Rational Irrationality

Over at the always-interesting Marginal Revolution blog, George Mason University economics professor (and a pal of mine from ye olden days) Bryan Caplan has been guest-blogging some interesting stuff. My favorites have been some observations on why libertarians should cheer that Paul Krugman is the most prominent lefty voice in economics, and some reflections on the inherent irrationalities in public opinion on issues such as inequality, spending, regulation, and welfare, concluding that "The big lesson is that public opinion is not just wrong, but downright silly."

Caplan as an economist has also done some theorizing on why that is so, positing the existence of rational irrationality. An excerpt from the abstract of his 1999 paper on the topic:

According to the theory of rational irrationality, being irrational—in the sense of deviating from rational expectations—is a good like any other; the lower the private cost, the more agents buy. A peculiar feature of beliefs about politics, religion, etc. is that the private repercussions of error are virtually nonexistent, setting the private cost of irrationality at zero; it is therefore in these areas that irrational views are most apparent.