Dwight R. Lee

Do the Poor Vote Their Self-Interest?

Dwight R. Lee*
PRINT CITE COPYRIGHT
 
"The importance of one's beliefs explains why historically much of the political resistance to welfare payments came from the poor."
Many people worry that a majority of the voting-age population will soon pay no federal income tax and will, therefore, be motivated to vote themselves even more federal transfers. Undoubtedly, most of those paying little in taxes want more government transfers, and a large percentage of them vote for such subsidies. But the desire for transfers does not explain why recipients go to the polls, or vote for them. The fact that an increasing number of Americans pay no federal income tax does raise serious concerns. But the best hope for dealing with these concerns comes from recognizing that the desire for transfers that others will pay for has almost no effect on people's voting behavior. This conclusion, which may surprise many people, follows directly from thinking about incentives and about opportunity costs.
Different Settings Create Different Incentives

Economists typically assume that people are as self interested in one setting as in another. In particular, they assume people are just as self-interested when making political decisions as they are when making market decisions. This view is commonly challenged with examples of people voting in accordance with what they consider the public interest, even when it is against their self-interest.1 Economists deny neither that such examples are common nor that there are important differences between market and political behavior. But economists believe such behavioral differences are best explained by changes in incentives, not changes in people, from one setting to another. People face very different incentives in markets than they do in the voting booth. In the marketplace the shopper's choice decisively determines what he receives and pays for. In the voting booth, the voter's choice is almost never decisive in determining what he receives and pays for. At best2, voters receive and pay for what the majority of voters choose, whether they vote for it or not. Your vote is as decisive as a market purchase only if the election would have been a tie without your vote. Except for local elections in which very few people vote, the probability that your vote breaks a tie, and thus determines what you receive and pay for, is so extraordinarily small that it can be ignored. For example, the probability that your vote will determine the outcome of a state-wide or federal election (one in which there are at least 200,001 voters and the election is expected to be decided by more than one percent of the vote) is less than 1 in 500,000.3

The costs and benefits of what we are thinking about buying in the marketplace are far more important to us personally than the costs and benefits of what we are thinking about voting for. Assuming the probability of casting a decisive vote to be 1 in 500,000, we weight the importance of costs and benefits of a marketplace purchase 499,999 times more than we weight the same cost and benefits of a choice we are considering in the voting booth. For example, if you can buy a high-performance sports car that is worth $25,000 more to you than its price, you would obviously buy it, and make a quick trip to the automobile dealership to do so. In sharp contrast, if a poor person is considering a vote for a government transfer program that, in present value terms, would pay him $25,000 more than it cost him in taxes, his financial motivation to vote for the program is 5 cents. The probability may be high that the program will receive a majority vote, in which case he will be $25,000 better off. But since the probability that he will receive the extra $25,000 from the program only because he voted for it is 1 in 500,000, his expected value of voting for the program is 1/500,000 times $25,000, or a nickel. That is not nearly enough to cover the cost of driving to the nearest polling location to vote. Even if he is already in the voting booth, his financial motivation to vote for the transfer program is so small that he might vote against it. Why against? I discuss those reasons anon.

The sports car enthusiast clearly acts in his interest. On the other hand, many see the poor person as not acting in his interest if he does not vote, or if he votes against the government program that would yield him a net benefit of $25,000. Once we consider the difference in the incentives each faces, however, it is easy to see both of them as acting in their interest. The sports car enthusiast incurs an opportunity cost of $25,000 by not going to the car dealership and buying the sports car. The poor person incurs an expected opportunity cost of only a nickel by not voting, or voting against the personal payoff of $25,000, which may be far less than the value he receives from not voting, or voting against the government program.

This argument that a significant financial gain from transfers does not motivate poor people to vote is supported by voter behavior. Evidence is clear that low-income people are less likely to vote than high-income people. Even in the 2008 presidential election when Obama was credited with attracting a high percentage of low-income people to the polls with promises to "spread the wealth around", the percentage of low-income citizens who voted was far lower than the percentage of high-income citizens who voted.4 If low-income people knew that only those who voted would qualify for government transfers, their individual votes would become far more decisive and their voting participation would increase dramatically.5 But since low-income with few assets are eligible for transfers that are enacted into law whether they vote or not, their individual votes are not decisive and many who do vote will vote against the transfers for reasons I now explain.6

Why People Vote?

If financial advantages are not what motivate people to go to the polls, or to vote in favor of those advantages when they do go, why do so many people vote? The most obvious answer is that people vote to express their support for candidates and policies that they believe benefit the general public. Expressing ourselves in support of things we favor is an important source of satisfaction, and makes us feel good about ourselves.7 It is true that people who receive government transfers find it easy to believe that such transfers are justified as a means of accomplishing noble social goals.8 But people often have strong beliefs that are not self-serving and beliefs, whether self-serving or not, are a far more important reason to go to the polls and vote than any financial advantage from doing so. The good feeling people have from participating in an important civic activity and expressing themselves in favor of social virtue are largely determined by whether and how they vote.

The importance of one's beliefs explains why historically much of the political resistance to welfare payments came from the poor. Until well into the 20th century it was widely considered insulting to one's dignity to rely on charity and most people had to be in desperate need to accept it. This created a serious problem for people who wanted to use government to transfer wealth to the poor. Even those who could have realized immediate financial benefit from such an expansion commonly voted against it because they believed public welfare would ultimately harm recipients by undermining their sense of responsibility and self-esteem. The personal satisfaction they realized from acting on their beliefs, and voting against transfers, was far greater than any financial benefits they could expect to receive by voting for them.

Government welfare programs started to get political traction largely because of successful efforts by government to "overcome America's historic cultural resistance to government entitlements."9 Initial success built on itself as it became more common for people to take transfers, and the social stigma for doing so decreased. Also, people who resisted taking available transfers increasingly felt like suckers as they saw many others, including many of the wealthy, taking them. Yet continued success at suppressing resistance to accepting and supporting transfer payments is not being taking for granted. Government agencies actively pursue efforts to increase the availability of transfers, make that availability known, and encourage people to accept transfers as rights by referring to them as entitlements.10

Virtue and the Power of Public Opinion

It is easy to conclude that with so many people receiving transfers there is no hope for limiting them to those truly in need. Maybe it is hopeless. But the fact that a voter's beliefs about social virtue have a strong influence on how she votes, especially when compared to the extremely weak influence of financial advantage, points to the best hope for decreasing transfers. The wanton growth since the 1960s in government transfers, which now account for over 60 percent of federal spending11, is motivating a reevaluation of their social virtue. Government spending on transfers is increasingly seen as a fiscally irresponsible and morally questionable policy of subsidizing current consumption by imposing growing burdens on future generations, with no compelling evidence that the current benefits are favoring, or are favoring enough, the poor over the non-poor. The number of those holding this view could continue increasing until an ideological tipping point is reached, leading to a retrenchment in the size and scope of government. Such a shift could dramatically affect voting patterns as majorities go to the polls motivated by the belief that virtue is in pruning government transfers, not expanding them. That belief does not have to be very intense to overwhelm the financial interests of voters as a motivational factor in the voting booth.

We should not ignore the fact that even when voters see virtue in voting to reduce government transfers, each will see more virtue in reducing the transfers of others than in reducing his own. The large and growing number of people receiving transfers could nevertheless create opportunities for political entrepreneurship to reduce the conflict over whose transfers are pruned. We are moving toward Frederic Bastiat's concept of the "state," which he characterized as that "great fictitious entity by which everyone seeks to live at the expense of everyone else."12 And as we do, an increasing number of voters are paying more for the transfers of others than they are receiving from their own. This can make it possible for political entrepreneurs to generate majority support for significant reductions in transfers by presenting voters with a proposal consisting of a package of transfer cuts. Such a proposal, analogous to draining the swamp instead of fighting the alligators one at a time, would make it easier for voters to see the virtue in reducing transfers, even their own.

Conclusion

It is natural to think that people are enticed to vote by the desire for financial benefits. Even good economists are known to express that view. For example, a book, written by at least three good economists, states:

There is little reason to believe that a person making choices in the voting booth will behave much differently than when making choices in the shopping mall. In most cases voters are more likely to support political candidates and policies that they believe will provide them with the most personal benefits, net of their costs.13

The economics of expressive voting makes it clear, however, that the probability of realizing any personal advantage from voting is, in elections with a large number of voters, too miniscule to be worth considering. The widespread concern that an increasing numbers of people who pay no federal income tax are being attracted to the polls to vote themselves benefits is unjustified.

However, the trend of expanding transfers and increasing numbers of able-bodied citizens not earning enough to pay federal income taxes is a serious concern. First, this trend suggests that transfers are enticing a growing percentage of the working-age population to drop out of the labor market. Second, those receiving transfers and not paying any federal income tax, even when working, are commonly discouraged from increasing their earnings. The reason is that as they earn more money, the transfers fall, which means that they are facing, besides the payroll tax, very high implicit marginal tax rates in the form of lost transfers.14 Third, the availability of transfers encourages the dissipation of otherwise productive resources through organized rent seeking to maintain and expand the transfers. Fourth, increased dependency on transfers reflects government's success at convincing people that they are victims who deserve transfers as a right, even if they are dishonest when applying for them.

There is no doubt that far too many people have become dependent on government transfers, but that does not explain why they go to the polls, or how they vote. People's desire to vote for what they believe is in the public interest is what explains why they vote and how they vote. Paradoxically, and fortunately, that motivation is our best hope for reversing the growth in transfers.


Footnotes
1.

For example see Kelman, Steven, Making Public Policy: A hopeful View of American Government (New York:Basic Books Inc., 1987): pp. 250-259.

2.

Why "at best?" Because often the majority votes in a politician who proceeds to renege on his campaign promises.

3.

See Table 4.1 (in Chapter 4) in Brennan, Geoffrey and Loren Lomasky, Democracy and Decisions: The Pure Theory of Electoral Preference (New York: Cambridge University Press, 1993).

4.

See Annalyn Censky, "Why the rich vote more,". CNN, 2012/09/24. This does not mean that high-income people are motivated by financial advantage to vote. They are not, and many vote for higher taxes and other proposals that harm them financially.

5.

This observation is equally true of people in all income groups. People who are not low-income, including those who are quite wealthy, also receive transfers from a host of government programs, and many of them do not vote. If they knew that receiving transfers from their favorite government programs required them to vote, their voting percentage would also increase.

6.

Some cite the fact that many poor people vote Republican as evidence that the poor are likely to vote against government transfers that benefit them. This is not completely compelling evidence since transfers generally increase under Republican administrations, despite much Republican rhetoric..

7.

For important book length treatments of this "expressive voting," see Brennan and Lomasky (footnote 1) and Caplan, Bryan, The Myth of the Rational Voter (Princeton: Princeton University Press, 2007).

8.

Even wealthy farmers lobby for their subsidies as necessary to stabilize agricultural production, and many have probably convinced themselves that such claims are true.

9.

As quoted on page 25 of Ebertstadt, Nicholas, A Nation of Takers: America's Entitlement Epidemic (West Conshohocken, Pennsylvania: Templeton Press, 2012). Ebertstadt describes overcoming the resistance, also on page 25, as "a long and formidable endeavor."

10.

See Tami Luhby, "Government Wants More People on Food Stamps," (accessed July 22, 2013)

11.

Some estimates have federal transfers at slightly over 70 percent of federal budget. See Michael Sandoval, "Chart of the Week: More than 70 Percent of Federal Spending Goes to Dependence Programs," September 23, 2012. (accessed July 22, 2013.)

12.

See page 144 of Bastiat, Frederic, Selected Essays on Political Economy, George B. de Huszar, ed. Irvington-on-Hudson, New York: The Foundation for Economic Education, Inc., 1995). (accessed July 22,2013)

13.

See page 7 of Gwartney, James D, Richard L. Stroup, Dwight R. Lee and Tawni H. Ferrarini, Common Sense Economics: What Everyone Should Know about Wealth and Prosperity (New York: St. Martin's Press, 2010).

14.

Under Obama Care (or the Affordable Care Act) it has been estimated that with the smooth phase out of medical benefits as adjusted gross income increases, the implicit marginal tax rate is around 60 percent. See Michael Schuyler, "Health Exchange Subsidies Would Impose High Marginal Taxes," National Center for Policy Analysis, Brief Analysis, No. 697, March 3, 2010. PDF file.


*Dwight R. Lee is the William J. O'Neil Professor of Global Markets and Freedom at the Cox School of Business, Southern Methodist University in Dallas, Texas.

For more articles by Dwight R. Lee, see the Archive.

Return to top