Ultimately, I think that democracy is a very unreliable friend of economic freedom. The ability to vote with your feet is more valuable than the ability to cast a ballot. The trend in the U.S. is toward giving people less power to vote with their feet, as power becomes more centralized. If the median voter would like more decentralization, that is one message that is not getting through.
Here's the link.
In an outstanding explanation of the limits of democracy - it is a means, not an end - Mike Munger argues:
[W]e don't just demand too little of our democratic procedures, we are expecting too much of our democratic process. The educational system in the U.S. has failed students, because we don't know the limits of unlimited democratic choice. We teach that consensus as a value in itself, even though we know that true consensus appears only in dictatorships or narrowly defined decisions. As James Buchanan, Kenneth Arrow, and a host of public choice scholars have shown, groups cannot be thought to have preferences in the same way that individuals do. To put it another way, it is perfectly possible, and legitimate, for reasonable people to disagree. The role of democracy is not to banish disagreement, but rather to prevent political disagreements from devolving into armed conflict.
It seems to me that the fact you have to institute bi-partisan commissions to (at least attempt to) constrain politicians from wasting resources (to such an exorbitant degree that such commissions have to be instituted in the first place, rather than Congress doing its job) that it's obvious why it's essential to limit what democratically elected politicians and bureaucrats are permitted to achieve through the political process. As the size and scope of government expand, inefficiencies increase, and consequently you have to foreclose more exit opportunities for more and more people to keep the inefficiencies going. In other words, as Mancur Olson spelled out, the longer a stable democracy exists, the more likely it is to be captured by special interests seeking transfers from producers of wealth, which leads to economic stagnation. Keeping the transfers going, which is in the narrow interests of politicians, but against the broader interests of the people, requires monopolizing the decision making process to prevent the productive from fleeing to competing systems.
Keep in mind, we don't live in a democracy; we live in a constitutional federalist republic. The establishment of this form of governance was deliberate and intentional.
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