12 July 2016

The Fundamental Conflict Between Markets and Democracies

Economic progress is at odds with the democratic process in a way that's rarely mentioned.

One sign of economic progress is choice and diversity. I'll get lunch in about an hour and I have so many choices that it would take all week to properly assess them. There are problems with abundant choice but almost no one would choose to go back in time to when the ways to eat did not include the options of Pho, burritos Tikka Masala, Massaman curry, pizza, and ramen. The market economy is incredible in its ability to orchestra the efforts of dozens of growers, farmers, shippers, cook book writers, cooks, waiters, and entrepreneurs to provide you with a $10 lunch. It's nearly miraculous and one of the things it's allowed for is incredible diversity. You can buy a jazz album or a rock album. If rock, you can choose soft or hard. If soft rock, you can choose music from the 50s or 90s. If from the 90s you can choose from which continent. And on it goes. It does not matter how esoteric your tastes, the market will cater to them. This is enormously gratifying for anyone who has the $10 for lunch or an album.

Contrast that with the democratic process. Here you have to compromise. Again and again. You're more liberal? You have to negotiate between the definition of a liberal offered by Bernie Sanders and the one offered by Hillary Clinton. You are more conservative? You have to negotiate between the definition offered by Ted Cruz or Jeb Bush or Donald Trump. And once you compromise your ideals to finally put your support behind a Clinton or a Trump, you now face a process that threatens to offer you a president who is not just sort of different from what you'd hoped but is enormously different. In the Venn Diagram that shows the characteristics that appeal to their voters, it is hard to imagine much overlap between Hillary and Donald. This 49% probability of getting a politician who is so different from you is enormously frustrating for anyone who has a vote.

The market has taught us to have it our way. Democracies teach us that after enormous compromise on what we really want, we still have only about a 50% chance of getting even that. And of course given checks and balances, even sending someone into the Oval Office or Congress is no guarantee that you'll experience the policies they'd promise to fight for. If you have enough money, you have about a 90% chance of getting just what you want. If you have a vote, you have about a 10% of getting just what you want.

Until we all vote for our own virtual reality, this difference between giving the individual exactly what she wants and forcing her to yield on so much that matters is going to create anger. Politics may not be more divisive: it may just be that we're all so used to the market responding to our requests with clarifications ("Would you like fries with that?"), that we are shocked that the political process responds to our requests with "No." It feels divisive because we're not just deciding to have ramen for lunch but can't actually order lunch until everyone has agreed to ramen.

Economics at its best is wonderful because it lets individuals emerge. One of the greatest signs of progress is that we have so many ways to now make a living. 200 years ago over 90% of the population farmed. Now only 3% do. And the types of jobs available goes up every decade. The market lets us become individuals both as producers and as consumers.

But we haven't properly educated people on the purpose of politics. It is not a forum in which you get to be more individual. It is a forum in which you become a part of a group. It's not a place where you assert your own views and individuality; it's a place where you find what you have in common with the people who live around you. It's not a place where you demand what you want. That's the path to millions of angry people shouting. Instead, it's a place where you explore what you have in common, jointly defining what it means to be a San Diegan or Californian or American.

Done properly, this tension between markets and democracies can be a huge comfort. On the one hand you get to explore what it means to follow your own path; on the other hand, you get to explore what it means to be part of a community. If all you did was the first, you'd be adrift. If all you did was the second, you'd be repressed. Creating a life out of the tension between what you want and what the people around you want is not easy but it is gratifying. One key to that is not to approach democracies with the same expectation as we do markets. They are very different, even if they do work so well together.

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