All four are mass institutions, they work because of large numbers. Because there are many individuals it is hard for any one individual to effectively block progress. These institutions are often seen as empowering individuals or the people, but there is more truth in the saying that when everyone rules no one rules. Once again this is what makes modern Western Civilization so dynamic, no one is in a position to block progress.
In a perfect market there are many buyers and sellers. This means that the individual has no control over the price. The individual supplier can not increase the price by selling less and the individual buyer can not decrease the price by buying less. The supplier produces the product by the most efficient means possible because if they do not other suppliers will use the most efficient process and the less efficient will be swiftly driven out of business. In this way the market encourages efficient production.
In economics, particularly the field of industrial organization, it is often argued that markets must be at least potentially competitive. Otherwise a corporation, or perhaps a few corporations, an oligopoly, could cut back on production and achieve monopoly profits. In science it is important that experiments can be repeated even if no one normally does so. So in economics we want contestable markets, in science we want repeatable experiments. I am arguing that these are very similar concepts.
If the number of voters is large the probability of casting the deciding vote is very small. Therefore, the individual voter is free to ignore his or her self-interest, and indulge their values. The weakly benevolent rich man can vote for a candidate who promises higher taxes on the rich and greater welfare for the poor and it costs him essentially nothing. Of course, the extra tax may cost him a lot if this candidate wins, but unless he cast that magic deciding vote, his charitable vote still cost him nothing. He pays whatever the tax rate is regardless of how he votes.
In economics we say buyers and sellers in a perfect market are price takers, they simply accept the price determined by the market without trying to change that price. In a similar way the voters are law takers. There is no reason they should try to change the laws to serve their temporal self-interest.
They may vote according to their religious self-interest. For example, our rich man may think that he can go to heaven by voting for the politician who promises to tax the rich and give to the poor. But I include religious self-interest under the category of values. Self-interest is short for temporal self-interest. This is the standard way economics has treated self-interest for centuries. Given these definitions of self-interest and values, voters tend to vote their values rather than their self-interest.
This view of voting was originally introduced by Gordon Tullock in his 1971 article in The Journal of Economic Inquiry “The Charity of the Uncharitable.” Tullock applied rational thinking to voting, but other scholars have investigated the issue empirically.
David Sears and many different co-authors published many papers in which they showed through multivariate analysis that values dominate self-interest in voting. When they tested equations to predict how people would vote, the independent variables that represented values proved statistically significant and those variables that represented self-interest almost always dropped out because they were not statistically significant.
So both the theory of Tullock and the empirical work of Sears and his associates show that values dominate voting. If both the empirical evidence and the theory say the same thing perhaps we should take notice.
Tullock as the title, “Charity of the Uncharitable”, implies takes a negative attitude toward this. I take a more positive view. In the market we produce goods, which are as the name implies generally good. But while the market is for the free exchange of goods, the government is for the control of coercion. If you do not pay your taxes or otherwise break the laws you can be incarcerated. In many countries in times past you could also be killed, maimed, or tortured. These are not goods, they might reasonably be called bads. We want goods to be produced efficiently, but we do not value efficient coercion. We want the government to be benevolent and just.
Democracy and the market economy are a great combination. Democracy tends toward just and benevolent control of coercion, and the market tends toward the efficient production of goods.
Adam Smith famously wrote, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” In writing this Smith was speaking of the market, but we might expand it to science. If experiments are being repeated we do not have to rely on the honesty of the researcher but we can rely on their regard for their reputation and how quickly they will be caught by other researchers repeating their experiments.
But we may want to rely on the benevolence of those who exercise their right to vote and communicate by speaking, publishing letters to the editor, or using the Internet. As the individual's doing these things know they can not change the laws or the beliefs of society as a whole to benefit themselves. Furthrmore, we might assume that people are weakly benevolent, they wish others well if it cost them nothing. So we might reasonably hope that somewhat benevolent laws and societal ethics will result.
If a society rejects all these institutions it is likely to be so dysfunctional that it will not significantly threaten Western Civilization.
I would note, however, that even the combination of all four institutions is not the solution for all problems. There are other institutions that have their proper place in a well ordered society.
A particular weakness of all four institutions is that they require large numbers. Markets need to be contestable, experiments need to be repeated, there need to be many voters, and many communicators contributing to the creation of opinions. There are many times that this condition is not met. For example, the condition of large numbers is not met in the nuclear family, your work team, or a small group of friends.
The above thoughts on democracy and the market are part of a much larger theory of how the Western Institutions came to be. I have now put this on line.
Here is an index to my other pages on economics, and a short review of my qualifications in this field.
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Last updated April 11, 2020
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