I do not think it is the question of dumb public v. smart politcians or vice versa. It is the issue of information gap. To make informed decions on public policy issues, one needs to have adequate information about the likely effetcs of different policies. That information is difficult to obtain for experts, let alone for the general public.
In the absence of adequate information, public makes their decisions based on what sociologists call "stock knowledge" No it has nothing to do with the knowledge of stock markets - it is simply a set of truisms, conventions, beliefs, expectations, and stereotypes that are "generalized" i.e. applied to specific instances to predict or explain unknown outcomes.
Stock knowledge is perhaps the most universal low-transaction-cost cognitive mechanism of coping with uncertainty, found in pre-historic as well as modern societies. It is like a fast food outlet near a freeway exit - you may not like the food, but you stop and eat there anyway instead of venturing into the nearby town to find a better place because it is there and it is a known quantity.
Party politics is based on the same principle. Instead of the difficult intellectual task of researching policy issues, people make their decisions based on stock knowledge stereotypes that fit self-perceived identities of the voters. Politicians know that and manipulate those stereotypes to gain votes.
People prefer political candidates whose positions are closest to what they are familiar with and what is conventionally considered apropriate. They may ex-post-facto rationalize their preferences in terms of economic interests, but they have no way of logically connecting those interests to the positions proposed by politicians.
So the answer is that it is neither dumb public nor dumb politicians, but the political process that - like markets - force everyone in the race to the bottom.
wojtek