Efficient Electorate Theory

by JT McGee

Today is the day that millions of Americans engage in the best of boondoggles – voting.

Much like active stock picking, the active selection of political candidates is a complete waste of time. You see, the market (the electorate) has already priced in all necessary information into the voting process.

Yes, everyone is equally-informed and there is no way that your political philosophy is any better than any other voter. In fact, you know no more than someone who goes to the voting booth to pull the lever on a straight ticket ballot having no more information than political party.

No matter how much time you spend following politics, you cannot have more valuable information to throw into the market. Voting is an entirely efficient market made up of people who are making a calculated decision about our political leaders. If grandma steps up to vote based on a 30-second TV advertisement, her vote is just as valuable as your very calculated, very well-informed vote.

Yes, this post is 100% sarcasm, but I love nothing more than the idea that millions of believers in the efficient market hypothesis will spend countless hours waiting in line to engage in a market just as efficient as the stock market for their next political leaders.

Transaction costs matter – the time you spend waiting in line for an efficient market dilutes your total expected returns.

Become a political Boglehead, we get the same results with less time.

{ 2 comments… read them below or add one }

PK November 6, 2012 at 01:08

I voted early in a state where the candidate with a (D) next to his name always wins. However, I’m of the opinion I can’t credibly complain if I don’t spend the 2 stamps cost to mail it in.

On a side note – how is forcing me to add my own stamps not a poll tax?

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Paula @ Afford Anything November 6, 2012 at 18:26

I struggle with the paradox that my vote individually doesn’t matter, especially since I don’t live in a swing state, AND YET I still feel that voting is my duty as a citizen and my token of appreciation for those who fought for my right to vote.

I “find peace” with this paradox by getting well-informed about local elections, where my vote may have more sway. Go ahead, ask me anything you want to know about Fulton County, Georgia’s commissioner candidates. 🙂

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