A little less democracy might be a good thing

Given the rise of Donald J. Trump to the U.S. presidency in 2016, the decision by the U.K. to leave the European Union in 2016, and the rise of illiberal regimes in Hungary and Poland, many have begun to worry about the future of democracy not only in North America and Europe but also in the rest of the world. Interesting new research, particularly the book 10% Less Democracy by the economist Garett Jones, suggests that democracy, as a form of government, can be made better than it presently is. This research tells us that in most of the world’s rich countries, we have taken democracy a little too far. As such, we would most likely be better off if we kept the voters and even elected officials a little further away from what Professor Jones calls “the levers of power.”

To see why, think first of the so-called “Laffer curve.” This curve delineates an inverted U-shaped connection between the tax rate set by a government and the tax revenue received by this government. Because of the inverted U-shaped nature of this connection, there is a specific tax rate that maximizes government revenue. Carrying the “Laffer curve” logic to the case of democracy, if we were to plot the “quality of democratic outcomes” against the “level of democracy,” the new research suggests that we would find a similar inverted U-shaped connection between these two variables. This tells us that there is a particular level of democracy that maximizes the quality of democratic outcomes for all citizens. The worry expressed by some researchers is that collectively, the world’s rich democracies are on the wrong side of the democracy Laffer curve meaning that the level of democracy is higher than the level that yields the best possible outcomes for citizens.

Moving on to politicians, readers will not be surprised to learn that politicians frequently change their behavior when an election is near. For example, by devaluing a nation’s currency, a government can make exports inexpensive to foreigners and imports more expensive to domestic citizens. Voters who purchase a lot of import goods are unlikely to be happy with such a currency devaluation even though it is often a reasonable way to strengthen a nation’s economy. Extending this argument, in areas as disparate as exchange rate policy, trade policy, and labor regulation, politicians facing an upcoming election are often unwilling to take the tough but most likely effective actions that are required to ensure better outcome for citizens. One way to deal with this problem would be to make elections less frequent. This can be done, for instance, by lengthening two-year political terms to three or four years.

Next, consider the case of judges and industry regulators. Should these individuals be elected to office by voters or should they be selected by apposite committees and hence be more independent of voters? Professor Jones and many others would argue that these individuals should function like independent central bankers. The available evidence seems to suggest that selected judges write better opinions than judges who are elected either via partisan or non-partisan elections. Similarly, in the case of industry regulators, independence is a desirable attribute because the most potent benefit arising from independent regulators is that their independence enables them to say no to the government itself.

A new and somewhat provocative idea put forth by Professor Jones is that a democratic country’s bondholders ought to be thought of as a separate but co-equal branch of government. The logic for this line of thinking stems from the fact that current and future bondholders already shape government policy in important ways. To see this a little differently, observe that we can think of voters in democracies as government shareholders. As such, what Professor Jones is suggesting is that we obscure the line between shareholders and bondholders. Once this has been done, we can, in Professor Jones’ words, think of bondholders as “democracy’s high-level financial councilors, advisers with real skin in the game.”

It has long been known that for democracies to function effectively, we need informed voters. For voters to be informed, they need to have a threshold level of education. In addition, educated workers are far less likely to subscribe to conspiracy theories or to succumb to the sort of lies that are now frequently peddled on social media. All said and done, if basic rights — to freedom of speech, health, a fair trial, etc. — are to exist in democracies, then voters have the right to a government that is capable enough to provide these rights. As the philosopher Jason Brennan reminds us, a salient component of a capable government is a relatively well informed and intelligent set of rulers. But, in a democracy, ordinary citizens are, in a very basic sense, the rulers.

Batabyal is the Arthur J. Gosnell professor of economics at the Rochester Institute of Technology but these views are his own.