause is magical thinking. I think people want more for less, and don't much worry about how the "less" they vote for now (ie. lower taxes) will affect the "more" they're going to want later. But, ok, let's be more psychologically rigorous. I am very far from being an expert on this literature, but I'll summarize some of what I know. I'd be very interested in input from psychologically savvy readers into other likely causes and relevant phenomena.

A number of psychologists have examined how people reason about causation. While some of the results appear to be encouraging -- for example, infants appear to be pretty excellent Bayesian inference machines when it comes to figuring out basic contingencies between candidate causes and consequences, all observed together in an experimental setting, many theorists have pointed out that adults reasoning about causality on a larger scale, attempting to consider multiple potential causal factors simultaneously, are prone to a large number of biases. This research goes back as far as early work on the fundamental attribution error, which describes a psychological phenomenon in which people ascribe more external causality (uncontrollable, outside factors) to unfavorable events affecting them, and more internal causality to favorable events -- vice versa when judging causal factors affecting other people.

Beyond general fallacies in causal reasoning, more recent research is more relevant here. Specifically, it appears that humans are prone to two fallacies when reasoning about some specific strong causal factor: conditionalization and discounting. In the former, people ignore the effect of a moderate causal factor in the presence of an accompanying strong factor when the effects of the two factors are not independent of each other, apparently holding all factors but the strong one constant when engaging in causal reasoning. Discounting also describes a phenomenon where people ignore a moderate factor in the presence of a stronger one, but happens even when conditionalization does not occur -- that is, even when the two causal factors are completely independent.

These phenomena may explain some of the magical thinking at the root of "the California disease". Voters may find the actions of their elected officials a more salient, direct and apparently "stronger" cause of the budget deficits their governments face. This may cause them to disregard the causal impact of their own referendum voting to freeze tax revenues. This is an empirical question, and one I would like to see explored in the (unfortunately relatively tiny) political psychology literature.

Furthermore, even if we correctly analyze the eventual consequences of our actions and our votes, our weighting of those consequences is subject to the well-known phenomenon of temporal discounting. As much research has shown, people tend to weigh immediate rewards more significantly than ones they will receive later. Conversely, negative effects occurring far in the future don't seem to be as bad as ones occurring now. In other words, even if I know that lower taxes now will cause fewer services later (which is a big IF), lower taxes now might just be worth more to me now than the corresponding services, which after all, are only some distant event on the horizon. Of course, temporal discounting applies to thinking about the future -- once the future becomes the present those decreased services start to look awfully undesirable, which is probably why California voters have repeatedly voted down measures to decrease the level of state-run services all the while insisting on keeping their lower taxes, providing no suggestion as to how these services should be funded, and generally giving ulcers to their elected officials.

The main point I want to make is that these (and probably other) biases, heuristics and cognitive mechanisms may make us simply incapable of knowing "what's best for us". It is the role of elected officials to make tough, unpopular choices that eventually prove to be in voters' best interest. I hope, for example, that the result of the recent federal health care bill, which was enacted while somewhat publicly unpopular, will be positive in this way. Certainly, historical cases like Medicare lend some support to this hope. Conservatives will, of course, perceive this as traditional "father-knows-best" liberalism, but that gets the direction of causality backwards. I do not believe in "father-knows-best" government because I am a liberal. I am a liberal (partly) because I believe there is good independent reason to think people are bad at making collective action decisions that are in their own long-term interest, let alone the general public's. This leads to a clear problem with the notion of direct democracy, and may imply that indirect, or representative democracy, is a better alternative. Of course, it is not so clear that other people can make better judgments for us than for themselves.

To be clear, I don't think this magical thinking phenomenon is anything new, or special to California. It is simply that direct democracy systems like California's give these biases more opportunity to cause negative effects. Whether we have a direct or indirect democracy, the California Disease is a constant threat to our economic well-being as a society -- not because people are evil and not even just because they are selfish (although the fundamental attribution error can be interpreted as some form of selfishness), but because we are built with limited and final cognitive machinery which does not allow us to fully analyze the impact of our own actions, or to weigh those impacts appropriately.