Against Laissez-Faire Democracy

In a recent paper, Brennan and Freiman assert that the arguments against laissez-faire capitalism can be directly applied to laissez-faire democracy, a notion that may seem counterintuitive given the widespread rejection of laissez-faire capitalism but the widespread acceptance of laissez-faire democracy. The study highlights the numerous market failure issues that also plague democratic systems, such as externalities, asymmetric information, principal-agent problems, and behavioral concerns.

One key difference between markets and politics is that market decisions are typically internalized, whereas political decisions impact everyone, including those who did not vote, did not vote for the winning side, children, and future generations.

The authors argue that the problems associated with externalities, like pollution caused by automobile drivers or airline passengers, are similar to those faced by political decisions. Since individuals bear the benefits but externalize the costs, it is logical to regulate these decisions similarly to how pollution is regulated.

They propose various regulations applicable to democracy, such as government actions like direct voting on certain issues, leaving others to elected leaders or judges, and removing specific matters from political consideration. Additionally, they suggest regulating election timing and place, voter eligibility, eligibility to run for office, campaign funding, and campaign expenditures as forms of regulatory oversight to counteract laissez-faire democracy.

The paper explores potential regulations, including paying citizens to complete a voluntary civics exam, tracking and penalizing deceptive political campaign promises, implementing stricter advertising regulations for political ads, and requiring supermajorities for certain decisions. The authors caution that these regulations might be susceptible to capture by special interests or administered by biased officials, echoing the arguments of laissez-faire proponents.

Nonetheless, the authors argue that these potential drawbacks are the essence of laissez-faire itself.