The idea trap

The other day I saw a link to Bryan Caplan’s description of what he calls the idea trap, which seeks to explain why failing countries have a hard time enacting the policies that can lead them to success. I’ll let him explain:

Good ideas lead to good policy, good policy leads to good growth, and good growth reinforces good ideas. The bad news is that you can also get mired in the opposite outcome. A society can get stuck in an “idea trap,” where bad ideas lead to bad policy, bad policy leads to bad growth, and bad growth cements bad ideas.

Once you fall into this trap, all it often takes is common sense to get out. But when people are desperate, common sense gets even less common than usual. The recent flu vaccine shortage is a fine example. Common sense says that to alleviate a shortage of the vaccine, you should make it more lucrative to supply. But the reaction of much of the public is, instead, to lash out at greedy suppliers for failing to do their job.

His main point is to dispute the general idea that things have to get worse before things get better. Generally people make worse decisions as conditions worsen, thus encouraging a downward spiral.

My point in linking to this article, though, is to ask whether America is caught in an idea trap right now? Is bad policy leading to bad ideas and vice versa? Caplan argues that economic growth (not simply wealth) is a necessary precondition for better policy and better ideas. Is a psychological sense of economic growth a reality for most Americans right now? And if not, is that what underpins the incredibly poor collective decision making we’ve seen over the past few years?