Democracy Is Competition

How much should business be regulated? This is often framed as a choice between the good feelings of freedom, and the costs of unmanaged cut-throat competition. But consider: the democracy that most people want to use to manage business is itself a form of cut-throat competition. That is, candidates usually have wide freedoms as they compete to get elected.

Oh sure there are places like Iran or China where democratic competition is highly regulated, such as via restrictions on who can run for office and what can be said to whom. But such places are usually seen as shams – real democracy must have highly competitive elections.

Fans of democratic regulation of business thus need to explain why mostly unregulated business competition is bad, while mostly unregulated candidate competition is good. In both cases ignorant customers are often exploited, and there can be lots of waste and duplication of effort.

Libertarians, who want pretty free business competition but more limits on what regulations democratically-elected governments can choose, also need to explain why business competition is good but democratic competition is bad. It is autocrats and Adictators who are the most consistent here – they usually want strong regulation of both.

Added 12Jan: Campaign finance rules seem more to regulate business than candidates. The intuition is that unfair business competition makes some people unfairly rich, and we shouldn’t let that unfairness influence elections.

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  • mordy

    There are regulations that determine what kind of campaign you can run, how you can fundraise money, how you can spend that money, etc. There are also numerous popular regulations for campaign finance reform that are widely supported and seen as a way to support the essential characteristic of Democracy, not undermine it. I don’t think the assertion that regulations undermine Democracy is quite as self-evident as your post suggest.

    • http://entitledtoanopinion.wordpress.com TGGP

      That was a point I was surprised Robin didn’t acknowledge in his post. There’s also a degree of autonomy from democracy on the part of regulators (celebrated by certain folks) discussed here. Robin also previously discussed campaign finance laws as privileging media corporations over other corporations.

      • http://entitledtoanopinion.wordpress.com TGGP

        Although that reminds me that lefties have been disturbed by the political power of media in the case of Berlusconi.

    • http://overcomingbias.com RobinHanson

      See my added to the post.

  • John Salvatier

    I think Bryan Caplan has a clear answer on the libertarian side. Competition to be elected makes policy makers favor what voters want, but voters happen to want things which are often bad because they don’t have good incentives to have good opinions.

    • dEMOCRATIC_cENTRALIST

      Market idolotry is the (vain) hope that prohibitive information costs can be surmounted by incentives, where providing these incentives comes with a vast reduction in information available (because of the absence of a central plan and because of private hoarding of information).

      If all ithat ntelligent socialist majoritarianism is to self-discipline the citizens not to treat their opinions as beliefs ( http://tinyurl.com/4r9k5g3 ), then Bryan has practically conceded.

    • http://www.facebook.com/peterdjones63 Peter David Jones

       Libertarianism fixes that how? People voluntarily buy cigarettes and unhealthy food. It seems more like an argument for meritocracy. Or technocracy. Or vastly improved political education.

      • Margin

        “People voluntarily buy cigarettes and unhealthy food.”

        Because they want them.

        This is a choice people make for themselves.

        In contrast, policy choices are made by others, and then enforced through force.

      • Peterdjones

         In a democracy, policy choices are made by majorities of voters. You can’t say that the only good choices are individual choices because some choices affect everybody.

  • MikeRulle

    Short Answer. I believe the question is a non-sequitur.

    Long Answer. Why I believe so.
     
    First, voting is many degrees of separation from the outcomes produced by government. Thus political competition is more general and vague than business competition, thus producing a significantly higher noise to signal ratio than does economic competition  
     
    Just because we vote, does not mean we have “cut throat” political POLICY competition. We have cut throat election competition. New laws are very difficult to pass and even harder to over turn. You also couch the question in terms of “regulation” versus “free business competition”—as if that term were the yin to free enterprise’s yang. As if, ipso facto, there were some kind of two way cost benefit continuum between the two that is voted on in elections in the voting booth. This is of course not true.
     
    Your question assumes that somehow my vote, which is a binary yes/know for parties A and B, somehow results in observable, immediate, and responsive competitive change in policy outcomes. I must then state why competition in the latter produces better results than the former (being a Libertarian type as I am) while solving some erstwhile paradox.
     
    Presumably, this apparent paradox of “competition is good” producing divergent opinions when applied in different opposing spheres is important to resolve..
     
    The flaw in your question is in your presumed equivalence of the word competition and its framing in the two circunstances. Its application has different practical meanings when used in politics and business..
     
    Example. My friend has a factory with 10 employees. They produce complicated small machine tooled parts that go into aircraft and even rocket boosters. Their buyers are the regulators as to the product meeting spec at cost. The workers are high skilled. He spends 10-15 hours a month with regulators. He was fined because he had not yet given an organized class on the proper functioning and use of a fire extinguisher to his employees. This was viewed as part surreal comedy and part Stalinism by the employees.
     
    Two young people in their 20s were sent from the Government and were checking off items on a pre-planned set of rules.
     
    Question—do my friend and his employees get to “vote” on whether regulators should be allowed to do this? Of course not. They vote for a congressman, a senator, a state legislator and so on. This is like Hayek versus Keynes. Or micro versus macro; or the mystery of markets versus central planning. This is what exists today. We do not vote on these issues. The company, on the other hand, is competing with other companies and their customers vote daily with outcomes changed daily. If they produce a worse or more expensive product, they lose to their competitors. .
     
    What consitutes “failure” for the two regulators? Not filling out the sheets? What constitures “voting” for whether that “regulation” should be permitted? Does “voting” result in a remotely reasonable chance in having this stop in a relevent time frame for his business assuming his party gets in power? Can anyone evn know whether this regulation is beneficial?

    Government produces permanence, not competition. We vote for who controls the largely unchangeable (or very slowly changeable—-like decades). Businesses live year to year and day to day. The two “competitions” are not remotely similar in meaning as their contexts are so different.
     
     
     
     
     
     
     
     

    • Muga Sofer

      >He was fined because he had not yet given an organized class on the proper functioning and use of a fire extinguisher to his employees. This was viewed as part surreal comedy and part Stalinism by the employees.

      To be clear, they already knew how to use a fire extinguisher, yes?

      • Mike Rulle

        I thought that was implied—–but yes. But further, do we really need 2 govt employees checking this? Who has a greater interest in preventing the fire? The people who work there, or voters in remote states who want “more regulation”? Few people know the details of what constitutes regulation.

        In answering the question, I tried to explain why political competition and business competition are categorically different

  • Silent Cal

    This strikes me as a very good question, going both ways.

    The libertarian side is already represented, it seems. (MikeRulle says he rejects the question, but I’d argue he answered it.) To summarize, they argue the generally efficient incentives in business ensure good outcomes, making regulation unnecessary, but you can’t say the same about politics.

    One possible argument for the other side, regulating business and not politics, is that business regulations can be changed through politics, whereas a regulation on politics could only be changed through violence. The problem with this is that some possible political regulations are fully reversible through peaceful politics, for example, if Congress regulated state politics (with enabling amendments as necessary). Only one who did not reject such regulation could use the above argument. Though I’m not at all sure most liberals would reject a federal law to restrict state campaigns against abortion and same-sex marriage, so maybe upon consideration they’d take the autocrat position.

    I imagine business decisions are more near than political decisions; one who trusted far mode thinking more would view politics as more reliable. If we usually trust far mode more than near mode when we’re in far mode, that would explain why so many people favor business regulation in their politics (and probably not when the regulators show up at their office).

  • Romeo Stevens

    But not all of us think democratic competition is bad, we just want voting power to be meritocratic.  1 person 1 vote is an absurd vote distribution scheme.

    • http://www.facebook.com/peterdjones63 Peter David Jones

       And who gets the power to distribute or withhold votes, and why don’t they get corrupted by it?

      A fairly recent example of this was Northern ireland in the 20th century, where the wealthy (ie Protestants) got extra votes. Heaver on Earth it wasn’t. That raises a problem: if a discrminated group fail the meritcocracy test, however do they change their lot?

  • http://profiles.google.com/prakash.chandrashekar Prakash Chandrashekar

    Libertarians, at least some, are in favour of genuine political competition – Federalism, Subsidiarity and Seasteading.

  • Margin

    In a free market, I can choose who gets to affect me, and how.

    In a democracy, millions of total strangers can choose who gets to affect me, and how.

    • Norman

       ”In a free market, I can choose who gets to affect me, and how.”

      As long as externalities don’t exist, yes.

    • Muga Sofer

      >In a free market, I can choose who gets to affect me, and how.

      That’s an interesting definition of “free” you’re using.

    • http://www.facebook.com/profile.php?id=599840205 Christian Kleineidam

      No, if a company dumbs mercury or lead into the enviroment which reduces your IQ there’s little you can do about it in a purely free markets. 

      • http://www.facebook.com/people/Jonathan-G-Bastiat/589840315 Jonathan G. Bastiat

         If we are in a purely free market, such a firm is going to be overwhelm by lawsuits (because there’s no monopolies of the State on the river a free marketer) which make dumping mercury in the water very counter productive for the firm in the first place (opportunity cost of dumping the mercury in the river versus disposing of it properly).

        When you think in term of free market, you can’t project your current paradigm.

      • http://www.facebook.com/profile.php?id=599840205 Christian Kleineidam

        To have lawsuit about enviromental pollution you need laws. Those laws come from other humans. Either a parliament, the executive or a judge who makes case law. 

        As recently as last year the US Republican advocated that US fims should be able to poision more people with mercury than the EPA advocated. You have a real conflict about how much is too much. Solving those conflicts through lawfare isn’t efficient. 

  • dEMOCRATIC_cENTRALIST

    This is often framed as a choice between the good feelings of freedom, and the costs of unmanaged cut-throat competition.

    Strawman arguments are again appearing. Why not a single quote to substantiate the claim or, at least, to provide a clear idea of the referenced theme?

    What is “cut throat competition”? The price gouging of a monopolist or the subsistence income of competing small owners? Both are effects of “competition,” but they are each bemoaned for entirely different reasons.

    You could as logically ask why most libertarians, who  consider private monopoly to result from state action, consider these monopolies harmful, when monopoly is as “competitive” as small ownership.

    Some silly idealists, during the Cold War, used to hope that international tensions could be drained by athletic competition. There are many good rebuttals, but surely one of those wasn’t that both are forms of competition, so why favor one over the other.

    “Competition,” in this context, is an hypostasization.

  • Adam Ricketson

    Political competition in America is a joke. I’ll list some reasons below (sorry if I repeat some of MikeRulle’s points)

    We basically get to choose between two alternatives (if we’re lucky), not tens of alternatives. Electoral reform may help this (e.g. ranked voting, proportional representation, etc). Barriers to entry in politics are immense.

    More fundamentally, elections are heavily regulated in that a set of rules have been laid down for how the elections are conducted and what powers are given to the victors. This is not the sort of bottom-up, fluid structure that we associate with competition. In essence, elections are a “market” that was created by regulations (similar to copyright or emissions markets).

    There is no direct feedback between a person’s vote and their own welfare, therefore there is little incentive for informed choice.

    The connection between a vote and anyone’s welfare is extremely indirect and complicated, making it impossible for anyone to make an informed choice. Rather than making a simple decision like “I choose to give my money to a hospital” we are asked to develop a strategy for electing a good candidate (which is complicated enough), who we hope will develop a strategy for getting good legislation passed (if we can trust him and he doesn’t have to compromise too much with selfish interest groups), which will cause the state bureaucracy to act in a way that produces our desired outcome (in spite of laziness, corruption, and all the other unintended consequences that occur when the public responds to bureaucratic intervention).

    In summary, our political system is a heavily regulated system that is designed to give the illusion of choice to the general public even as all real decision making rests in the hands of a largely self-selected elite.

  • ThaomasH

    “This [business regulation] is often framed as a choice between the good feelings of freedom and the costs of unmanaged cut-throat competition.” 

    This seems like an odd way of fraiming the question.  Most regulation seeks a lower cost method of overecoming market failures and negative externalities than is possible through courts (and often fails for well-known reasons).  Indeed the costs of the lack of competition is one object of regulation.

  • Justin Hume

    I don’t think violence/coercion alone answers the question, but it’s a significant enough factor that I think any post not mentioning that factor feels a little useless.

  • http://www.facebook.com/profile.php?id=599840205 Christian Kleineidam

    How much should business be regulated? This is often framed as a choice between the good feelings of freedom, and the costs of unmanaged cut-throat competition.

    I don’t know many people who advocate regulation who frame the choice that way.

    Not all regulation reduces competition. If the government prevents a company from forming a monopoly they can increase competition. 
    If the government forces a coal factory to use filters that reduce enviromental polution, they aren’t really reducing competition either.
    The coal factory still competes with other coal factories just as they did before. 
    If the government regulation like cap and trade introduces new market incentives you could even say that it increases competition. 

    Oh sure there are places like Iran or China where democratic competition is highly regulated, such as via restrictions on who can run for office and what can be said to whom.

    In the West nobody advocates that there are restrictions for who can start a company and which business owner is allowed to say what. 
    China does those things for both businesses and political candidats. 

  • Psychohistorian

    Even libertarians think businesses should be regulated. They generally believe that strong property rights enforcement is necessary, and, in some cases, antitrust law. They believe that businesses should be subject to tort law and other product liabilities, and more generally subject to the jurisdiction of courts. The fact that we take these legal restrictions for granted does not change the fact that regulation is necessary. Without this regulation, you get a lot of very harmful competition, like businesses hiring private armies to sabotage each other or protect themselves. 

    Similarly, much regulation may be necessary for democracy to function efficiently. It’s easy to say unbridled competition is best for all, but only if you forget about the bridle we take for granted. This likely applies to election competition as well.

  • furslid

    The easy answer for the libertarian is that politics is a one size fits all solution, while the market is not.  Those whose needs are not met by the most successful competitors can still go elsewhere to get their needs met.  Those consumers who back less successful/popular competitors can still get what they want as long as they are in a minority large enough to make catering to their interests viable.  This is not the case in politics.

  • http://www.facebook.com/peterdjones63 Peter David Jones

    What’s “regulation”? Anti-trust? Honouring contacts? Givign accurate information? Regulation is such a baggy term that there is no meaningful comparison.