Why Democracy?

A very nice piece of work. The economists you cite are indeed pioneers. Arrow’s to welfare economics and Oslen to the devlopment, and Amartya Sen’s socil choice theories are cornorstones of institutional policies the world over.

You are talking about government structure and preferences of the people. I wrote a paper on “Workers’ Objective and Organizational Performance” to explain the relationship between the two, and to determine which Org Structure is critical to economic success. I recommended that ownership structure (in a democratic firm – “i.e., industrial democracy” should be based both on the degree of externalities, maket imperfections, etc., and the development of consciousness on the one side and on the balance between different political forces on the other. I concluded that in the absence of it, a firm will lead to “Illyrian Behavior”. Pretty much what you are talking about but on a much smaller scale.

I`d say an argument in favor of democracy ideally, in a multicultural society, is that it allows for peaceful negotiation between groups. There are very few truly democratic societies and the one-person-one-vote system that serves as a caricature of democracy is only a sop that gives people the feeling that their interests are being served as best as possible.
As they say, democracy is the worst system except for all others...
The argument against dictatorship is it is the crudest form of might makes right. It cannot be a stable long-term situation for this reason and the reasons you have given..

``A monarch achieves to maximize residual revenue of the state over unlimited time period.``
Is there any basis for this assumption? Why should he not try to maximize his sexual gratification by keeping a harem and why should he not try to mazimize his land holdings?What if he is insane and likes to kill people for pleasure?
``He argued that when there are more than two alternatives, majority voting (one way democracy is exercised; majority voting is sometimes used synonymously with democracy that is a blatant mistake) results in cyclical voting. Other theorists have argued (e.g. Congleton) that cultural pre-requisites to democracy are essential for democracy to work.``
Kindly explain the above in more detail.Maybe as a layman I am missing something, but these look like statements to me, not arguments for or against anything.
Quoting hep economists does not a good article make.

kaka will make this simple..

People contributing monies (tax) towards a pool (government) for a number of ventures (roads, defence, loans for busniesses) which can only be effective/optimal because of the joint partnership.. should ALSO have the option to elect (1) policy makers, (2) executioners and (3) overseers.

Any model, be it Islam or Jinnah`s original vision or Marx`s wet dreams, if deviates from the model above should be shot down and ridiculed..

Re: # 3

First of all, theory is a very good way of ironing out logical inconsistencies in an argument. Theory doesnt work perfectly as intended but that is not theory claims to do. What I presented were not statements but long established theoretical arguments. I assumed that they are well-known that I can afford to refer to them in passing. I apologize for being wrong.

A monarch can do whatever he wants. That makes him a monarch. Of course he would maximize his land holdings. Infact all the land will belong to him. However, he would give rights to the farmers because it will increase the produce of the land and thus the residual wealth. The `encompassing interest` argument says that the monarch will take care of the health of his subjects, their education, will provide roads and other infrastructure and will even care for the happiness of his subjects as long as being happier helps farmers to produce more goods for which the monarch is the residual claimant. The monarch will not confiscate all the property because that will provide negative work incentive and thus reduce the total output.

About cyclical voting and cultural pre-requisit
This is Arrow`s very well known argument. I will attempt to summarize it here as well as I can. When two or more individuals have to chose between more than two alternatives, they will show cycles in their choices in such a way that one choice is never better than the other two. You can make up a table of three alternatives between three individuals and show that there are instances that no alternative wins the majority as long as turned down alternatives can be voted upon again. As a result, majority voting cannot result in stable outcomes (if you google it, i am sure you will get a number of sites for illustration of `Arrows Impossibility theorem`). There are other philosophers (economists, political scientists) who argue that some theoretical problems with democracy can be solved by setting norms and traditions. According to that argument, most of the democracies in the world have worked because these norms have been set up. In the context of above problem of cyclical preferences and unstable outcomes, for example, it can be argued that if the alternatives which are turned down once are not offered for voting again, the cycling of preferences can actually be avoided.

About democracy and majority rule:
Different philosophers have given different conceptions/definitions of democracy...operational democracy, democracy based on consequences only, democracy based on representation...but generally (even sometimes in academic circles) democracy is equalled to majority rule. Perfect representation would require unanimity in every decision. But since there are costs associated with perfect unanimity, majority decision making is the easier option but not the only option for democracy. Philosophers differ in this view. I tend to take the above position.

I hope I answer all your questions.

There is only one real argument in favor of democracy, the one that Soysauce has already made clear: it is absolutely the worst form of governance except all others.

Those who are looking for the perfect system should be dealing with automatons, not human beings. (That`s why all Utopias - without exception - try to turn perfectly normal human beings into automatons.)

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rahul_capri

For a lay person, the task of comprehending the mind of an economist is harder than that of knowing God. To anyone intelligent but not quite famliar with the field of economics as a social institution even top economists can sound like blithering idiots.


kulharee ji

Impressed. Aap by trade, I/O economist hain?

Re: # 5 My gripe was that there is no analysis and counter arguments with any of the theoretical arguments. Perhaps the scope of this article was presenting assorted theoretical positions for and against democracy.
Thanks for the info, seems interesting, particularly the Arrow theorem.

Ghazia

Read your ilog...

There is a communication problem between economists and noneconomists whose resolution seems to strike people only after they have bid Grad School adieu. The Grad School, at times, can have the feel of an akhara.

Re: # 6
This is an interesting comment. I see no basis for this assumption or theory -``A monarch achieves to maximize residual revenue of the state over unlimited time period. `` specially if we apply the theory of marginal utility(I know some economics too :-)) .Not unless we presume a materialist or capitalist ethical framework of a monarch which is constant over time. A hedonist will try to maximize his pleasure and a religious person would try to do his duty by the book.
So, do economics make an a priori assumption of a materialist or capitalist ethical framework for everyone?

rahul_capri

All theories and such in economics begin with:

``Assume a fully-grown, male African elephant hanging by slender cotton thread at the edge of a needle stuck in the tail of a rational baby squirrel sitting atop a tiny plant.....

Then the theories are proven, and their implications are generalized to include everyone and everything from Timbaktoo to Transylvania. Rigorous economists call this process verifying the external validity of their reasoning.

My first reaction was- oh great, another Paki offering a lame defence of Musharraf- turns out I was wrong. Pretty nicely written, with solid references.

Amartya Sen`s viewpoint and the Bangladesh example just about perfectly illustrates what democracy is about. Democracy is about REPRESENTATION, period. Some individuals assume democracy is the right to speak freely and dissent openly. Technically, that isn`t true, though in a significant number of cases, the one accompanies the other.

The arguments for authoritarian rule having the potential to create more wealth are intriguing, but some examples might have helped. Usually, the authoritarian regimes one hears of are only raping their subjects (literally and figuratively). You seem to be linking it to the old days of raja-praja (king & subject). Maybe one can look at the Gulf states as examples of countries where authoritarian rule has meant the trickle down of wealth to the poorest. I don`t know.

Hey, but enough beating up on economists.

Gazia deserves a more respectful discussion of his article :)

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To answer your last question, Rahul, there are all kinds of economists and some of their more recent work is absolutely fascinating in the boundaries it has been pushing.

Still, for the most part (or in the classical sense), one would have to answer in the affirmative (I would).

Wonder what Gazia would say!

rahul_capri #3and #9

Actually you are missing her point. I find it interesting but I think she needs to refine it or maybe say it differently.

Democracy is the most unnatural system ever devised for governance. What comes naturally to man? The respect of authority and a desire to have the authority. Democracy is supposedly the antithesis of that and therefore, a system alien to human being. That’s why its implementation is the hardest and it is always a work in progress even in the most advanced countries like the US. Democracy rarely meets with success in societies that are just coming off some system where participation was limited. Be it colonialism, feudalism or the good old monarchy.

In a way democracy is also a monarchy of the elected persons at least for a certain period of time and then people get to elect another set of monarchs. The communists also talked about this by declaring that proletariat dictatorship is the real democracy rejecting the current form of democracy that only allows the ``haves`` to control the system or form a monarchy over the less fortunate majority.

So in reality the current democracy is not the perfect democracy as the representation is manipulated for those individuals or parties that have the money to buy votes and influence.

More later…

Re: # 9

You catch the argument at the right place. Yes economists assume that monarchs will maximize their material wealth. There is a difference between monarch and a dictator/authoritarian ruler. Monarchy, since it is inherited, will have a longer time horizon, longer than even the democracy. So the argument is that a monarch will worry about all the public goods which are required to maximize the total output over a longer horizon unlike democracies. The tax rate that he decides will be on the margin i.e. the tax rate where marginal increase in tax revenue is equal to decrease in total output due to decreased work incentive. The tax rate (mathematically) comes out to be higher than tax rate in a society where revenue maximizing is not the main objective.

But yes you are right, monarchs do not have long enough horizons, their information is limited and they have arguments in their maximization function in addition to wealth. Moreover, monarchies do not provide gaurantee against other monarchies and therefore as a result tend to be unstable. although this fact is not historically very robust.

and about the economics making assumptions....in order to understand you have to simplify and economics has been able to do it best in social sciences. The burden of understanding the implications of these assumptions falls on whoever tries to implement the theory to reality not the theorist. Again...only my position.

Re: # 12

Ghazia is a she and not a he :)

A case of stereotyping?

Re: # 11

Democracy is about representation...theoretically. It is quite safe to assume that every voter is rational. He may not know what is best foreign policy but he knows what is in his interest. A farmer in a remote village would fully know the impact of removing support prices for wheat, or abolishing sharecropping. As a result, everybody`s `interests` are represented. Following the same argument, proportional representation makes better form of government. Of course, there are information barriers (voter may not know the complexity of policy or for that matter credibility of the promises made by the candidate) that introduce biases but the consequences are not as detatched from the ideal.

HOWEVER, representation in debate is very different from majoratarian decision making processes. Once the candidates are selected they make decisions in the Congress and Parliament and the outcome is not only of debate amongst different `interest` but the of political bargaining, lobbying etc that goes on in the legislature. Downs argues against Propotional representation on the basis of above argument. His contention is that in PR system you dont know what coalition is going to emerge in the end so you dont really know what you are voting for. In the present system, this is a very plausible argument. I, however, despite the fierce disagreement of my colleagues and professor still stick to the representation idea. But I am begining to see the problems with it.