Libertarians and liberals . . . brothers under the skin?

Ezra Klein and Tyler Cowen are having an interesting back and forth over whether they systematically differ in their models of human behavior. The latest installment, from Tyler, is here:

A very good post. On the specifics: relative to most libertarian economists, I am more likely to think -- or should I say admit -- that human beings are irrational, even when the stakes are high (see the self-deception chapter in Discover Your Inner Economist). But, relative to social democrats, I tend to think that politicians are irrational actors trying to pander to irrational voters and that it can't be any other way. I am much less optimistic about democracy as an instrument for fine-tuning good policy or for that matter as a medium for enforcing progressive sentiments.

Like Tyler, I believe the evidence for human irrationality from behavioral science supports government intervention only if you believe we can draw our bureaucrats and politicians from some other gene pool. But I wonder if there isn't an element of egotistical bias to the arguments between libertarians and liberals. We tend to assume that people who disagree with us are disagreeing about hte point we ourselves care most about--so if you're a liberal very worried about power accumulation in market institutions, or consumer irrationality, you tend to assume that libertarians who disagree with the conclusions you draw therefrom are simply denying the premise.

In reality, many libertarians are aware of, and believe, the research showing consumer irrationality; they simply think that government interventions, for a variety of reasons, tend to malfunction even worse.

Also there's an intriguing possibility that consumer irrationality is one of those micro phenomenon that don't scale up to macro irrationality. The institutional features of markets may simply correct those biases--market experiments generally show those same irrational consumers behaving pretty much like your average Micro 101 textbook would predict. (Though not, I understand, in asset markets, where you get bubbles and busts, just like the real world). Thus Milton Friedman's response to behavioral economics, which boiled down to saying that the rational actor model still seems to have the best predictive value. Personally, I very much believe in the behavioral economics work on consumer irrationality--but it still seems possible that it may fall into the category of "true, but not particularly useful".

Of course, symmetry implies that I, too, am thusly unfairly maligning those with whom I disagree.