An oligarchic democracy
Peter Thiel is wrong, democracy is good (plus empirical data to support this)
For most of my intellectual life, I agreed with Peter Thiel that democracy is inherently a force against liberty and maximising economic prosperity. Electorates can consistently be relied upon to vote for gerontocratic welfare states, closed borders, protectionist measures, rent controls, and so on. An alien observer would conclude that democracy cannot be compatible with the efficient outcome, and that individuals would be best served by a philosopher king with the correct libertarian outlook. However, we already live in a second-best (at best) world, so one has to adopt the Churchill (and Burkean!) principle and compare to historical or incentive-compatible alternatives. On this basis, I'm gradually becoming less hostile to the idea.
An important caveat is that, were a libertarian autocracy ever to arise, then I would likely support that. Such a government is likely not incentive-compatible however. How would citizens, many of whom as far from libertarian preferences as possible, voluntarily establish such a system? You would have to enact a coup to achieve this, yet militaries and other groups reliant on the use of violence alone (without consent) to enforce their beliefs can hardly be trusted to stick with libertarian principles. Autocracies are generally reliant upon rent extraction and opaque patronage networks for survival - amounting to a substantial tax on growth, and a distortion of outcomes. This is likely why Tabarrok (whom I agree with on most policy matters) finds that democracy is correlated with economic freedom, and this is likely (to some extent) causal. Besides, whilst there are a few autocracies that embraced capitalism, every socialist economy is autocratic. Venezuela, Zimbabwe, North Korea, Khmer Rouge, Mao, Stalin - if there is one lesson to learn from these examples, it's that tail risks must be considered when deliberating on optimal institutions.
I used to highlight the Gulf as an example of efficient autocracies, yet Neom, and the billions were squandered on perpetually cancelled projects in Dubai, shows how an economy subject to the whims of a king will misallocate resources according to the preferences of one man. This is also closely related to the Hayekian argument I discussed in my last post. Likewise, I consider Hanania's defence of the mainstream media to be another example of how liberal democracies (with the necessary norms and checks) optimise information aggregation. Obviously, this is vital for the innovation that drives endogenous growth.
Regular readers will be wondering at this point why I have abandoned my previous idea of a network of for-profit charter cities and seasteading ventures, where people “vote” with their feet, to replace the post-Westphalian order of nation states. I still support innovation in government on the margin. However, on reflection of geopolitical developments in the last half-decade, I'm convinced by Nozick’s argument that scale is necessary to defend against the (ever-present) threat of war by a much larger power. If one cluster of cities doesn't integrate, another will. Rational actors know this, so via backward induction, larger political entities will arise. Indeed, this is the story of how Carthage got destroyed by the Romans: a vital lesson that anarcho-capitalists must heed. Moreover, I basically recreated Yarvin’s neoreactionary philosophy from first principles, and if I'm in agreement (on a fundamental principle) with an intellectual fraud, then I'm missing an important step in my reasoning. There's no guarantee that charter cities would necessarily advance a libertarian agenda. In fact, patronage, corruption, and feudalism, could be considered examples of for-profit governments. The idea that they yield the correct incentives to facilitate capitalism cannot be assumed.
Whilst we're on the subject of violence, Pinker highlighted in his famous book on conflict, that liberal democracies since 1945 have never waged war against one another. This is a significant factor in the reduction of interstate violence in the last century. I discuss this in more detail in my last post; right now I will deal with one counterargument. A key argument in favour of democracy is that it promotes the peaceful transfer of power. Without it, civil wars and coups occur. Yet Sudan shows that, in some cases, autocracies prevent civil wars from occuring. Hence, my defence of democracy is not a universal defense, but a generalised claim that holds in most cases.
At this stage, we’re dealing in the language of theoretical conjecture. What is there is a causal identification strategy possible to empirically support this thesis? This week, I came up with a thought! Many of the Latin American dictatorships in history were the sort of “based” right-wing governments that many neoreactionaries and free-marketeers may be inclined to support. What if it was possible to compare their economic performance with liberal democracy in Latin America? ChatGPT gathered the necessary data, produced a DiD with synthetic controls, and the R code ready to run. Unfortunately, my laptop needs a software update, yet for the interests of science I cannot in good conscience sit on these findings. It doesn't much matter to me if someone else verifies, writes up the findings, and takes credit - just as long as it's out there. It seems that the overall conclusion though is that, whilst autocracies can temporarily drive macroeconomic stabilisation (also see East Asia), their long-run economic performance is worse relative to democracies. This holds for the relatively capitalist, “based”, free-market dictatorships.
Using similar methods, populism is also a tax on growth. See here for my definition of populism, yet most can agree on who is or is not populist, so let's move on from tedious semantics. Obviously, many autocracies are populist, and populism tends to descend into anocratic or autocratic rule. Yet is a non-populist autocracy preferable to a populist democracy? It seems to be that the most important variable of concern is designing institutions such that non-populist elites maintain power, democracy or not.
Define elites as:
Motivated primarily by status and prestige (not necessarily money per se), with some concern for integrity. Generally the most educated and intelligent subset of citizens.
Advocate for liberal democratic institutions, and will work to impose constraints on electoral outcomes if necessary to maintain them (see last hyperlink).
A tendency towards liberalism in outlook. A consistent finding in social science is that intelligence is correlated with liberalism. If rational agents cannot honestly disagree, and all disagreements are a function of search costs to information acquisition given heterogenous priors (you could consider higher IQ as reducing search costs), then it seems sensible to conclude that over time, smart individuals converge to liberalism whilst Bayesian updating.
These are the class of individuals we want in power. Education polarisation puts all the stupid people onto one side, with (as we see with Trump) grave consequences for policy when they hold power. The populist tax in action!
Therefore, we want to design democracies with an anti-majoritarian slant, and which minimise polarisation. Obviously, checks and balances constrain the leviathan. In electoral outcomes however, I consider proportional representation systems as superior due to their fragmented outcomes, and the general necessity for coalition. Should a populist and low-IQ party ever gain significant traction, elites can impose the cordon sanitaire to block them from power. Alternatively, they may share power with the populists, yet the nature of coalition government further constrains their destructive impulses. Yes, establishment parties may adopt some populist policies to move closer to the median voter, yet this is a small price worth paying in comparison with majority rule by populists. As I said, democracy is second-best.
One can now consider liberal democracy, contrary to how democracy is conventionally conceptualised, as oligarchic. If liberal democracy works well, then only a small and highly selective elite calls the shots where it matters, in policy. Paradoxically, good democracies are elitist - indeed one of the most common criticisms of Western institutions. This is a good thing, and is why I can embrace democracy.