In the market:
the products that everyone buys are the products that will become cheaper.
the products the majority shuns are extremely hard to get.
So isn’t the market the absolute form of democracy? The decision about prices isn’t determined by you, but emerges out of the prefference of the majority.
Discuss.
One problem with this analogy, and as many a socialist will be quick to point out, the number of votes you get is proportional to your wealth. Therefore not really akin to “genuine” democracy which is one person, one vote.
I think that criticism is a bit misplaced. Granted, a millionaire will get preferential treatment when he walks into a Vegas casino because of his greater purchasing power, but the dollars in the working class schlep’s pocket are just as valuable as the millionaire’s as far as the market is concerned. Kroger is just as happy to sell a filet mignon to me as to my wealthier neighbors.
The socialists also ignore the salutary effects for consumers of competition between producers. Probably because they’re too busy listening to Chomsky podcasts on devices that would be out of reach for all but the wealthiest a decade ago.
If, by “Isn’t the Market just another form of Democracy” you mean, “Have we dealt with that whole scarcity thing yet?”, the answer would be no.
No, I didn’t mean that.
I meant that “the majority” decide if a product/service should be easy or difficult to obtain. Not by passing laws, but by going out shopping.
Which just reflects scarcity. No, the market has nothing to do with democracy, it just reflects the world we live in, one with scarcity.
Democracy is majoritarian rule. So if the question was “what do we eat tonight” and a majority chose beef, then the people who wanted chicken or fish would be S.O.L.
In the market, we ask “what do we eat tonight” and the people who want chicken or fish can have it, albeit at a slight premium because beef is the highest demand.
It’s the difference between beef or beef, chicken and fish.
The problem with your analogy is the assumption that only the majority get what they want. The market provides to everybody what they want. If even one person wants something, the market provides it, if the person can afford it and the market can provide it.
So no, it is nothing like a democracy.
Right, a free market leaves room for individual consumer choice while political democracy does not. It is not true that I must buy whatever the majority decides - I have the option to not buy it at all. Not so in political democracy. Furthermore, it is perfectly possible for me to obtain something that the majority dislikes in a free market, so long as there is a willing seller and I can meet their price. There is no such thing as free competition and consumer choice in political democracy, which breaks up the analogy quite a bit. But actually, I still agree with the premise that a free market is a form of democracy - it’s an economic form of participatory democracy. But that is an entirely different animal than political and representative democracy, and wether or not “democracy” should be used to describe it is kind of semantic.
It sounds like you have the law of supply and demand backwards.
Yes, the majority does (rightly) have a great deal of say. The difference is that the minority has the choice not to participate, unlike the State (which forces you to pay for its idiotic social reforms, welfare systems, and ill-conceived wars).
OK, here’s a reasonably thorough analysis of the question by Leoni (he does a fair amount of quoting Mises in this chapter if you read through the whole thing as well, so this question was certainly also addressed by Mises.:
I do not want to deny that there is something correct in this conclusion. But what I do want to point out is that by putting political and economic decisions on the same level and considering them comparable, we deliberately ignore the differences that exist between the law of supply and demand in the market and any procedural law whatever governing the process of confrontation among political preferences (and the subsequent emergence of the preferences to be accepted by the group in its decision), like, for example, the majority rule.
The law of supply and demand is only a description of the way in which a spontaneous adjustment takes place, given certain circumstances, between several preference scales. A procedural law is completely different, notwithstanding the fact that it is also called a “law” in all European languages, just as the Greek language (at least since the fourth century before Christ) used the same word, nomos, to mean both a natural law and a man-made law, like a statute. Of course, we could say that the law of supply and demand is also a “procedural” law, but once again we would be confusing, under the same words, two very different meanings.
The main difference between individual decisions in the market and individual contributions to the decisions of groups on the political scene is that in the market, at least by virtue of the divisibility of the goods or services available in it, the individual not only can foresee exactly what the outcome of his decision is (for instance, what kind and quantity of chickens he will buy with a certain amount of money), but he can also put in a definite relation every dollar he spends with the corresponding things he can acquire. Group decisions, on the contrary, are of the all-or-none variety: if you are on the losing side, you lose your vote. There is no other alternative, just as there would be none if you went to the market and could find neither goods nor services nor even parts of them that could be bought with the money you have at your disposal.
As a distinguished American economist, Professor James Buchanan, acutely pointed out in this connection, “alternatives of market choice normally conflict only in the sense that the law of diminishing returns is operating. . . . If an individual desires more of a particular commodity or service, the market normally requires only that he take less of another commodity or service.”4 By contrast, “alternatives of voting choice are more exclusive, that is, the selection of one precludes the selection of another.” Group choices, so far as the individuals belonging to the group are concerned, tend to be “mutually exclusive by the very nature of the alternative.” This is the result not only of the poverty of the schemes usually adopted and adoptable for the distribution of the voting strength, but also of the fact (as Buchanan points out) that many alternatives which we usually call “political” do not allow those “combinations” or “composite solutions” which render market choices so flexible in comparison with political choices. An important consequence, already illustrated by Mises, is that in the market the dollar vote is never overruled: “The individual is never placed in the position of being a member of a dissenting minority,”5 at least so far as the existing or potential alternatives of the market are concerned. To put the point the other way round, there is a possible coercion in voting which does not occur in the market. The voter chooses only between potential alternatives; he may lose his vote and be compelled to accept a result contrary to his expressed preference, whereas a similar sort of coercion is never present in market choice, at least on the assumption of production divisibility. The political scene, which we have at least provisionally conceived as the locus of voting processes, is comparable to a market in which the individual is required to spend the whole of his income on one commodity or the whole of his work and resources in producing one commodity or service.
In other words, the voter is limited by some coercive procedures in the utilization of his capacities for action. Of course, we can approve or disapprove of this coercion, and we can occasionally discriminate between different hypotheses in order to approve or disapprove of it. But the point is that the voting process implies a form of coercion and that political decisions are reached through a procedure that implies coercion. The voter who loses makes one choice initially, but eventually has to accept another that he previously rejected; his decision-making process has been overthrown.
This is certainly the main, although it is not the only, difference between individual decisions in the market and group decisions taking place on the political scene.
The individual in the market can predict, with absolute certainty, the direct or immediate results of his choice. “The act of choosing,” says Buchanan, “and the consequences of choosing stand in a one-to-one correspondence. On the other hand, the voter, even if he is fully omniscient in his foresight of the consequences of each possible collective decision, can never predict with certainty which of the alternatives presented will be chosen.”6 This uncertainty, of the Knightian type (that is, the impossibility of assigning any number to the probability of an event) must in some degree influence the voter’s behavior, and there is no acceptable theory of the behavior of a decision-maker in uncertain conditions.
Moreover, the conditions under which group decisions occur seem to render it difficult to employ the notion of equilibrium in the same way in which it is employed in economics. In economics equilibrium is defined as equality of supply and demand, an equality understandable when the individual chooser can so articulate his choices as to let each single dollar vote successfully. But what kind of equality can exist between, for instance, supply and demand for laws and orders through group decisions when the individual can ask for bread and be given a stone? Of course, if the members of the groups are free to rank in changing majorities and can partake in revisions of earlier decisions, this possibility may be conceived of as a sort of remedy for the lack of equilibrium in group decisions, because it gives to each individual in the group, at least in principle, the possibility of having the group decision some time or other coincide with his personal choice. But this is not “equilibrium.” Freedom to form part of changing majorities is a typical feature of democracy as traditionally understood in Western countries, and this is, incidentally, the reason why many authors feel that they may describe “political democracy” as similar to “economic democracy” (the market system). In fact, democracy appears to be, as we have seen, only a substitute for economic democracy, although it is probably its best substitute in many cases.
Thus, we reach the conclusion that legislation, being always—at least in contemporary systems—a product of group decisions, must inevitably imply not only a certain degree of coercion of those who have to obey the legislative rules, but also a corresponding degree of coercion of those who directly participate in the process of making the rules themselves. This inconvenience cannot be avoided by any political system where group decisions are to take place, including democracy, although democracy, at least as it is still conceived of in the West, gives to each member of the legislating body a chance to form a part sooner or later of winning majorities and so to avoid coercion by making the rules coincide with his personal choice.
Coercion is not, however, the only characteristic of legislation as compared with other law-making processes, such as that of the Roman law or of the common law. We have seen that uncertainty proves to be another characteristic of legislation, not only on the part of those who have to obey the legislated regulations, but also on the part of the members of the legislative body itself, since they vote without knowing the results of their vote until the group decision has been made.
Now the fact that coercion and uncertainty cannot be avoided by the members of the legislative bodies themselves in the process of legislation leads to the conclusion that not even political systems based on direct democracy allow individuals to escape coercion or uncertainty in the sense we have described.
No direct democracy could solve the problem of avoiding both coercion and uncertainty, since the problem is not itself related to direct or indirect participation in the law-making process through legislation resulting from group decisions.
This warns us also of the comparative futility of all attempts to secure more freedom or more certainty for the individuals in a country as far as the law of the land is concerned by letting them participate as frequently and as directly as possible in the law-making process through legislation by universal adult suffrage, proportional representation, referendum, initiative, recall of representatives, or even by other organizations or institutions revealing the so-called public opinion about as many subjects as possible and making the people more efficient in influencing the political behavior of the rulers.
On the other hand, representative democracies are much less efficient than direct democracies in obtaining the actual participation of individuals in the law-making process through legislation.
There are many senses in which representation may be thought of, and some of them certainly do give the people the impression that they are participating in a serious, although indirect, way in the process of law-making through the legislation of their country or even in the process of administering the affairs of the country through the executive apparatus.
Unfortunately, what is actually happening in all the countries of the West at present is something that does not afford us any real basis for gratification if we undertake a cold analysis of the facts.
I think you’d be hard pressed to find a more comprehensive and yet more succinct evaluation of your question elsewhere…
Here’s my dillemma: people are not telepathic.
How is the price adjustment system “spontaneous” ?
It seems to me that there are two differences here between theory and practice:
Information quality. One can’t know what everyone on the market wants. One can do an analysis of the market and on that make some pretty good estimates that might or might not work.
Information lag. One can’t be aware instantly of a change in the market, and the market won’t react instantly to your contribution.
There should be some information theory that describes how information is passed around in the market, you know, like Relativity brought light-speed-limit and killed simultaneity in physics. Newton believed in simultaneity and infinite light-speed, so I think any economic thought that assumes information is available instantly throughout the market is pretty ..newtonian.
Why don’t you just do the reading?
There is.
what about when consumers “irrationally” choose something like an iPod over technically superior and cheaper alternatives?
you could easily make the argument that prices would be much different in a society where people were smarter because demand for different things would be greater or less. This is the justification of the central planner. The simpletons won’t or can’t choose the objectively best outcome so someone who is educated should make it for them. This fails to take into account the fact that once you meddle with the market accurate pricies are destroyed and now even the “intelligent” people can’t make correct decisions.
One answer here is that people don’t pick their desires according to technical specs (and why should they?), they like the feeling the brand gives them.
Of course, it can also be argued that they’re objectively irrational in claiming they “know the iPod is superior” (perhaps that’s why they bought it - while in reality it isn’t).
Hayek’s theory on this was one of the ways he attacked socialism during the socialist calculation debates.
There is also:
Memetics (Neo-Darwinian proto-science that approaches evolutionary models of cultural information transfer as based on the concept of the meme; has recently turned into a new area of study, one that looks at the self-replicating units of culture. It has been proposed that just as memes are analogous to genes, memetics is analogous to genetics).
As well as Emergence, but I haven’t read Hayek so perhaps he might’ve already mentioned emergence already.
I disagree because many contracts in the market are only “voluntary”,and most are not negiotable. For example Co-ops are very democractic,and unions are also(although not as democratic). Most features of the market though are non-democratic though and are similar to feudal contracts in some sense.
Actually, I’ve been giving this some thought and I think the differences between “right” and “left” libertarianism can be captured by the differences between monarchy and democracy. It seems to me that the left seems to favour a stateless society that they imagine resembling democracy. The entire philosophy of democracy is very egalitarian, one man one vote. Indeed the left libertarian political philosophy seems to reflect this in the sense that note only will the “votes” in the market place (e.g. the money one spends) be largely equal due to equality (or something close to it) in incomes but each individual will live on their own plot of land. Also there would seem to be a complete lack of hierarchy in the left libertarian philosophy which is allegedly the advantage of political democracy (everyone rules themself). In fact, the left libertarian favours less hierarchical forms of business (cooperatives) which are far more democratic than corporations. And furthermore they favour forms of charity that all more egalitarian than those favoured by “right libertarians” (right libertarians favouring the family and the church primarily as forms of charity, whereas the left favours mutual assistance). In fact, the left favours the democratic institutions of unions.
On the other hand the right libertarians imagine a society in which insurance and defence would be provided by hierarchical institutions, there would exists something resembling monarchy in the form of natural elites or the owners of multi tenant land ownings (manoralism). Business would take the form of corporations, which are distinctly inegalitarian. Furthermore local custom would have importance.
No Giles, only a handful of confused people believe that nonsense.