Is the Market More Competent than Democracy?on 29 May 2018
By Jonathan Benson
There has been an increasing interest in the question of whether democracy is competent.
Research on levels of voter knowledge has led many in the tradition of Plato and Joseph Schumpeter to be sceptical about whether citizens can really make wise decisions. A scepticism which has been further heightened by the poor political discourse surrounding the election campaigns of Donald Trump and the United Kingdom’s referendum on European Union. Many democratic theorists, however, in an alternative tradition of John Dewy and Aristotle’s ‘wisdom of the multitude’, have attempted to ease these worries by pointing to the special problem-solving abilities of democracy. Some even argue that we can expect much better results from democracy than it’ more elite and less inclusive alternatives.
There is, however, another tradition which has often questioned the competence of democracy. This is the pro-market tradition of Friedrich Hayek. For Hayek, the problem of how to provide goods in a complex society requires accessing and using not just the scientific knowledge of experts, but also the local knowledge of individuals. Most knowledge, he claimed, was knowledge of local condition which is only known to particular on-the-spot individuals spread throughout society. This knowledge is dispersed and cannot, therefore, be easily communicated to a central authority – such as a democratic parliament or assembly – so it can make competent decisions. The market however, argued Hayek, could solve this problem. It allows individuals to act on their own local knowledge and be coordinated ‘spontaneously’ by changes in market prices. As a result, goods will be better provided by a decentralised market than any democratic forum.
In a new article in Political Studies, I take up this market challenge to democracy. Engaging with contemporary writers in Hayek’s tradition, I argue that there is a broad range of important goods which are more competently provide by democracy than the market. I call these goods ‘low feedback goods’. The important thing about low feedback goods is that they are somewhat disconnected (i.e. in terms of time and space) from the individuals who value them. The result of this disconnection is that individuals do not know what effect their individual actions have on these goods.
Consider, for instance, ethical or moral goods. These include things such as fair labour and trade practices, human rights, resource distributions and many environmental goods. Unlike something such as tasty food, where there is a direct connection between individuals and the good, these ethical goods are often greatly separated from those who value them. When you try out different food products, you will receive direct feedback about how they taste and whether they match your preferences. You may be completely unaware, however, of how these goods affect ethical goods you value, such as labour standards or the environment. You will often have no connection to the people who produce the goods you buy or the environments affected by their production. You will not, therefore, receive feedback about the effects of your actions on such goods. Other goods, not valued for ethical reasons, may also fail to provide feedback. Consider all the ways a product can affect your personal health without your knowledge. When you are disconnected from a good, there will no feedback telling you about the effects of your market decisions.
The problem is that without such feedback, individuals will require large amounts of additional information which they cannot be expected to have. If, for example, I value the Amazon rainforest I will require knowledge about the production and consumption of all the products I may buy, and their effect on this good. Do they, for instance, use resources linked to deforestation or produce waste which is damaging to biodiversity? Alternatively, if I value labour standards, I will require knowledge of the labour practices involved in the production of each product I buy and all the resources used to make them. In markets, decisions are made by individuals. Low feedback goods, however, present individuals with a large burden for knowledge which they cannot be expected to have. As a result, markets cannot be expected to provide low feedback goods.
The next question is; can democracy do any better? I argue that it can. I argue that democracy is much better placed than markets to access the knowledge required to provide low feedback goods. To do this, however, democracy must be able to overcome Hayek’s original problem; that knowledge is often dispersed through society and is not necessarily available to a democratic forum.
To solve this problem, I draw on recent system approaches to democracy. In Hayek’s view, democratic forums appear as isolated islands fully disconnected from the dispersed knowledge surrounding them. In a framework of a democratic system, however, such formal democratic institutions are linked to a wider system which includes many institutions within public space. Institutions such as scientific bodies, social movements, think tanks and campaign groups. In the article, I put forward an epistemic account of a democratic system, where these institutions have an important role in providing knowledge for democratic decisions (fig 1). Institutions in public space gather and aggregate different forms of knowledge which they then attempt to communicate to formal democratic institutions so it can influence decisions. The Intergovernmental Panel on Climate Change, for instance, gathers large amounts of scientific knowledge which is then used by decision-makers in democratic institutions. Similarly, campaign groups and social movements gather local knowledge about how social problems affect individuals and attempt to communicate this information so it can influence democratic decisions.
A systems view of democracy can, therefore, help us to see how democracy can utilise knowledge which is spread throughout society. Institutions in public space connect democratic decisions to knowledge which is otherwise dispersed and shows how democracy can access the knowledge required to deal with low feedback goods. Through a system approach then, we can see how democracy may be much more competent than its markets critiques such as Hayek have argued.
Jonathan Benson is a PhD candidate in Politics at the University of Manchester and is a member of the Manchester Centre for Political Theory. His research interests include political and democratic theory, environmental politics and political economy.