Saturday, September 1, 2012

Democracy, Markets, and Classical Liberalism

One thing you notice from time to time - and particularly in "you didn't build that" exegeses - is that people who have been (rightly) convinced of the efficiency of voluntary market exchange as an organizing logic for society have a very hard time accepting other voluntary logics that don't work quite as smoothly as market exchange. That seems like a shame to me.

We shouldn't jump straight to government. Let's keep it in the private sector - you see this even with skepticism about charities sometimes. Sometimes people who (rightly) appreciate market exchange will make the critique that although charity is voluntary and private, the fact that the needs of the recipient aren't explicitly taken into account hurt the case for charity. This will often lead people to consider aid to Africa hopeless, or scold you for giving a homeless person food instead of just giving them money (which is more comfortable for someone that's thoroughly ingrained Kaldor-Hicks into their ethical sensibilities). One can go further than that: see Bryan Caplan on the deserving poor, Ayn Rand on altruism, and Malthus on charity.

When you get into government it's often no longer just a cataloguing of the differences between market order and government, it can be an outright denial that "government" and "voluntary" should even be used in the same sentence. And that's really what I have a problem with. I'm not one that promotes socializing everything. I know the limits of political allocation and the problems with majoritarianism. That's not in dispute. My concern comes in when people using government to solve their problems and constitutional democracy aren't even considered voluntary versions of an admittedly problematic organizing logic.

In the market, we choose voluntarily as individuals. In a democracy we choose voluntarily as a community. There are costs and benefits to each. The communitarian nature of democracy prevents democracy from being good at supplying private needs. The individual nature of the market prevents the market from being good at supplying collective needs. This seems to offer a liberal solution that - in practice - will always be a contested one, but which nevertheless is characterized by a relatively straightforward division of labor between the public and the private sphere. The fact that the contours of this division of labor will be contested can be ameliorated by democracy itself, federalism, constitutionally limited government, and free movement and speech. This is the classical liberal position and the position of the American founders.

Unfortunately there are a lot of people today who couldn't write that about government but who nevertheless claim the classical liberal mantle.


  1. I like this post, as a classical liberal, I also have been stressing this exact point. For example, Carl Menger, a classical liberal and founder of the Austrian school, supported an active role for government, while also acknowledging its limits. He supported progressive income tax, regulations to prevent deforestation, regulations improving worker conditions, and government monopoly of coinage. See my posts:

  2. Right, you're an egalitarian socialist (aka a social democrat). Big surprise, what's new? I find it funny that you state that you're not a classical socialist (you don't want to socialize everything), but then you essentially show your egalitarian socialist colors. You're playing the whole "equal distribution" game, it is so fucking obvious.

    1. Equal distribution? That would be a travesty. I'm a liberal in the classical sense, a moderate in the modern American sense.

    2. By what measure do you determine that government-supplied goods are more preferable than market-supplied goods?

    3. Joesph, does Menger advocating progressive income tax, worker condition regulation, regulation against deforestation(even on private property), government monopoly coinage and a tobacco tax make him a socialist?

    4. I'm not super well-read on Menger, I've read 'Principles of Economics', 'On the Origins of Money', and a few other short works, but I don't remember seeing anything like that. Can you cite chapter and verse for your claims so that I may investigate them more thoroughly, I obviously can't simply take your word for it. To be honest, as an economist I don't know why Menger would have been advocating policy at all.

    5. Also, I will say that such policies are certainly socialist. So, if Menger did indeed make such statements, then he certainly was recommending socialist policies in such an instance. However, that would be a separate issue from Menger's work on theory and methodology.

    6. Menger has several articles that deal with the importance of the state's influence on money.

      For a good book on Menger and money see, Carl Menger and the Evolution of Payments Systems: From Barter to Electronic Money (edited by Michael Latzer and Stefan W. Schmitz).

      You can read these articles to start;

      “Geld”, in: Handwörterbuch der Staatswissenschaften, Vol. 3, 1892.
      “Geld”, in: Handwörterbuch der Staatswissenschaften, Vol. 4, 2nd edition. 1900.
      “Geld”, in: Handwörterbuch der Staatswissenschaften, Vol. 4, 3rd edition, 1909.

    7. You could start with Menger's Lectures to Crown Prince Rudolf of Austria p.120-130.

    8. SM,
      I actually was fully aware of where Isaac was drawing his info from, and I know who's blog has recently mentioned it (in fact, it's the same blog where you're getting your sources from, though you probably haven't read them yourself). I was hoping Isaac could answer so that I could see how he was going to present his case (whether he was going to play it off as a direct quotation).

      In any case, the source in question is the notes of Crown Prince Rudolf from when Menger was one of his tutors. This is pretty shoddy, because we don't know if these are the words of Menger, or of Rudolf, nor do we know that these aren't the words of another of Rudolf's tutors. In fact, the entire collection is from a classical perspective, and is in fact very Smithian. Further, there is no mention of Menger's subjectivity, monetary theory, or any of his methodological work at all. That seems a bit strange, doesn't it? Menger could very well have been instructed to teach Rudolf from a particular perspective. Or, none of those words could be Menger's. It could be Rudolf's ode to Smith.

      The fact is, we don't know. Nobody does. All we know is that they are the notes of Crown Prince Rudolf, which doesn't bode well for LK's case.

    9. My response is in the link down below, but in short, the lectures were revised and corrected by Menger himself, before the lectures were published.

    10. My full response is down below but on short, these lectures were revised and corrected by Menger himself before they were published

    11. Are you seriously disputing the legitimacy of Menger's lectures? It is known that when the Prince's notes deviated from Menger's lecture Menger would correct him.

      Also, why are you assuming Menger wasn't influenced by Smith? Only a silly Rothbardian pseudo-critique of Smith could lead one to conclude that Smith's economics were not extremely important.

      How are regulatory policies of private companies socialist?

    12. I didn't assume that Menger wasn't influenced by Smith, I was pointing out that the lectures were almost entirely classical and Smithian in nature, and that they didn't have mention of any of Menger's work. I don't know, I would think that Menger would have mentioned some of his theories, don't you?

      "How are regulatory policies of private companies socialist?"

      I'm afraid I don't know what you're asking here. By definition private "anything" cannot be socialist. If you're asking how government regulation on companies can be socialist, that wasn't my contention (that would be interventionist, not necessarily socialist).

    13. Somebody here doesn't know what socialism means, and I think his name starts with a 'J'.

  3. "In a democracy we choose voluntarily as a community."

    Doesn't this assume that the democracy was formed voluntarily?

  4. This comment has been removed by the author.

  5. Joseph,

    In short, your criticisms of the lectures is flawed, given that Menger himself revised and corrected the lectures before it was published.

    Here is my full response

  6. Someone just called Daniel a socialist, without visible irony.

    This should be brought up every few months or so, when it has time to fade from memory; that'll refresh its novelty and keep it funny.

    1. Of the two or so years that I've been reading Daniel's blog and comments in the blogosphere, I've been convinced that he is a social democrat rather than a liberal at least 2/3 of the time (I think that he may have even described himself as a social democrat at one time). Also, almost all of his arguments for government-provided goods rest on the basis of egalitarianism in some form or another.

    2. As an indicator of socialism, egalitarianism is necessary but not sufficient. "Social democrat" might fit, though I'd wager he's pretty moderate as those go. "Socialist" requires a particular attitude towards private property that I've simply never seen him espouse. (Though I am open to being proven wrong.)

  7. Joseph Fetz@September 2, 2012 12:09 AM:

    "In any case, the source in question is the notes of Crown Prince Rudolf from when Menger was one of his tutors. This is pretty shoddy, because we don't know if these are the words of Menger, or of Rudolf, nor do we know that these aren't the words of another of Rudolf's tutors."


    The notes were, without doubt, revised and corrected by Menger himself, and approved by him, and that is quite plainly stated on p. 12 of the English edition and translation:

    "the notebooks were then handed to Menger for correction ..." (p. 12).

    "Apart from occasional naive remarks and a certain effusiveness, we can thus be sure that on the whole the Notebooks reproduce faithfully what Menger said ... " (p. 12).

    "Rudolf's text was corrected by Menger .... Parts of Notebooks I and II are altogether in Menger's handwriting (in ink) ... " (p. x).

    Carl Menger, Carl Menger's Lectures to Crown Prince Rudolf of Austria (ed. Erich W. Streissler, Monika Streissler).

    So not only do you have exactly zero evidence for your assertions, but also the plain evidence that does exist utterly refutes you.

    That word "shoddy" would seem to apply more to your comment above, so it would seem, than to anyone else here, either me or Isaac.

    1. Ok, so why are they so different from anything Menger ever talked about in his own work? Why are none of Menger's theories mentioned? As I said, he could very well have been instructed to tutor Rudolf from a particular perspective, which is pretty common in tutoring. There is still much that you don't know, but are assuming.

    2. It is true that Menger’s own work on value, exchange and price is absent, and he may have based his lectures on Adam Smith.

      Why was this so?:

      “Menger thought that rather than sophisticated economic theory, Rudolf really needed to know what kind of policy the state should adopt, how to manage its finances, what taxes to levy, how to reward public servants and how not to make citizen’s lives more miserable than they already might be. At any rate, this is exactly what Menger taught the prince: principles of public economics for a future public administrator.”
      Karen Vaughn, "Review of Carl Menger’s Lectures to Crown Prince Rudolf of Austria (edited by Erich W. Streissler and Monika Streissler." Journal of the History of Economic Thought 18.1 (1996): 168-170, at 170.

      So this was clearly what Menger did think was the proper role of the state in public policy: if it was not, he was (1) a liar or (2) would have said something else.

    3. Does Menger ever state he believes this himself? A third party statement of what Menger believed isn't proof of what Menger believed.

    4. They were his lectures which he revised and corrected Rudolf's notes.

    5. But LK is posting a quote of someone saying Menger believed this based on those notes. If those notes so clearly say that Menger himself believes them, why doesn't LK post those?

  8. Daniel,

    In the past I have criticized you for failing to recognize that "democracy" is a political and interpretive concept that includes within certain normative ideals. In order to engage in clear and productive philosophical discussion and debate, one must set forth a morally-meaningful conception of legitimate democratic governance. I believe that your failure to recognize this point and your affirmation of "democracy" as a simple decision device that can be pointed to by any governments we commonly label as "democratic" undermines this post of yours.

    1. I imagine there can be legitimate and illegitimate democracy. In other words there's no presumption from me it's always legitimate or moral for that matter. You should take more care in diagnosing peoples' "failure to recognize" things. We've gone over this before. I know your critique.

  9. Suppose within a family of four, father sets down the following voting scheme for important decisions: the father’s vote counts for four, the mother’s for two, and the two children combine to count for one vote. Whenever an important issue arises (the importance of which is determined by the father, who decides when an issue will be presented to the family for deliberation and vote), they all present their case for deciding one way or the other. At the end of deliberation (the father decides when deliberation terminates), they all vote. Whichever option receiving the most votes is selected. Note that the mother and children can leave "the household" by divorce or emancipation. Is this family ruled by “democratic” governance? Why or why not? What considerations were important in thinking about this issue?

    1. Hume make a point or ask a direct question. Otherwise post this on your blog.

      It's a comment thread, not a post thread.

      You and I have fundamentally different interests, and the fact that I don't delve as deeply into one particular side question as you do doesn't mean I've "failed to recognize" something - it means we're asking different questions. I restrained myself above from saying that putting the question that way comes across as arrogant, but its inching towards that.

  10. Daniel, “make a point or ask a direct question.”

    I did. I’m trying to understand your conception of legitimate democratic governance, what it is that makes you feel comfortable to say “In a democracy we choose voluntarily as a community... Unfortunately there are a lot of people today who couldn't write that about government but who nevertheless claim the classical liberal mantle.”

    It seems that your idea of democratic governance allows us to say we choose policies “voluntarily” and “as a community”. My hypo was meant to bring out all the different dimensions that highlight different aspects of democratic governance, and how your conception of democracy is likely different from modern “classical liberals” and the differences make it such that we are likely to talk past each other. For example, note the following different dimensions:

    (1) The question of community: why is democratic decision-making restricted or extended to this group, the nuclear family, rather than a wider scope of the extended family, or perhaps a narrower scope of those who voluntarily subject themselves to the decision-making process. Modern classical liberals tend to take this question as fundamental. Many others simply take the political group as given (even if morally arbitrary and the result of immoral historical contingencies).

    (2) The question of political equality at the agenda-setting stage. Why does the father have this power?

    (3) The question of political equality in the deliberative stage. Why doesn’t each individual, including the children, have an equal opportunity to express their ideas?

    (4) The question of political equality at the decision-making stage. Why does the father have so many votes? Why does the mother have less than the father but more than the children?

    (5) The question of proportional representation. Closely related to (4). Why do the children have to elect a single view to express their beliefs. Why not allow both into the deliberative arena?

    There are many different domains that require interpretation, and these interpretations are to be guided by some underlying conception of the “democratic ideal” (which is generally the ideal of “we the people govern ourselves”). If someone believes that democratic governance requires a certain answer along a certain domain, and the current institutional setups fail to instantiate these requirements, they are likely to object to “democratic governance” as it is *currently* in practice. This is because their conception of legitimate democracy requires something else.

  11. Daniel, you write:

    “You and I have fundamentally different interests…”

    I guess I’m not exactly sure what your interests are. But because I find your views interesting and often enlightening, I am trying to figure out exactly what you are trying to get and what your conception of democracy is. But I do think we have convergent interests when it comes to one question: the place of democratic governance within a political philosophy. You repeatedly criticize others, most notably classical liberals and libertarians, for failure to appreciate “our democratic decision-making”, how “our decisions” manifest an important choice of certain welfare state institutions (this is usually in the context of criticizing supposed Hayekians for their emphasis on “spontaneous order”, etc.), and how their view points are importantly flawed for this reason. I am also interested in these questions, but I think you are unfair to others in the sense that you do not adequately set forth what it is you think makes governance importantly “democratic” and I fear that you do not adequately appreciate that others may be operating with a conflicting conception of democracy.

    I apologize for badgering you with this. I wouldn’t waste my time and yours if I didn’t appreciate your views and think this sort of conceptual clarification is extremely important for helpful public dialogue. I think you agree with me on some level, as I think I recall you making exactly the same point regarding different conceptions of “freedom” and “liberty”, and how different viewpoints are not necessarily “anti-freedom” just because they do not share the libertarian ideal of negative liberty.

    1. If you could phrase this another way I'd be happy to try to answer:

      "you do not adequately set forth what it is you think makes governance importantly “democratic”"

      it's not clear what you're getting at.

      And I understand they view democracy differently. That's part of the problem. They see democracy as ceding choice to others in decisions that are not theirs to make. The market is treated differently because (it is alleged) in markets choice is made by those who have business making the choice. As an approximation of course I agree with that, that's the virtue of the market.

      But there are many choices that it's not legitimate for just one person to make - everyone has a stake in the decision. We can improve our lot by making these decisions collectively, but of course the same rules apply: give the decision to those who have a stake in it. As a general rule, that means give everyone a say: democracy.

      Part of the problem, I think, is that you're looking at this as a philosopher and I'm not. You're concerned with questions of "legitimacy" that I'm not even sure have actual answers and may only be worth thinking about insofar as articulating the position might convince more people to adopt democracy.

  12. Daniel,

    I would say that legitimacy is extremely important, but of course we can differ on this. Nevertheless, let me clarify what I mean. By “legitimacy”, political philosophers typically have in mind the “right to rule” which is accompanied by the correlative obligation to obey. A legitimate political community and its corresponding legitimate government possesses this moral quality (the right to rule): it possesses the moral right to issue edicts and make demands, and those subject to such dictates are morally obligated to obey.

    What does it mean to claim one has an obligation to obey the dictates of one’s political society? What does it mean to say that citizens are under a duty to obey the law? In many cases, it is obvious on its face that we have a moral duty to do what the law requires. For example, the criminal law characteristically forbids murder and rape, assault and fraud. It is clear that in these circumstances, we have a moral duty to do what the law requires. But to analyze the issue of political obligation in this light is to misconstrue the project. In these circumstances, there is clearly an external or independent moral obligation not to, e.g., rape and murder, and this moral obligation does not depend on the existence and content of the law in question (i.e., a law’s definition of the act of rape and murder). In other words, I have a moral obligation not to murder my neighbor regardless of whether a law exists proscribing such conduct. In some sense, then, we are morally obligated to comply with these laws. The question of political obligation, however, is the question of a duty to obey, and the concept of obedience is fundamentally different from that of mere compliance.

    Obedience is intimately connected to the source of a command or a rule, as opposed to its content. Thus, to “obey” entails adding a content-independent element to the mix. In the case of law, therefore, to say that one has a moral obligation to obey implies that one has a moral duty to act as the law requires because the law requires it. The obligation to obey implies that there is moral weight in the mere fact of legality. It is “because it is the law” that generates moral force, not the content of the act prescribed or forbidden. More generally, to claim the existence of political obligation is to claim that there is a moral duty to comply with the dictates of the political process because it is the outcome of the political process.

  13. Without trying to be arrogant (I know this usually foreshadows arrogance or offending someone, but I’m being genuine here), note that I think you may presuppose a certain ideal of legitimacy and legitimate democratic governance when you write "give the decision to those who have a stake in it. As a general rule, that means give everyone a say: democracy." Within democratic theory vis-a-vis theories of political legitimacy, this type of answer relates to the question I wrote in #1 regarding the appropriate political community, an issue sometimes referred to as democracy's "boundary problem". Your answer (“give the decision to those who have a stake in it”) is commonly known as the "all-affected" principle. There are many problems with this principle and I believe these problems are fatal, but I will not provide a detailed account of what I think those problems are. My point is rather that I think you implicitly hold a certain view of democratic legitimacy.

    In case you are interested, here are two quick problems with the all-affected principle. One problem is that in an interconnected world, *everyone* is affected by most political decisions, thus requiring global democracy. Cosmopolitans may favor this consequence, but it greatly undermines the plausibility of asserting collective *self-governance*. A second problem is that the all-affected principle gives appears to provide law-making institutions unacceptable unilateral power to determine the fundamental questions of political domain. As noted by A. John Simmons, “We cannot legitimate imposing our laws on, say, Canadians or Mexicans simply by treating those persons equally in our lawmaking process (by giving them an equal vote, etc.). ... [The problem of particularity for democratic theory] is the moral problem of grounding the authority of some particular state’s democratic processes over any particular person.”


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