This paper analyzes whether Austrian school theories of imperfect learining in politics - Bayesian mispeceptions, behavioral anomalies and rational irrationality, explain why the incentives to correct beliefs are weaker in politics than on the markets. It examines assumptions and conseqences of all the aproaches against issues of common knowledge, stability, symmetry and multiplicity of stable states.
The constructed model identifies different updating of beliefs as one of the reasons why political decision-making is more likely to produce a coordination failure than individual decision-making. The main findings of the paper are:
Bayesian misperceptions are unlikely to sustain over time
behavioral anomalies like innate biases, loss aversion and confirmatory bias make no difference between private and political choice
rational irrationality struggles with operational definition of meta-rationality and the implications of the consumption of pride goods or emotions do not exceed implications of classic rational ignorance
Author thus created an alternative model with coordination failure, where collective play of an identical game leads to a Pareto-inferior outcome than private play. This approach shows that original insights of Austrians can be transformed into formalized models with adaptive learning and evolutionary dynamics.