Why Democratic Institutions are Necessary
My last article was a short tirade about a George Mason economist, who recently authored a book lambasting democratic governments. A lot of his facts were right: contemporary and past democracies have never been utopias where each citizen possessed deep technical understanding of the political issues of his time. No election will likely be settled by one citizen's vote. It is hard to imagine any society with complete political equality among the citizenry. Even hunting and gathering tribes have a pecking order. But, despite these caveats, democracy can be the best polity available. (Of course, you must be ready for—witness the case of Iraq—a nation that is not there yet.) This article will pursue this argument. I will begin by citing the testimony of another practitioner of the dismal science. (Economists don’t all share the same precise models, theories and prescriptions. In spite of its plentiful math, economics is not dispassionate social physics, animated by universal, trans-historical scientific laws.)
Economist Donald Whitman contends in his award-winning book, The Myth of Democratic Failure: Why Political Institutions are Efficient (1995),
“that democratic markets are organized to promote wealth-maximizing outcomes, that these markets are highly competitive, and that political and bureaucratic entrepreneurs are rewarded for efficient behavior . . . This book attempts to (1) cure the schizophrenias facing most economists, who believe that economic markets work well, but political markets work poorly, (2) overcome the blindness of many sociologists to the full implications of rational behavior and competition, and (3) help political science (a field lacking in a coherent understanding of democratic phenomena) to develop a consistent theoretical approach.”
Whitman states that, although power is not uniformly held, the clout of groups like the National Rifle Association has been exaggerated. Moreover, he argues that the solution to inefficient political markets isn’t less democracy, it’s more intelligent organizational design. The majority of the book is proactive, investigating how current political conventions have come about “…in order to mitigate the potential for principal-agent problems in a democratic system,” and suggesting alternate ways of accomplishing the same objectives.
The work delves into the nuts-and-bolts of these issues, demonstrating that although the average voter does not operate like a scholar, a journalist or a political junkie, she uses a variety of techniques, networks, institutions, smart individuals, political parties, candidates, et cetera to efficiently decide how to cast her vote. Thus, the average voter may know the source of his problems more accurately than typically thought and may prudently make the best choices possible, given his values, race, socioeconomic status and interests.
Dan Usher’s gigantic tome, Political Economy (2003), comes to comparable positions. The book is an in-depth statement of contemporary micro-economics, embedded in a political economy framework. Its discussions are largely based in neo-classical economics, but with lots of new stuff tossed in. These include information economics, principal-agency theory, transaction costs and the New Institutionalism, and a great deal of Public Choice-flavored views of politics and markets.
But Usher is not an ideologue. This Canadian-born economist has an excellent discussion of private market failures. Still, he is won over by the flexibility, innovation, productivity and knowledge of markets. Yet, if we did not have relatively uncorrupt, constitutionally-based democracies, we would be in big trouble. Usher implies that failed states, fascism, theocratic fusions of government and religion, and communism are the likely fruits of governments of men, not laws.
Markets are embedded institutions as well. Crony capitalism is another good example of how things can go wrong, wrong, wrong in an undemocratic polity. Accurate prices and respectful politics, private and public organizational talent, and a widespread attitude of trust and tolerance among the citizenry are all necessary. Too much dependence on markets can even undermine their standing and encourage envy, selfishness, anger, resistance and even revolution.
Usher’s textbook concludes: “There is a technical connection—social technology, but technology all the same—among property, voting, rule-based administration and law. These four pillars of what we are calling the liberal society stand or fail together.”
This author is no left-winger and warns repeatedly of the dangers of too large a public sector, of majority abuse of minorities, of the danger of overly restricting property rights and of taxing too much. But the answer is not free market fundamentalism. Both markets and politics can lead us astray, and both can harm people, institutions, values and the ecosystem. Instead, Usher’s counsel is all four of these edifices are necessary if we are to have a free and affluent society. This social system is a rare event historically—we must not take it for granted.