Out of Sight, Out of Mind: How Opportunity Cost Neglect Undermines Democracy
Every government program has an opportunity cost, which consists of the private and public goods that society must forgo to make the program possible. In evaluating government programs, rational voters would take opportunity costs into account. Unfortunately, opportunity costs are usually implicit, and psychologists have shown that decision makers tend to irrationally ignore implicit information while giving too much weight to salient situational elements. This Article presents evidence that the bias against implicit information causes voters to neglect the opportunity costs of government programs. The Article also explains for the first time the implications of opportunity cost neglect for democracy.
Voters’ neglect of opportunity costs has far-reaching consequences. Ignoring the sacrifices required by government programs makes them more appealing. As a result, opportunity cost neglect artificially increases the demand for government spending, tax expenditures, and regulation. In particular, the failure to consider opportunity costs helps explain why the federal government’s budget is on an unsustainable path. Opportunity cost neglect causes voters to demand a high level of government spending even though they are unwilling to pay for it, which leads to chronic budget deficits
