Democracy and the Never-Ending Challenge of Adjustment

I knew when I wrote my first essay that it would stir debate and likely vex the average Cato Unbound reader. But people here have given as good as they’ve gotten - since the seminar is close to ending, here are some responses.

First, thanks to Ilya for his engagement on the topic of states, power, and markets. I still think that like other libertarians who have engaged with the recent political science literature, he greatly overstates the case against democracy and understates the case against markets.

Ilya disputes my suggestion that Chris Achen and Larry Bartel’s book is both an argument for democratic realism and a case for more equal democracy. In his reading they describe in

great detail how partisan bias often actually exacerbates the impact of political ignorance, by skewing voters’ judgment of public policy, and even their perception of basic facts, such as the rate of inflation and unemployment. Particularly in an era of severe polarization, parties exacerbate the negative impact of political ignorance at least as much as they may ameliorate it.

For sure, Achen and Bartels have a lot to say about partisan bias. However, this hardly exhausts their discussion of parties. They strikingly emphasize that parties and interest groups can work well – but under conditions of political equality. As they describe it (p.321-322) the challenge is to understand group politics in power terms:

If voters are to have their interests represented in the policy-making process, then, interest groups and parties have to do the work. And the organizations representing different interests have to have power in the policy-making process proportionate to their presence in the electorate. The rich, the well-placed and the well-organized cannot have extra power to advance their interests. Too often, as we have seen, naïve reformers have imagined that the pseudo-democratization bestowed by plebiscites would solve these problems cheaply and easily.

To the contrary, spelling out the simple normative perspective of equal power in the context of an honest description of the policy-making process makes it only too clear how far we have to go to become seriously democratic. It also makes clear how hard the conceptual task will be of devising the right institutional arrangements, and how bitterly those reforms will be opposed by the groups that profit from the current inequalities and ensuing injustices.

This is worth quoting at length because it makes it quite clear that Achen and Bartels have a quite different political agenda than their libertarian admirers. They surely believe that advocates of democracy ought recognize its warts, that current justifications of democracy are flat out wrong (here, I think they overstate their case, though they land some good blows), and that certain naïve versions of democratic reform are likely to founder or be actively counterproductive. But they specifically and explicitly argue that serious democracy – by which they mean contention among groups and parties in a situation of real equality – can have salutary benefits. Their book is, more than anything else, a call for building better understandings of democracy that start from the cognitive psychology of real human beings, and the inescapable role that groups play in structuring politics and public opinion. This is why I think that it presents a very interesting complementary set of arguments to Brink and Steve’s book and vice versa. Both talk in useful ways to the relationship between power, equality, and democracy. Another valuable interlocutor, whom Achen and Bartels single out as one of the few political theorists to take these questions seriously, is Nancy Rosenblum (whose book on partisanship was the subject of another Cato Unbound seminar a few years ago).

This understanding also presents a significant implicit challenge to Ilya and to other libertarians who appeal to the benefits of markets over democracy. We have the beginnings of democratic realism – but not of market realism. Cosma Shalizi’s case against the libertarian two-step is pungent and direct:

On the one hand, the sanctity of private property and private contracts is held to be a matter of inalienable natural right, guaranteed by the fundamental facts of morality, if not a basic part of Objective Reality; capitalism is the Right Thing to Do. On the other hand, much effort is devoted to arguing that unfettered laissez-faire capitalism is also the economic system which will produce the greatest benefit for the greatest number, indeed for all, if only people would just see it. Natural right therefore coincidesexactlywith personal interest. A clearer example of wishful thinking could hardly be asked for. It’s not hard to see what function this plays, rhetorically.

Markets too are fallible social entities involving fallible human beings. As Cosma notes (and as Arrow himself more or less concurred), Arrow-Debreu efficiency proofs are of mathematical rather than practical interest. Hayekian justifications place a far greater informational load on the price mechanism than it can possibly bear. And actual markets are more plausibly characterized by strategic than competitive logics. If woman is “free to choose,” it is under circumstances not of her making. Markets can be wonderful things – but they are not the universal panacea that many libertarians claim.

Economists like Richard Thaler who have looked to establish a more cognitively realistic understanding of human beings have drifted away from markets and toward loose paternalism. Few economists indeed have tried to take groups and parties seriously (Mancur Olson is the only really good one I know about, though this may merely reflect my own ignorance of the field). None, as best as I know, have done much to bring the two together.

This brings me to my disagreement with Brink. First I obviously agree with his basic claim that democracies and markets can and should co-exist (the title of my original post wasn’t chosen by me, but by the Cato Unbound editor, who justifiably wanted to stir things up a bit). But that is quite compatible with my argument. What I am asking is whether markets should be the measure by which we look to assess the benefits and drawbacks of other forms of organization. If we start with rent seeking, we are using markets as a measure, since the notion of rents precisely refers to the additional benefits that an economic actor can secure above those that they would get under perfect market competition. It is, of course, true, that “the misuse of public power for private or narrow group gain is perennial,” but the way in which we choose to conceptualize, study, and try to correct it is not. Should we look to return to perfectly competitive markets? Or alternatively, should we look to more equal democracy? There are very different accounts in public choice economics and democratic theory (see, for example, Mark Warren’s work on corruption), which would suggest very different remedies.

Another, closely related point is that sophisticated arguments for democracy do not imply democracy all the way down. It would be a thoroughgoing nuisance if we had to put the prices to a vote every time we bought vegetables in the supermarket. Instead, as Knight and Johnson argue, we should think of democracy as a “second order” system of decisionmaking. In some spheres of interaction, markets may be the best solution. In other spheres, regulation. In other spheres again, voting, or voluntarism, or non-binding consultation. Rather than trying to apply democracy everywhere, we should use it as the second order means of deciding whether it is best to apply markets, or voting, or regulation, or whatever, in a particular setting.

This marks a sharp difference from market-focused libertarianism. Democracy is, in the end, collective choice made through a system of voting or whatever, plus coercion. Market libertarianism instead emphasizes individual choice as the ultima ratio. One can reach either outcome plausibly from classical liberal foundations. One can also point to the ways in which democracies require individuals to make the choices, and individual choice depends on collective frameworks. But in the end, there is an important disagreement here, and liberaltarians/liberals (or maybe we should just call them ‘new classical liberals’) are going to have to choose, sooner or later, whether to jump in the one or the other direction.

Finally, Steve. Despite our political differences (Steve is a moderate, I am a solid leftwinger), our ways of thinking about the world have a lot in common – e.g. our shared dislike of nudging. Hence, we probably don’t have nearly as much to disagree about as we might– which is no fun at all. Steve does push back on one question, suggesting that:

we detail the many ways that a government liberated to regulate everything, everywhere can turn into a bazaar for concentrated interests to take over for their own ends.That is not, except in the most polluted sense, what any of us mean by democracy. Unlike Ilya, we do not want (except in a few narrow cases) to rule entire areas of economic life out of bounds for the state. But we do think it makes sense to make some kinds of economic regulation face particularly high evidentiary standards, and to change the geographic or institutional location of decisionmaking to make it less susceptible of capture by concentrated interests. Constraint, we would argue, can be liberating for democracy, and that is true even—perhaps especially—when one has a broad conception of the role of the state.

As a pragmatist, I agree in broad principle – so long as these constraints are themselves the product of democratic consideration, and open to reconsideration when they go substantially awry. To the extent that they are not open to some kind of reasonable democratic consideration, not so much. The likely end result then is government by judges, who have authority to interpret the constraints in ways that they may find more or less ideologically congenial, with all of the accompanying deformities that plague the politics of American courts right now.

One interesting example of how such restraints might be handled differently is my native country, Ireland. Here, as in the United States, there is a written constitution. However, it is possible to amend it via popular referendum.

In recent years, a combination of sortition (random choosing of citizens by lot) and expertise has led to a series of recommendations about constitutional reform. These recommendations then go to the legislature, which has the power of rejection, but also has to take them seriously (given that they have the legitimacy of public opinion). The Parliament can then move enabling legislation for a constitutional referendum, which completes the circuit by allowing people to vote on the proposed reform.

This seems (at least to someone with my values, and likely the values of many libertarians too) to work pretty well. It avoids many of the problems of radical plebiscitarianism but also makes it tougher for politicians to block reforms that people really want. This is why Ireland – a country notorious in my young adulthood for its religious conservatism – voted emphatically in favor of marriage equality in a popular referendum. It is also the driving force behind the forthcoming referendum on the legalization of abortion. Pragmatically, of course, it may turn out not to work well in future situations. Figuring out how to make democracy work is a never-ending challenge of adjustment.

Also from this issue

Lead Essay

  • Brink Lindsey and Steven M. Teles have largely made their peace with “big government.” They insist, though, that not all big government is good, and they draw on libertarian insights to criticize government action that tends to concentrate wealth and power in the hands of a few. The political mainstream can learn much about doing even big government better, and ironically, some of that insight comes from those who have been most skeptical about big government itself - libertarians.

Response Essays

  • Ilya Somin argues that in our attempts to free the economy and deliver prosperity to more people, there is no substitute for limited government. Government has not only captured the economy; it holds people where they are by making it more difficult to live and work in new places. This reduces economy dynamism as well as limiting individuals’ choices. Human mobility is a key part of the puzzle, he argues.

  • Henry Farrell urges libertarians to give up on the idea of rent seeking. There is no such thing as an unregulated market, so “rent seeking” ends up meaning something like “state action I happen to disfavor.” This will not do, he says, and he urges decisive interventions, particularly in financial markets, to save the neoliberal state. This he characterizes as a mix of market institutions and democracy. Democracy is the part in peril, he argues, not markets.

  • liberal. Though it is out of fashion and more often found a term of abuse today, liberal politics works to ensure that citizens share power broadly, and that no one can wield arbitrary power over another. Reeves suggests that we need even more of this kind of liberalism.