Thursday, 31 May 2012

Small Logical Steps

Somewhat short of time, but a thought occurred to me and I wanted to lay out this curious little argument, even if it's a bit facetious and doesn't mean very much.

If you:
a) believe in rational expectations - that consumers will always act in their own self-interest,
b) believe in a classical free market economy - that the aggregation of individuals' self-interested decisions creates the optimum allocation of resources, and
c) believe that government is imposing a large burden on the economy, and believe that a substantial reduction in taxation and spending would provide major economic benefits, then
d) there is something seriously and fundamentally wrong with our democracy, and it is failing to represent the views of the people.

Think about it. If everyone acts in their rational self-interest, this produces the optimal economic outcome, and the optimal economic outcome involves a smaller state, then democracy must be failing to provide the people's desperate wish of a drastically smaller government.

Of course, the people who hold these views aren't really upset at our democracy for failing to represent the interests of the people. They aren't calling for direct democracy; it's interesting, in fact, that the calls for greater democracy are coming from the leftist Occupy movement, which rejects free markets, let alone rational expectations. What irritates neoliberals is the failure of democratic institution to propagate their own - patently correct - views.

I'm not blaming them for this. I get quite angry when government policy deviates from my views of how things should be. But it does bear thinking about, because the majority of people aren't voting for the Super Neoliberal Party. The closest thing we have is the Tories, many of whom are far too preoccupied with being tough on immigration, crime and the moral decline of society for most economists' tastes (though it is arguably this message that strikes the best chord with the wider electorate).

So, either consumers are irrational, free markets aren't best anyway, or the state isn't too big. Otherwise we need more direct democracy.

Just a thought.

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