Democracy < Monarchy < Natural Order

Friday, Jul 30, 2010

I propose first a revision of the prevailing view of traditional hereditary monarchies and provide instead an uncharacteristically favorable interpretation of monarchy and the monarchical experience. In short, monarchical government is reconstructed theoretically as privately-owned government, which in turn is explained as promoting future-orientedness and a concern for capital values and economic calculation by the government ruler. Second, equally unorthodox but by the same theoretical token, democracy and the democratic experience are cast in an untypically unfavorable light. Democratic government is reconstructed as publicly-owned government, which is explained as leading to present-orientedness and a disregard or neglect of capital values in government rulers, and the transition from monarchy to democracy is interpreted accordingly as a civilizational decline.

Despite the comparatively favorable portrait presented of monarchy, I am not a monarchist and the following is not a defense of monarchy. Instead, the position taken toward monarchy is this: If one must have a state, defined as an agency that exercises a compulsory territorial monopoly of ultimate decision-making (jurisdiction) and of taxation, then it is economically and ethically advantageous to choose monarchy over democracy. But this leaves the question open whether or not a state is necessary, i.e., if there exists an alternative to both, monarchy and democracy.

In complete contrast to the orthodox opinion on the matter, then, elementary social theory shows, and will be explained as showing, that no state can be justified, be it economically or ethically. Rather, every state, regardless of its constitution, is economically and ethically deficient. Thus, the choice between monarchy and democracy concerns a choice between two defective social orders. In fact, modern history provides ample illustration of the economic and ethical shortcomings of all states, whether monarchic or democratic.

Moreover, the same social theory demonstrates positively the possibility of an alternative social order free of the economic and ethical shortcomings of monarchy and democracy (as well as any other form of state). The term adopted here for a social system free of monopoly of taxation is "natural order." Other names used elsewhere or by others to refer to the same thing include "ordered anarchy," "private property anarchism," "anarcho-capitalism," "autogovernment," "private law society," and "pure capitalism"... where every scarce resource is owned privately, where every enterprise is funded by voluntarily paying customers or private donors, and where entry into every line of production, including that of justice, police, and defense services, is free (xix-xxi).

Throughout most of its history, mankind, insofar as it was subject to any government control at all, was under monarchical rule. There were exceptions: Athenian democracy, Rome during its republican era until 31 B.C., the republics of Venice, Florence, and Genoa during the Renaissance period, the Swiss cantons since 1291, the United Provinces from 1648 until 1673, and England under Cromwell from 1649 until 1660. Yet these were rare occurrences in a world dominated by monarchies. With the exception of Switzerland, they were short-lived phenomena... With the end of World War I, mankind truly left the monarchical age. In the course of one and a half centuries since the French Revolution, Europe, and in its wake the entire world, have undergone a fundamental transformation. Everywhere, monarchical rule and sovereign kings were replaced by democratic-republican rule and sovereign peoples.

During the monarchical age... the share of government revenue remained remarkably stable and low. Economic historian Carlo M. Cipolla concludes, "from the eleventh century onward all over Europe, it is difficult to imagine that, apart from particular times and places, the public power ever managed to draw more than 5 to 8 percent of national income." And he then goes on to note that this portion was not systematically exceeded until the second half of the twentieth century.

Until the very end of the nineteenth century, government employment rarely exceeded 3 percent of the total labor force. Royal ministers and parliamentarians typically did not receive publicly funded salaries but were expected to support themselves out of their private incomes.

A similar pattern emerges from an inspection of inflation and data on the money supply. As hard as they tried, monarchical rulers did not succeed in establishing monopolies of pure fiat currencies... It was only under the conditions of democratic republicanism... that this feat was accomplished. From the beginning of the democratic-republican age--initially under a pseudo gold standard and at an accelerated pace since 1971 under a government paper money standard-- a seemingly permanent secular tendency toward inflation and currency depreciation has existed. During the monarchical age with commodity money largely outside government control, the "level" of prices had generally fallen and the purchasing power of money increased, except during times of war or new gold discoveries.

In addition to taxation and inflation... monarchs also showed considerably more moderation and farsightedness than democratic-republican caretakers [in regards to debt]. Throughout the monarchical age, government debts were essentially war debts. While the total debt thereby tended to increase over time, during peacetime at least monarchs characteristically reduced their debts... In striking contrast, since the onset of the democratic-republican age British debt has only increased, in war and in peace. Likewise, U.S. government debt has increased through war and peace.

Finally, the same tendency toward increased exploitation and present-orientation emerges upon examination of government legislation and regulation. During the monarchical age... the king and his parliament were held to be under the law. They applied preexisting law as judge or jury. They did not make law... Under democracy, with the exercise of power shrouded in anonymity, presidents and parliaments quickly came to rise above the law. They became not only judge but legislator, the creators of "new" law.

The phenomenon of social time preference is somewhere more elusive than that of expropriation and exploitation, and it is more complicated to identify suitable indicators of present-orientation. But all of them point in the same direction... The most direct indicator of social time preference is the rate of interest... A tendency toward falling interest rates characterizes mankind's suprasecular trend of development. Minimum interest rates on 'normal safe loans' were around 16 percent at the beginning of Greek financial history in the sixth century B.C., and fell to 6 percent during the Hellenistic period. In Rome, minimum interest rates fell from more than 8 percent during the earliest period of the Republic to 4 percent during the first century of the Empire... This trend was by no means smooth... With this historical backdrop... it should be expected that twentieth-century interest rates would be still lower than nineteenth-century rates... this is not so... If real incomes are higher but interest rates are not lower, then the ceteris paribus clause can no longer be assumed true. Rather, the social time preference schedule must have shifted upward. That is, the character of the population must have changed. People on the average must have lost in moral and intellectual strength and become more present-oriented.

The degree of urbanization began to increase dramatically from about 1800 onward. A period of rising crime rates during the early nineteenth century can be attributed to this initial spurt of urbanization. Yet after a period of adjustment to the new phenomenon of urbanization, from the mid-nineteenth century onward, the countervailing tendency toward falling crime rates took hold again, despite the fact that the process of rapid urbanization continued for about another hundred years. And when crime rates began to move systematically upward, from the mid-twentieth century onward, the process of increasing urbanization had actually come to a halt. It thus appears that the phenomenon of rising crime rates cannot be explained other than... by a rising degree of social time preference, an increasing loss of individual responsibility, intellectually and morally, and a diminished respect for all law-- moral relativism-- stimulated by an unabated flood of legislation.

For decades... real incomes have stagnated or even fallen (50-70).

In the U.S. between 1960 and 1990 the murder rate doubled, rape rates quadrupled, the robbery rate increased five-fold, and the likelihood of becoming the victim of an aggravated assault increased by 700 percent (102).

Until the end of World War I, the overwhelming majority of the public in Europe accepted monarchical rule as legitimate (Etienne de la Boetie, The Politics of Obedience; David Hume, Essays: Moral, Political, and Literary) (70).

Democracy: The God that Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order, Hans-Hermann Hoppe, July 30, 2001,

A fundamental change in the relationship between the state, natural elites, and intellectuals only occurred with the transition from monarchical to democratic rule. It was the inflated price of justice and the perversions of ancient law by kings as monopolistic judges and peacekeepers that motivated the historical opposition against monarchy. But confusion as to the causes of this phenomenon prevailed. There were those who recognized correctly that the problem was with monopoly, not with elites or nobility. However, they were far outnumbered by those who erroneously blamed the elitist character of the ruler for the problem, and who advocated maintaining the monopoly of law and law enforcement and merely replacing the king and the highly visible royal pomp with the "people" and the presumed decency of the "common man." Hence the historic success of democracy.

How ironic that monarchism was destroyed by the same social forces that kings had first stimulated and enlisted when they began to exclude competing natural authorities from acting as judges: the envy of the common men against their betters, and the desire of the intellectuals for their allegedly deserved place in society. When the king's promises of better and cheaper justice turned out to be empty, intellectuals turned the egalitarian sentiments the kings had previously courted against the monarchical rulers themselves. Accordingly, it appeared logical that kings, too, should be brought down and that the egalitarian policies, which monarchs had initiated, should be carried through to their ultimate conclusion: the monopolistic control of the judiciary by the common man. To the intellectuals, this meant by them, as the people's spokesmen.

I do not say that democracy has been more pernicious on the whole, and in the long run, than monarchy or aristocracy. Democracy has never been and never can be so durable as aristocracy or monarchy; but while it lasts, it is more bloody than either. … Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide. It is in vain to say that democracy is less vain, less proud, less selfish, less ambitious, or less avaricious than aristocracy or monarchy. It is not true, in fact, and nowhere appears in history. Those passions are the same in all men, under all forms of simple government, and when unchecked, produce the same effects of fraud, violence, and cruelty. When clear prospects are opened before vanity, pride, avarice, or ambition, for their easy gratification, it is hard for the most considerate philosophers and the most conscientious moralists to resist the temptation. Individuals have conquered themselves. Nations and large bodies of men, never.

John Adams, letter to John Taylor (15 April 1814),

Democracy clearly works if you set the bar low enough.  Is democracy better than dictatorship?  Of course.  Does democracy allow most people in the First World to live long, comfortable lives?  Sure.  But we now hold most of our social institutions to far higher standards.  If 90% of women survived childbirth, we wouldn't say "Medicine works."  We'd expect doctors to use everything they know - and constantly strive to learn more.  And if mothers were dying because doctors stubbornly clung to superstitious treatments, we judge the doctors very harshly indeed.

So what would we conclude if we held democracy to analogous standards?  Do democracies use everything we know?  Do they constantly strive to learn more?  Do they at least avoid acting on sheer superstition?  I say the answer is no across the board.  When we actually measure voters' policy-relevant beliefs against reasonable proxies for the Truth, voters do poorly.  Democracy's defenders often insist that these errors will harmlessly balance out, but the facts of the matter is that voter errors are usually systematic.  Voters err alike.

What "reasonable proxies for the Truth" do voters fare poorly against?  They fail against objective statistics.  For example, American voters vastly overestimate the share of the budget that goes to foreign aid and welfare, and vastly underestimate the share that goes to Social Security and health.  They fail against better-informed voters.  Voters who score higher on tests of objective political knowledge favor very different policies than otherwise identical voters who score poorly.  And they fail against expert consensus - even after you adjust for possible biases in the experts' judgments.

I'm an economist, so I've focused a lot of my attention on the public's economic illiteracy.  Despite popular stereotypes about economists' failure to agree with each other, there are many contrarian conclusions that economists across the political spectrum share.  Regardless of ideology, for example, economists have a strong tendency to support free trade, oppose price controls, and favor more open immigration.  The main reason is that they actually know surprising, unpopular facts about trade and markets: Specialization and exchange enrich the world, even if one trading partner is better at everything; minimum prices create surpluses; maximum prices create shortages.  Economists are often distressed by how little economics college students learn and remember; but the average college student knows far more economics than the typical voter.

I do think that democracies are very responsive to public opinion.  Given the facts about public opinion, however, responsiveness is greatly overrated.   When the public holds systematically biased beliefs, politicians who want to win have to pander to popular error.  And that's precisely what happens in every major election: Pandering.

Couldn't we solve this problem with better education?  I'd like to believe that, but the facts once again get in the way.  "Educating" people out of their policy beliefs is very hard.  Why?  In large part, because error is, selfishly speaking, free.  If a voter is intellectually lazy, what happens to him?  The same thing that happens to people like you who voluntarily attend online debates on "Does Democracy Work!"  This contrast is easy to see when you offer to bet someone about his policy views: Even passionate ideologues usually decline to back up their extravagant claims with cold hard cash.  As I explain in The Myth of the Rational Voter, we shouldn't think of democracy as a market where people buy the policies they like.  We should instead think of democracy as a common well where people throw their intellectual garbage, heedless of the fact that we all drink the water.

What can be done?  For starters, we need to learn from Alcoholics Anonymous: The first step is admitting that you have a problem.  The fact that most people vote for X doesn't make X a good idea.  We also need to take a more favorable view of constitutional checks on democracy.  But above all, the evidence is a strong argument for relying less on government and more on markets.  Economists may know a lot of ways for government to improve on market outcomes; but thanks to misguided public opinion, actual government policies tend to make market outcomes worse than they'd be if government left well enough alone.

Debate: Does Democracy Work?, Bryan Caplan,