As Winston Churchill once said: "Democracy is the worst form of government, except all those other forms that have been tried from time to time." While still humorous in its construction, this statement is hardly controversial in this day and age, when most of the world is (at least in name) governed "by the people". But Bryan Caplan, an adjunct scholar at the Cato Institute and associate professor of economics at George Mason University, would like us to revisit our belief in democracy as the ideal form of government, if not in fundamentals, then certainly in scope. He has written a book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (excerpt here), which examines failures of democracy due to systematic voter error, and puts forth markets as a solution to the problem.
In democracies the main alternative to majority rule is not dictatorship, but markets. A better understanding of voter irrationality advises us to rely less on democracy and more on the market.
In a dictatorship, government policy is often appalling but rarely baffling. The building of the Berlin Wall sparked worldwide outcry, but few wondered, "what are the leaders of East Germany thinking?" That was obvious: they wanted to continue ruling over their subjects, who were inconsiderately fleeing en masse.No wonder democracy is such a popular political panacea. The history of dictatorships creates a strong impression that bad policies exist because the interests of rulers and ruled diverge. A simple solution is make the rulers and the ruled identical by giving "power to the people." If the people decide to delegate decisions to full-time politicians, so what? Those who pay the piper--or vote to pay the piper--call the tune.
This optimistic story is, however, often at odds with the facts. Democracies frequently adopt and maintain policies harmful for most people. Protectionism is a classic example. Economists across the political spectrum have pointed out its folly for centuries, but almost every democracy restricts imports...In theory, democracy is a bulwark against socially harmful policies, but in practice it gives them a safe harbor.
How to explain this paradox? In Caplan's view, the usual suggestions of non-representative representatives and/or voter ignorance are insuficient. He contends, rather, that voters are much worse than ignorant.
They are, in a word, irrational--and vote accordingly. Despite their lack of knowledge, voters are not humble agnostics; instead, they confidently embrace a long list of misconceptions.
Keeping in mind the caveat to keep this discussion in perspective (no one is claiming that democracy is tantamount to dictatorship in anti-social consequences), Caplan urges us to transcend the old familiar "democracy is better than communism," and examine the ways in which democracy falls short.
Miracle (or Myth) of Aggregation
Many students of political economy will be unimpressed at claims of voter ignorance. Since a single vote counts for so little in the eventual outcome of the election, a self-serving voter can opt not to inform himself at all--that is, he chooses rational ignorance. Empirically, this is often borne out in findings of extremely low political knowledge amongst the citizenry. This is not really a problem, as long as voters are not making systematic errors--that is, they err, but randomly. Witness the following simple example:
With 100 percent voter ignorance, matters are predictably grim. One candidate could be the Unabomber, plotting to shut down civilization. If voters choose randomly, the Unabomber wins half the time. True, the assumption of zero voter knowledge is overly pessimistic; informed voters are rare, but they do exist. But this seems small consolation. One hundred percent ignorance leads to disaster. Can 99 percent ignorance be significantly better?
Yes. Democracy with 99 percent ignorance looks a lot more like democracy with full information than democracy with total ignorance. Why? First imagine an electorate where 100 percent of all voters are will-informed. who wins the election? Trivially, whoever has the support of a majority of the well-informed. Next, switch to the case where only 1 percent of voters are well-informed. The other 99 percent are so thick that they vote at random...It is basic statistics that--in a large electorate--each candidate gets about half of the random votes. Both candidates can bank on roughly a 49.5 percent share. Yet that is not enough to win. For that, they must focus all their energies on the one well-informed person in a hundred. Who takes the prize? Whoever has the support of a majority of the well-informed.
This result has been aptly named the "miracle of aggregation." It reads like an alchemist's recipe: mix 99 parts folly with 1 part wisdom to get a compound as good as unadulterated wisdom. An almost completely ignorant electorate makes the same decision as a fully informed electorate--lead into gold indeed!
This "miracle" works sometimes, but not always. And it always depends on the individual members of the group in question making random errors, which in effect cancel each other out to arrive at something pretty close to the ideal. This case of non-systematic error is actually where the majority of political economic theories start off--by assuming that citizens are well-informed, at least on average (i.e. the 'representative voter' is well-informed). Caplan's contention is that this just ain't so, that "[voters make systematic errors on] questions of direct political relevance."
Economic policy is the primary activity of the modern state, making voter beliefs about economics among the most--if not the most--politically relevant beliefs. And if there is one thing that the public deeply misunderstands, it is economics.
Bias in Economics
Here Caplan digresses into a discussion of bias in economics--namely, whether economists themselves are biased, either because of who they are (usually rich white men) or because of how they think (right wing conservatism). He makes use of the Survey of Americans and Economists on the Economy (by the Washington Post, Kaiser Family Foundation and Harvard University Survey Project) to construct three groups: economists, the public, and the "enlightened public" (yes, he could have picked a less inflammatory name). The enlightened public is basically a statistical construction of how a person who is totally average in every respect (income, race, political beliefs, etc.) would respond if he (or she, since we're averaging here) had a PhD in economics. I won't mention most of the findings on specific beliefs, since all you really need to know is that the enlightened public sides with the economists on just about everything. All this is basically to show that economists are not biased, just expert in their field, and as such can be granted the usual level of deference on matters to do with the economy.
A more interesting point that comes out of this section is the finding that "education makes people think like economists". On many questions in the survey, education and economic training move together. "It is not merely members of one inbred discipline who diverge from mainstream opinion. So do educated Americans in general, with the degree of divergence rising with the level of education." This is true of many fields. Education makes people think more like "onomists" of all kinds. Admittedly, it's not exactly revelatory to say that universal education is a social good, but it seems it can't be said enough these days.
Systematic Voter Bias
Caplan analyzes four main types of systematic voter bias. Like a sinister version of Captain Planet, their powers combined can result in woefully bad economic policy.
Anti-Market Bias, a tendency to underestimate the economic benefits of the market system. The public has severe doubts about how much it can count on profit-seeking business to produce socially beneficial outcomes. It focuses on the motives of business, and neglects the discipline imposed by competition. While economists admit that profit-maximization plus market imperfections can yield bad results, non-economists tend to view successful greed as socially harmful per se...
There are too many variations on anti-market bias to list them all. Probably the most common is to equate market payments with transfers, ignoring their incentive properties... To take the classic case: People tend to see profits as a gift to the rich. So unless you perversely pity the rich more than the poor, limiting profits seems like common sense...
The second most prominent avatar of anti-market bias is monopoly theories of price. Economists obviously acknowledge that monopolies exist. But the public habitually makes "monopoly" a scapegoat for scarcity. The idea that supply and demand usually control prices is hard to accept. Even in industries with many firms, noneconomists treat prices as a function of their CEO's intentions and conspiracies. Economists understand, however, that...if an industry has more than a handful of firms, industrywide conspiracies are unlikely to succeed.
I dwelled on this bias a little longer than I will on the other three because I see an interesting parallel here between economics and biology. Is it possible that this reluctance to accept that markets, in which individuals seeking to maximize their own payoffs construct an elaborate economy which functions efficiently, comes from a similar place to the reluctance to accept that evolution, in which individuals seeking to maximize their own reproductive success end up contributing to the wondrous diversity and complexity of life? Of course, the difference between conscious economic activity and unconscious reproductive maximization can be drawn, but I think it's possible that people often have difficulty wrapping their heads around the idea that individuals with very simple rules can generate incredibly complex systems. What are your thoughts?
Anti-Foreign Bias, a tendency to underestimate the economic benefits of interaction with foreigners...As the 19th century mathematician and economist Simon Newcomb explained: "It has been assumed as an axiom which needs no proof, because none would be so hardy as to deny it, that foreign nations cannot honestly be in favor of any trade with us that is not to our disadvantage; that the very fact that they want to trade with us is a good reason for receiving their overtures with suspicion and obstructing their wishes by restrictive legislation."...
Why [do] people focus on money draining out of "the nation," but not "the region," "the city," "the village," or "the family"? In practice, human beings then and now commit the balance of trade fallacy only when other countries enter the picture. No one loses sleep about the trade balance between California and Nevada, or me and my grocer. The fallacy is not treating all purchases as a cost, but treating foreign purchases as a cost.
Distrust of foreigners, however unreasonable (dare I say irrational?) it may be, has the potential to prevent us from realizing all our potential gains from trade.
Make-Work Bias, a tendency to underestimate the economic benefits of conserving labor...Saving labor, producing more goods with fewer man-hours, is widely perceived not as progress, but as a danger.
To demonstrate the folly of this line of thinking, Caplan simply refers us to the transition from agricultural economies to industrial economies. For a time, many agricultural workers were unemployed as it became possible to produce more with fewer laborers. This freed up labor to provide new goods and services, and the industrial age kicked off.
Pessimistic Bias, a tendency to overestimate the severity of economic problems and underestimate the (recent) past, present, and future performance of the economy.
'Nuff said.
The Religion of Democracy
The last sections of Caplan's excerpt deal with the prevalent preference of accepting democratic decisions rather than market decisions. It is common today to dismiss economists who advocate market solutions to problems as "market fundamentalists"--intellectual lackeys who begin by assuming that markets are the answer to everything and seek only justification and support for that position. According to Caplan:
The disparity between economists' open-mindedness and the charge of market fundamentalism is so vast that it is hard not to speculate about the motives behind it. I sense a strong element of projection: accusing others of the cognitive misdeeds one commits oneself...[T]he most vocal opponents of "market fundamentalism" are themselves often believers in what can accurately be called "democratic fundamentalism." Its purest expression is the cliche, attributed to failed 1928 presidential candidate Al Smith, that "all the ills of democracy can be cured by more democracy." In other words, no matter what happens, the case for democracy remains untouched.
In the end, apologists for democracy often fall back on Winston Churchill's slogan that "democracy is the worst form of government, except all those other forms that have been tried from time to time." On the surface, this sounds like mature realism, not democratic fundamentalism. But Churchill's maxim is an all-or-nothing rhetorical trick...Just because dictatorship is disastrous, it hardly follows that democracy must have free reign. Like markets, democracies can be limited, regulated, or overruled. Contramajoritarian procedures like judicial review can operate alongside democratic ones. Supermajority rules allow minorities to thwart the will of the majority. Twisting a marginal tradeoff into a binary choice is fundamentalism trying to sound reasonable.
The long and short of it is that Caplan sees markets as a substitute for democracy where markets are better equipped to provide the socially optimal outcome. Private choice can be an alternative to democracy as well as dictatorship.
The optimal mix between markets and government depends not on the absolute virtues of markets, but on their virtues compared to those of government.
note:
I chose this piece to post for a couple of reasons. One, it's interesting food for thought about where you philosophically want to draw the line on which economic decisions you think should be yours and which should be up for a vote. But secondly, I chose it because one of the most common critiques of economics as a discipline centers on the assumptions of individual rationality. I thought it might be good to provide an example of a line of thought that relaxes that assumption. I look forward to reading your responses.
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Vernon Smith has published several papers showing that the individuals participating in a market do not need to be particularly rational for the market to operate well. In fact, even traders in markets that operated by computer programs can guarantee optimal allocation of resources. (I would read this post by Alex Tabarrok at Marginal Revolution.)
On the flip-side, James Buchanan -- not the 15th president -- has been arguing for decades that there are numerous examples of government failure because of the ways that democracies are organized.
The common theme is that is markets and governments both must be analyzed in terms of how their organization predispose them to irrationality. Smith argues that the effects of irrationality are limited in markets. Buchanan argues that the effects of irrationality are widespread, hence the necessity of anti-majoritarian policies.
(The other common theme is that Caplan, Tabarrok, Smith, and Buchanan are all faculty at George Mason. Perhaps they have all talked?)
Some of the things that I find worrying about democracy:
(1) A societal problem for which the solution is counter-intuitive. It seems that the learning curve for the whole population is very long.
(2) A societal problem for which the long term solution causes short term pain. The "no pain now, no gain later on" problem.
(3) Similar to (2) but where a given policy action is good for a few, but slightly negative for the rest, and the integral of good/bad is negative. Its too easy to focus on the up-close and personal story of those few who would gain, and ignore the small losses of the many.
(4) Biases that are not about policy. Voters voting for the candidate they'd prefer to have a beer with is a good example of this one. Or the fact that the taller candidate has a substantial advantage.
(5) The lumping of policies into partisan clumps. For instance in America why is concern for the environment left, and say desire for no gun control "right". We get to choose from a basket of left policies, or a basket of right policies, but rarely get to pick and choose. Because my shopping list had usually been roughly equally divided between the two on offer, I always had to compromise, determining which "goods" were more important to me. This wouldn't apply to direct democracy, but seems to be inherent in the party system.
It's not difficult to come to this conclusion from the perspective of standard economics. Voting in itself is irrational, since the expected utility of casting a vote in any particular election is very low (corresponding to your chance of influencing the election). Due to this, it would seem that the marginal utility of investment in researching a political decision for that vote is vastly outweighed by the corresponding marginal cost. Thus we should expect that people will, on average, avoid educating themselves on any particular political issue.
One thing that I can see that upsets this view is an instance where people, in the aggregate, seem to ignore the expected utility of an investment despite huge costs. Gambling is one example of this. Taking those into account, it would seem that irrationality would have to be tied more to innate cognitive propensities rather than economic cost/utility.
Of course, the difference between conscious economic activity and unconscious reproductive maximization can be drawn, but I think it's possible that people often have difficulty wrapping their heads around the idea that individuals with very simple rules can generate incredibly complex systems. What are your thoughts?
I think you're kidding yourself if you think that regardless of complexity, the overall appearance of the resultant economy is going to look any different than the Energy Pyramid. Considering how much of history has been build on a system where the "Photosynthesizer" bottom layer was populated by slaves, serfs, and peasants, I would strongly suggest you think twice about applying "pure" market analysis to economic systems unfettered by egalitarian checks to unfettered economic power.
Oh Jesus, that last sentence came out as word salad. I really need to use the preview button whenever I write after midnight. Let's try that again:
Considering how much of history has been built on a system where the "Photosynthesis" bottom layer was populated by slaves, serfs, and peasants, I wonder how one can avoid this through "pure" market principals without egalitarian checks on unfettered economic power.
Anti-Market bias? Yeah, sign me up for that one. It sounds like lobbyists and corruption are being completely ignored in the analysis. When the Market's inside-the-beltway goons take their hand out of government's pocket, well, maybe then this topic would be worth discussing. Until then, the Cato guys are just trying to shift the discussion away from that man behind the curtain...
I'm curious to read Caplan's book, and compare it to "The Wisdom of Crowds," but I have two major questions that I hope Caplan addresses. My first thought is, it's easy to criticize and hypothesize, but does he have any practical suggestions for how to improve our system of government? And my second observation is that it seems tricky to distinguish "irrational voter" from simply "uneducated voter." My own political ranting of late has focused largely on this obsession: wouldn't it be great if you had to pass a quiz on relevant issues to vote? It wouldn't be a difficult test! Question 1: Was Saddam Hussein responsible for 9/11? Question 2: If you died today, would your heirs be subject to the estate tax? And so on.
Cato's response would undoubtedly be that if you didn't allow government to have such power in the first place, you marginalize the impact of lobbyists to the point where it is not worth it for market participants to lobby the government. It is also fair to say that this problem is similarly prevalent among both Democrat and Republican politicians with the possible exception of someone like Ron Paul.
In other words, by allowing the government to regulate a market--health care, energy, whatever, you are inviting those with money and influence to try to game the system. If the government said "Sorry, we aren't allowed to regulate or interfere in that market", the only thing a lobbyist could do would be try to encourage the government to change its position on that one issue. As long as the government uses horribly stretched Constitutional arguments to allow it to enter and regulate any field it wants to (Interstate Commerce Clause?? Hello??), you're going to reap what you sow.
That's one of my biggest pet peeves with libertarian thought, it that it fails to recognize political power as being a separate entity from "government". Any collection of people will organize into a system for the regulation of political influence and control, and a business is no exception. Corporations, Militaries, Churches, committees; they all form their own methods to regulate and direct the expression of political power within that organization.
In the absence of government as the dominant method of regulating political power, the next most powerful structure will take it's place: The dominant church, the Military, the biggest corporation, the wealthiest individuals. By eliminating or restricting a government, you merely allow the next biggest organization to assume control over the regulation of political power; likely an oligarchy, where economic power is the dominant expression of political power.
This drives me crazy because so many so-called "Liberterian" organizations will willingly accept terms and conditions from corporations that they would NEVER accept in a million years from a state (I.e. recent news regarding corporations charging more for smokers and obese employees health care). And this is regardless of the fact that a business's political structure almost always resembles a feudal monarchy: with the CEO as king, the Board of Directors as house of Lords, and the individual workers as the peasantry (at least as far as the expression of political power in the industry goes).
The democratic system is at least based on an egalitarian impulse behind the democratic system: One person, one vote. This is counter to the market system, where one dollar means one vote, and any individual can have as many of those dollars as they can achieve by the rules they can buy.
The reason libertarians accept terms from the market is because of principles of the market . . . we have seen markets humble giants, and seen market dominance erode to paradigm shifts and hungry players. There is logic to the principles of economics that goes down to the core of human nature. Markets are based on the principle of voluntary engagement rather than coercive force. I find that whole first half of your post to be quite disingenuous in its assumptions and conclusions.
How smoothly does your comparison flow in comparing public entities such as corporations? Suddenly the "King" is responsible to someone . . . wait for it . . . wait for it . . . shareholders! It's true that shareholders vote proportional to their ownership, but to merely claim CEO as "King" is simplistic at best and in most respects completely invalid even as a general analogy. A CEO, unlike a government, is not entitled to use coercive force against his peasant population.
You talk about a democratic system as if that is what we have in the U.S. (assuming we are both U.S.). Our Constitution is so much more than a mere democracy because of the limitations the Founders placed on government power. The document of the Constitution is very libertarian, and to the extent you have a government based on libertarian principles there is very little conflict between such a government and the markets that operate within it.
Markets are based on the principle of voluntary engagement rather than coercive force.
Nonsense. Markets are based on BOTH voluntary engagement AND coercive force. A monopoly is a classic example of a coercive force, and arises in any situation without active interventionist forces. Eventually economic power in successful companies aggregate until they reach the point where competition has to be X big to compete.
How smoothly does your comparison flow in comparing public entities such as corporations? Suddenly the "King" is responsible to someone . . . wait for it . . . wait for it . . . shareholders!
How would that be any different than the guilds and barons who were in control of large areas of the kings taxable base? Naturally the king must listen to the people who control their income, but only to the extent that their resources are vital and impossible to manipulate. A shareholder with a minority vote has no say proportionate to a shareholder with greater economic leverage ("One Dollar, Oe Vote")
It's true that shareholders vote proportional to their ownership, but to merely claim CEO as "King" is simplistic at best and in most respects completely invalid even as a general analogy.
No, the misunderstanding comes from being unable to differentiate between "Monarch" and "Tyrant". The Magna Carta did not eliminate the monarchy, but it forced the king to be accountable to the rule of law and the House of Lords. Just because a king is
A CEO, unlike a government, is not entitled to use coercive force against his peasant population.
Mandatory drug testing, mandatory overtime, constant monitoring of employee use of office resources. Termination without notice for any cause. And that's WITH the intervention of government agencies and union agitation (peasant revolt, if you will). While a peasant might be able to leave the company, it depends solely on their economic situation. Work-linked health insurance, tight job markets, and low wages all continue to economic disincentives (i.e. coercion) to accept the terms given by the employers.
You talk about a democratic system as if that is what we have in the U.S. (assuming we are both U.S.).
Dual citizen: worked in the US for 4 years, back in Canada now.
Our Constitution is so much more than a mere democracy because of the limitations the Founders placed on government power. The document of the Constitution is very libertarian, and to the extent you have a government based on libertarian principles there is very little conflict between such a government and the markets that operate within it.
Oh come on. Virtually every modern democratic nation is a constitutional democracy these days. Even nations which still have kings and queens have constitutional systems in place that restrict their roles to figureheads, in favor of a democratically elected government based on a foundational rule of law. The American Constitution was a document far ahead of it's time and an inspiration for modern democratic nations across the world. But that time was over 200 years ago.
The American Constitution is in many ways antiquated, and was a compromise between liberal idealists who believed in the ability for people to self-rule, and conservative aristocrats who were afraid of mob rule. Modern america is now in many ways one of the least representative systems around, and has greatly reduced and restricted the role of the public in participating in the political system.
Gah, there I go again:
Just because a king is is theoretically accountable to another power doesn't change the otherwise significant power inherent to the position. As long as the majority owner is in charge, then they can pretty much run the business however they see fit.
I think if we have a core disagreement, it is the extent to which actual force, or the threat thereof, exists in a market environment compared to that exercisable by a government--which ties back to the original point regarding the private lobbying of government. (Hence I would take strong issue with your proclamation of "Nonsense.") I find it difficult to believe you can, with a straight face, argue that the incentives that prevent me from easily leaving my job (due to any of the factors you mentioned) and seeking alternative employment (or starting my own business where I presumably would not have to drug-test myself) are equivalent to the powers brought to bear by the EPA, OSHA, the IRS and certainly the Department of Homeland Security (which has in a Borg-like way has assimilated so many government agencies), among others. I would also like to point out that at least one of the major dis-incentives for me to leave me job, health coverage (as you pointed out), is largely the product of government regulation, not free market forces (due to the tax subsidy for employer-provided health care).
Credit where credit is due--you make a solid presentation.
I find it difficult to believe you can, with a straight face, argue that the incentives that prevent me from easily leaving my job (due to any of the factors you mentioned) and seeking alternative employment (or starting my own business where I presumably would not have to drug-test myself) are equivalent to the powers brought to bear by the EPA, OSHA, the IRS and certainly the Department of Homeland Security (which has in a Borg-like way has assimilated so many government agencies), among others.
I think you make a serious mistake in seeing our conditions of modern America as the natural state of free market policies, without researching the struggle of labour prior to unionization and the New Deal policies of government intervention in the free market. A good primer on the scale of coercion possible by an economic system is that of West Virginia mining towns where the entire economy was controlled by a single corporation: http://www.wvculture.org/history/minewars.html
And while I absolutely agree that the Department of Homeland Security is bad government, the consolidation of political power in a single government organization has similar parallels in the consolidation of economic power when corporations acquire other businesses (including potential competition). At least in theory, consolidation of government sectors doesn't necessarily mean lack of political oversight (Yeah, not in practice, I realize). In the corporate field, this sort of consolidation can (and often does) reduce choice and limit competition.
These are the fundamentals of where I come from:
1: Morality is a purely political construct; it only has meaning in social situations.
2: A pure market economy is amoral, and will act in ways we consider both moral and immoral in pursuit of profit unless restricted by an external political force.
3: Large groups of people will inherently organize in ways to regulate and direct political power, as well the associated powers accumulated by that group.
4: Without the "state", the next strongest organization will immediately take control, whether military, economic, intellectual or religious.
5: Thus, by elevating an unregulated market over the state, we are adopting the amorality of the market and the plutocratic political structures of the market into the dominant system of control.
It's my view that constitutional democracy and market economies complement each other, in that the market can provide a very efficient and organized system of complexity to distribute goods and services, while democracy can provide a moral framework in which the market to operate, as well as an egalitarian counterbalance to the dangers of economic power.
I guess I would contend two things: 1. Just because a market is an amoral framework, that does not require individuals, groups, the collective, or citizens acting through government constructs to adopt amorality. It is an essential libertarian principle that actors within the market have the freedom to act pursuant to their morals. If you contend that people are systemically incapable in an amoral framework of acting morally, I would say that does not speak highly of humankind and is not a viewpoint I share. I just want to make sure I understand your point. In fact, I would content that because (going back to my earlier post) government has much more actual force at its disposal than any corporation, that when the populace does act irrationally (and immorally, as it can from time to time), that such damage is mitigated within a market framework much moreso than when the citizenry has the full power of the government at its disposal.
2. What is required to provide "egalitarian counterbalance to the dangers of economic power"? I'll tell you in advance that, for example, I don't know that I consider Universal Health Care to be much of a "complimentary" system between market economy and constitutional democracy. I know that is a pretty politicized and charged issue, but if you are espousing principle that this issue has to fit within that framework.
I hope you don't mind the extended discussion. I much enjoy the open exploration of the framework I believe in.
I hope you don't mind the extended discussion. I much enjoy the open exploration of the framework I believe in.
Well, ditto. :)
Ok, back to the discussion then;
1. Just because a market is an amoral framework, that does not require individuals, groups, the collective, or citizens acting through government constructs to adopt amorality. It is an essential libertarian principle that actors within the market have the freedom to act pursuant to their morals.
Yes, and no. You are correct that individuals _can_ act morally in a market, and may even be rewarded for that morality through profit. But the problem lies with the fact that those with greater economic resources have greater say in their chosen morality.
Prime example is Pharmacists refusing to provide emergency contraception or the morning after pill. Many smaller communities in the United States have only one pharmacy, so if the pharmacist refuses, then their choice is limited by their ability to travel to a location where it's available. The poorest will have the morality of the pharmacist forced upon them. There are dozens of daily issues where our choices as consumers are limited by the choices of the businesses. If one opposes outsourcing, it's harder and harder to find any merchandise still made locally. Eating organic is detemined by your ability to afford said food, or even FIND said food on a reasonable budget. (In my case, it's $30 of gas to buy a bag of fair trade coffee)
Segregation is also supported by free trade economics. A white restraunt refusing to serve blacks might be harmed coomically, but as long as they have enough wealthy white customers, then their morals are maintained. If enough businesses in the region follow this practice, then wealthier communities can create nearly separate economies from impoverished communities. This sort of "trickle down" economics creates serious imbalance of wealth, and gives rise to permanent underclasses.
Because of this, the more profitable the moral framework, the more dominant that framework becomes, since those with wealth are able to impose their morals on those without wealth.
I'll have to get back to your second part about socialist institutions later on, I'm late for a party. :)
Equality always makes more financial sense as you scale up. Segregation and discrimination may have worked back in the 50's when everything was mom-and-pop, but equality is the proven financial model, and even the most wealthy individual investors can only support seriously discriminatory practices for certain durations. Maintaining discrimination on a scaled-up level eventually becomes public (where it is viewed negatively), and such discrimination in and of itself, especially in a digital age, increases the cost per transaction vs. models of equality. Discrimination may exist and persist in niche markets, but not scaled up.
Consider the morning after pill. Perhaps in an extremely small market where there is a single outlet, or just a couple, could moral discrimination exist like this. But a market, given freedom, would allow someone to order and dispense such contraceptives to people that needed them. Another key factor is the freedom to move to new areas. A populace willing to move somewhere is a powerful thing.
Government has done its part against discrimination, but keep in mind that government is also a tool of discrimination (see, e.g., homosexuality)--which goes back once again to being scary given the force government can bring to bear.
Just going to make my case on point two before adressing the new parts. :)
2. What is required to provide "egalitarian counterbalance to the dangers of economic power"? I'll tell you in advance that, for example, I don't know that I consider Universal Health Care to be much of a "complimentary" system between market economy and constitutional democracy. I know that is a pretty politicized and charged issue, but if you are espousing principle that this issue has to fit within that framework.
Fair enough.
In a purely market-based system, the major control on potential excesses by a company is competition. Without competition, participation is no longer "voluntary", but is coerced. The natural form of competition is the null option; the ability to say "no" and go without any version of the product or service. The other major point about competition is the barrier to entry; how much potential is there for competition to arise in the existing economic market? For these reasons, the amount of government involvement will vary depending on the amount of competition possible.
Another point to keep in mind are the terms for failure in a company are not necessarily measured in the quality of the product, but the ability for the company to sustain itself. While quality my be a determining factor in the ability of a company to turn a profit, it is merely one variable contributing to the financial success of the company; the business organization and marketing plans are every bit as important.
Finally, it's important to understand that socialist institutions are fundamentally different than corporate ones. For starters, the system exists to provide a service. If the system fails to provide the service, regardless of how much money is saves or spends, it's judged a failure. Second, as long as there is democratic involvement in that institution, there can be public control. This makes the form of government vital to the success of these institutions, since the less say the constituents have, the more room there is for the system to serve as an instrument of graft and corruption, as opposed to providing the services it was built for. I personally think it's vital to keep these socialist organizations independent from the legislature, and compartmentalized as much as possible to avoid bureaucratic creep, and reduce political orthodoxy from limited-party systems. That way resource management issues could be considered independently of the limited two-party system.
In practical terms:
Most consumer goods hit the null criteria, and the low cost of entry. Entertainment products for example, are usually cheap to make, have a huge range of competition, and can be avoided completely if one desires. Because of this, they need only minimal regulation to ensure that the companies compete within moral limits (I.e. labour standards, environmental standards, health and safety of the resulting product)
Some areas don't have a null option (i.e. food, transportation, clothing and housing), but the barrier for entry is so inexpensive that competition thrives. These too the market provides effectively, as long as there are stringent regulations protecting the consumers and labourers. This is an area where the government should provide a safety net, for those who are unable to afford the services, and to help offer a socialist "null option" for people.
When the individual choice of the null option would harm others, the collective government has an interest in ensuring universal access through a socialist institution. Sewage, sanitation, and fire are good examples of this; these work well with a socialist structure, so that both the individuals and the community as a whole benefit from their use. This also works well for areas where the service would benefit the population as a whole, but may not be otherwise profitable (transit infrastructure, recycling services and toxic waste processing). It should be noted that even when the government takes over these services, it may subcontract the actual service to corporate bidders.
Where the null option is not feasible for the individual and the cost of access to the service is high, then the high potential for abuse by a capitalist system would be more efficiently served by a socialist institution. Good examples of this are municipal water services, and I would even go so far as to argue Healthcare and Electrical services are in this category. As services become indispensable to the functioning of the society, the null options for those services become increasingly unfeasible. Eventually the public may decide that those interests are better served through socialist systems than corporate ones (much the way electrical generation on the west coast was socialized during The New Deal).
Now, as to healthcare specifically, I think there needs to be a socialist stake in the process, but I'm open as to whether that is at the insurance level, or the service level. Canada uses a socialist insurance model, with hospitals run by non-profit organizations or doctors running independent clinics. This system isn't as efficient as the British or French universal socialist systems where the doctors are government employees, but I don't know if that's an aspect of relative funding, inefficiency in the system, or a result of our massive size and low population density.
Discrimination may exist and persist in niche markets, but not scaled up.
I'm afraid I have to disagree on this one. I once worked on a training animation for a major brand conglomerate for employees. Recycling assets, we made the manager character african american. We were then told by the client to replace the character because, and I quote "We don't hire black managers".
Contractor wants the multi-million dollar contract to make this training video, so they ask the subcontractor to make the change. Subcontractor needs money to stay afloat, so the subcontractor agrees to make the change. So now it's down to the employee. The company has made it a priority to get it done, so what are my choices in the matter? I might get myself transferred off, but as long as the company has committed, they'll still find someone else to do it in house. Any choice I make at that point is going to hurt my relationship with a company I otherwise respect and enjoy, or land me back on the street in what was then a very VERY bad economy for unemployed animators. I can't even mention the company because of my NDA. Breaking that is like stamping "Don't hire me" in my references, not to mention the legal consequences.
And so it goes.
When one says the egalitarian market is "better" the question is "better for whom". An unregulated market tends towards the unequal distribution of wealth; those with the most money, and therefore the most influence are probably going to be more interested in maintaining that system to their benefit, rather than the optimization of the nation's GDP.
Consider the morning after pill. Perhaps in an extremely small market where there is a single outlet, or just a couple, could moral discrimination exist like this. But a market, given freedom, would allow someone to order and dispense such contraceptives to people that needed them.
http://ctbob.blogspot.com/2006/05/lieberman-vs-day-after-pill.html
http://majikthise.typepad.com/majikthise_/2006/10/feminist_blogge.html
http://www.alternet.org/rights/19584/
It's not all that isolated.
Another key factor is the freedom to move to new areas. A populace willing to move somewhere is a powerful thing.
Willing to move does not equal financially ABLE to move. See entries under "Hurricane Katrina".
Government has done its part against discrimination, but keep in mind that government is also a tool of discrimination (see, e.g., homosexuality)--which goes back once again to being scary given the force government can bring to bear.
But again, what happens without "government" in place? I still contend that if you eliminate or reduce the state, the next-most powerful organization will take it's place. The more hierarchal and structured the society is, the more likely it'll tend towards recist, sexist and classist divisions.
I have a question: it relates to the "probability discount" that Caplan applies to costs of bad policy. If one is even handed, you've got to apply it to benefits as well.. which leads to a rather interesting (but hypocritical) conclusion vis-a-vis free market policy... the background and full explanation is on my blog site: literalmayhem.com