A Link Between Schooling and the Quality of Political Choices: Does a Higher Level of Education Help Democracies to Choose Better Policies?

The central idea tested by Caplan in his paper is that voters are worse than ignorant; they are irrational and they vote accordingly. The average citizen's level of political knowledge is extraordinarily low5 and the voter has such a small probability of affecting electoral outcomes that, in a selfish way, pays no attention to politics. The voter chooses to be rationally ignorant, but democracy can function well under almost any magnitude of voter ignorance as long as voters make random errors. Caplan stated:

"Imagine an electorate where 100 percent of all voters are well informed. Who wins the election? Trivially, whoever has the support of a majority of the well informed. Next, switch to the case where only 1 percent of voters are well-informed. The other 99 percent are so thick that they vote at random. Who takes the prize? Whoever has the support of a majority of the well informed."

This result has been named the "Miracle of aggregation".
The bottom line is that if the miracle of aggregation is true, then democracy can work, even with a morbidly ignorant electorate. However the "miracle" only works if voters do not make systematic errors.
If voters base their policy preferences on deeply mistaken models of the economy, government is likely to perform its function poorly. In order to study this phenomena Caplan categorizes the roots of economic errors into four biases: make-work, anti-foreign, pessimistic bias, and anti-market.

Caplan paid special attention to the 1996 Survey of Americans and Economists on the Economy (SAEE). The SAEE asked 1,510 random members of the American public and 250 people with PhDs in economics the same questions concerning the economy. Respondents were asked to answer in the Survey of Americans and Economists on the Economy Respondents to evaluate various explanations for why the economy is not "doing better than it is". To every question respondents could answer: "no reason at all", "minor reason", "major reason".
Caplan simulates what people would believe if they had the same circumstances as economists (enlightened public), a technique often used in political science called "enlightened preferences".
The reason for this is to eliminate the experts bias. How is it biased ? There two main reason. The first is that economists suffer from "self-serving bias." Economists, according to Caplan, are unusually affluent, tenured, white, and male, and supposedly confuse what is good for them with what is good for the country. The second is that economists suffer from right-wing "ideological bias." They use economics to give scientific respectability to their political prejudices.
In other words, he used the data to run a thought experiment: what would a person with average income, average job security, average party identification, average ideology, think if he had a PhD in economics? Caplan in his paper call such a person a member of the "enlightened public", someone who combines the circumstances of the layman with the knowledge of the expert. To obtain this result, the beliefs of enlightened public, he regressed economic beliefs on respondents' characteristics, including income, job security, income growth, sex, race, party identification, ideology, education, and whether or not the respondent was an economist. He then calculated the predicted belief assuming a respondent had the general public's
average income, job security, income growth, sex, race, party identification and ideology, combined with a PhD in economics.