Tuesday, May 24, 2016

The Economic Problem With Technocratic Rule

Perhaps we shouldn't be surprised - what with today's political "silly seasons" - when some authors suggest democracy is outdated, hence it's time for a change. Arnold Kling in a recent post highlighted a new book,"Against Democracy" by Jason Brennan. From the review:
Brennan argues that democracy should be judged by its results - and the results are not good enough...democracy is the rule of the ignorant and the irrational, and it often falls short. Furthermore, no one has a fundamental right to any share of political power, and exercising political power does most of us little good. On the contrary, a wide range of social science research shows that political participation and democratic deliberation actually tend to make people worse - more irrational, biased and mean. Given this grim picture, Brennan argues that a new system of government - epistocracy, the rule of the knowledegable - may be better than democracy, and that it's time to experiment and find out.
Some of Kling's commenters were glad that Jason Brennan had written a new book, nevertheless weren't happy with the gist of his argument. One noted, "I was initially excited...However as soon as I learned he would like to see democracy replaced with rule by arrogant technocrats, I despaired."  From another response, "Indeed, although the cynic might argue that this is already the situation we have. If so, the question remains whether it would be for the best if this truth was formally acknowledged."

"Democracy is outdated" arguments have multiple dimensions, and the best way for me to respond is that a world without democracy is also a world where many would gradually lose their economic freedom. Without sufficient rights to create product for the marketplace, social and political freedom would suffer as well. Alas, the task of "proving" democracy's worthiness is beyond my time and ability. However, I'm concerned that a technocracy such as Brennan prefers, would not lead to a good economic outcome, especially in a mature economic equilibrium that needs to further evolve.

Presently, some among the elite - regardless of ideological motivation - are united in their desire to maintain production rights as they currently exist. This motivation has resulted in marketplace limits which are not only difficult to overcome, but would likely worsen if not addressed, soon. Even though knowledge use limits aren't necessarily problematic for the resource management of tradable sectors, they are, for non tradable sector formation. Why the difference?

Tradable sectors greatly contributed to marketplace expansion, because of earlier gains in scale. Product that is mobile in nature can always be replicated, even though less employment may be needed to make it happen. Whereas less employment in non tradable sector formation, only leads to less knowledge/time based product in aggregate. Less participation in non tradable sector employment, means less marketplace capacity in terms of both supply and demand. If a lack of time based services employment were not problematic enough, these lower employment levels are reflected in insufficient housing formation. This helps to explain why technocratic preferences for knowledge use limits, means limits in total marketplace capacity and output.

In short, just because a knowledge wielding elite may be smarter than the average voter, does not mean they would be naturally inclined to deliver the economic results that nations need. Indeed, if more citizens were given the chance to use the knowledge which has become so important in their daily lives, perhaps they would not appear so "stupid"! One can only hope that arguments to limit personal freedoms, will not win the day.

Instead of taking away citizen responsibility, it's better to let citizens know what is really at stake, and doing so is all the more important now for governmental budgets, pensions and retirement expectations. Today's governments need the help of all their citizens for long term growth, if they are to overcome the natural inclinations of special interests to divide the spoils of economic stagnation.

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