Classical Liberal confusions about democracy

Posted on April 25, 2011 by


I think it ironic and perhaps tragic that classical liberals, who more than any other intellectual community appreciate how markets are emergent orders, make the same mistakes over democracy that central planners make regarding markets.

Traditional thinking across social scientific and ideological boundaries has regarded democracies as a kind of state.  Traditionally states have been regarded as organizations. States have interests, and goals which they pursue with better or worse success.  Habits of thought that applied to absolute monarchies have been adopted unthinkingly for states as a whole.

But except in wartime or other major emergency democracies cannot be described in this way.  They possess no hierarchy of goals, but rather are constituted by a complex stew of conflicting policy proposals and competing organizations and politician where nothing is stable.  Because democratic politics is turbulent and often filled with contradictory policies, many people judge democracies to be “inefficient.” Efficiency is a concept that applies to instrumental organizations, where resources can be used more or less efficiently to atta8n a hierarchy of ends.

I have argued in a book and many articles that democracies are normally not organizations and that these criticisms are misleading.  They are akin to criticisms of the market process for being “wasteful.” Markets are discovery processes, as Hayek noted, as is science, and in both cases discoveries include exploring what does not pan out.  Democracies are the same.

There is a fateful ambiguity in the term “state” analogous to the ambiguity in the word “economy” as Hayek has discussed it.  Originally the economy referred to the organization of a household in Aristotle’s Politics. Much later it was used to describe the interconnected network of economies in this first sense that we call a market economy.  The first use of “economy” refers to organizations, the second to spontaneous orders.  Hayek argued, quite correctly, that this confusion in the term “economy” led to all manner of harmful confusions, such as the belief that the broader economy could be planned, just as a household or business planned its economy.  For that reason Hayek advocated using the term “catallaxy” to refer to the market economy.

The same kind of problem applies for democracies considered as states.  No one is more confused here than classical liberals, who are so clear on the difference between the economy of the market and the economy of a household or corporation.

For example, we see among classical liberal and ‘conservative’ “anti-statists” a deep confusion between ‘small government’ and ‘limited government.’  This confusion reflects organizational thinking.  From this perspective government has certain quite defined tasks, and it needs to have the power to efficiently accomplish those tasks. But it should not do other things, no matter how popular they might be.

This style of thinking leads to the highly authoritarian and invasive policies advocated by many advocates of ‘small government.’  Whether it be the empowering of invasive searches and seizures, unrestrained authority by the police, torture, or regulation of the most intimate details of personal life, there appear to be no limits to governmental power within the limits of what these people regard as legitimate.  The state is an organization with guns, and when its tasks are appropriate in the eyes of an “anti-statist” there should be no limit on the use of those guns, if necessary.

It also leads to efforts to restrict voting and to arguments that voting is a privilege, not a right.  It is no accident that those who advocate “small government: often are also those who worry the most about “voter fraud” and advocate measures that will make it harder for voters who disagree with them to cast their ballots. This effort today is spread across many states.  From this perspective voting is not a way to discover what should be done, it is a way to choose the leaders who will do what has already been decided to do.  Voters who disagree should not vote. It is analogous to businesses outlawing their competition, or creating barriers preventing consumers from choosing freely.

As liberals, America’s founders were far less concerned with what government sought to accomplish than with how it accomplished it.  The constitution is deliberately vague as to the specific tasks government is to do, but far less vague on the limitations on its power to do what it wants to do.  It may not limit speech, oppositional organization, and the press – all of which interfere with the efficiency of accomplishing whatever the political leadership wants to do.

During their time the state governments were quite active.  Madison wrote that so long as Americans had more trust in states than the national government, they would continue to be the primary political bodies affecting citizens.  If the people ever changed their views, power would move upwards. This is exactly what happened as the country became more tightly knot together and the Great Depression convinced Americans the states could not handle the crisis. (I am not analyzing the Depression, just people’s response to it.) Madison would not have been surprised.

If sovereignty lay with the people and not the government,  it could not be otherwise.  They saved their greatest distrust not for the spheres of activity in which government might involve itself, but rather the efforts of people in government to free themselves from limits on their actions.  Such efforts, if successful, would free them from constitutional restraints, and make government a vehicle for exercising domination by the powerful over the less powerful.

So small government advocates get the problem precisely backwards.

I think we need a new way of thinking about democracy’s scope, one that incorporates awareness of limits on power, but not defining in advance the areas of life it can seek to influence.  The issue is not the number of issues a government can address, but the amount of power it can bring to bear to get its way.  There are models to help us here.

Consider a residential cooperative as a more suitable way of thinking about a constitutional democracy in terms of its domestic agenda.  A CO-OP is owned equally by all its members who then vote democratically to elect leaders or adopt specific policies.  A simple model of a residential CO-OP would own the land, housing, and business facilities, leasing or renting them out to members.  The bigger the CO-OP and more diverse its members the greater the “discovery problem” for what it should do in its members’ eyes.

No one would question the legitimacy of a majority of CO-OP members voting to adopt community wide fire, flood, and health insurance policies.  No one would argue that such a CO-OP should not have building codes and zoning if that is what the members wanted.  Such a CO-OP could also provide educational services.  Members who disagreed sufficiently strongly could leave, selling their share of ownership to another.  Less dissatisfied members would try to convince others to change the policies.  Successful co-operatives would have valuable shares because people would want tolive there, unsuccessful ones would have shares decreasing in value.

Democracies are not co-operatives because they exercise the power to arrest and imprison people and to engage in foreign affairs.  But their domestic policies are in principle largely identical in scope to what a co-operative might get involved with. This is particularly true for American states, which do not have armies and foreign policies, and are almost entirely involved with domestic activities.

I want to suggest a new take on what political democracies are – particularly cities and American states or provinces in countries like Canada.  In most respects a democracy is a shift from the state as an organization of domination to serve the leaders to a cooperative to serve its residents.

This alternative model also focuses our attention on what really matters.  It is not the size of government that matters, it is the “principle agent problem” whereby its leaders seek to turn a democracy into an organization they control.  This is the problem of autocracy.  In addition there is the problem of organized interests in a democracy seeking to bring it under their control.  This is the problem of aristocracy, and it is by far the largest problem we have today in American politics.

When we see these problems as the key problems, and not the “size” of government we are freed to think far more intelligently about the problems facing modern democratic countries.