I’ve started the new year by reading a wonderful book titled Robust Political Economy by the classical liberal political economist Mark Pennington. Although I’m only about halfway through, I strongly recommend it to anyone looking for a comprehensive approach to political issues. Pennington argues that any set of social institutions must be “robust” (that is, “able to function well”) under the hardest assumptions possible about people’s knowledge and motivations. Institutions premised on people’s having fairly complete knowledge or largely altruistic intentions are not likely to function well in the real world where individuals are largely ignorant and broadly self-interested. Robust institutions are ones that work under those conditions.
Pennington nicely brings together a lot of familiar material and, more important, applies this “robust political economy” perspective to arguments raised by critics of classical liberalism. One such group is those who favor various forms of so-called “deliberative democracy.” These critics argue that the market privileges wealthier people in the way it allocates resources and ranks wants or needs. The deliberative democrats favor a system in which these matters are decided through conversation among all people (regardless of wealth) either directly or through representatives. The deliberative democrats argue that this would give more scope to minority voices and encourage people to take more seriously the views of those with whom they disagree.
Winners and Losers
As Pennington points out, one major problem with this argument is that democratic processes ending in a vote necessarily mean that some views win and others lose. Compare that to markets, which can meet the tastes of just about everyone, even if a particular demand is fairly small. If you love lounge music covers of heavy metal songs, your odds of verbally persuading others to vote for such music are slim. In contrast the market requires not verbal persuasion, but simply a willingness to pay if we like something and the ability to walk away (or “exit”) if we don’t.
Understanding the importance of verbal persuasion is key to seeing the real flaw in deliberative democracy: The system pretty much has to assume that all knowledge relevant to social decision-making can be articulated. But can consumers and producers always articulate what they want and how best to make it? How exactly can the potential producers of health care articulate what sorts of inputs would be best to use, or what sorts of health care to produce and how to produce it, apart from the market and its prices?
As Mises, Hayek, and other Austrian economists have argued, one of the great advantages of markets is that they do not require us to be able to articulate what we want or why we think one good is more useful than another. All we need to do is act by choosing one thing over another. Often we do not know whether we would prefer one good or another until faced with the specific choice. Our actions convey, through the price system and other institutions, our comparative and contextual valuations. Deliberative democracy suffers from what Hayek called the “pretence of knowledge,” or the false belief that we know a lot more about the economy, and society as a whole, than we actually do.
Rigged Game?
Notice who would likely do best under deliberative democracy: those with a comparative advantage at persuading others using words and numbers. It would be a tyranny of the articulate and rhetorically sophisticated. Pennington cleverly notes that if deliberative democrats think it’s okay for those who were better able to persuade others in previous deliberations to have more power in future ones, why is it not okay for entrepreneurs who get rich by more effectively persuading others to buy their goods to have more economic power in the future?
The people who created the idea of deliberative democracy are largely academics, who, perhaps not coincidentally, specialize in using language to persuade others. Only academics could cook up this sort of proposal because they are so focused on that form of persuasion that they are blind to the market’s use of the price system to make inarticulate knowledge socially usable and to the communicative power of exit.
The real failure of deliberative democracy is that it’s a reflection of the tendency of academics to privilege their own world of reason, rhetoric, and articulate knowledge, even as they decry the supposedly unearned privileges of others. A little more modesty and a little less hubris might open more academics to the communicative superiority of the market.
Steven Horwitz
Steven Horwitz was the Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he was also Director of the Institute for the Study of Political Economy. He is the author of Austrian Economics: An Introduction.
