Give & Take Economics Theory guides us in understanding the optimal forms of government and commerce. Complete capitalism without fair rules of engagement that are consistently enforced and obligations to society leads to the creation of powerful exploitive oligopolies, periodically disrupted by major innovations and power shifts. In modern economies this often results in industry dynamics where a handful of powerful oligopoly firms split and maintain the market through M&A of innovative upstarts.
Capitalism is an economic system based on periodic competitive upheaval, and as such, a core safety net of social insurance needs to be in place to protect those individuals that experience severe fallout from capitalistic upheaval, in order to uphold a credible belief in the system and maintain social stability. By contrast, complete socialism or communism results in a stagnant economy without innovation, where in the aggregate people are trying to take more out of the system than they put into it.
Freely competitive markets and direct democratic political participation are the approaches that together deliver the most satisfaction for the most people in society – by removing the intermediary tax. However, free markets and direct participatory democracy are simply efficient coordination systems in delivering this result. They do not ensure in any way that the wants, needs and beliefs of society are appropriate in some moral sense. They simply make the most people happy to the highest possible degree given their preferences, and they can only do so to the extent that broad intermediaries don’t exert exploitative power.
This is the most that any coordination system, whether economic, political or social, can achieve. Society will only ever rise to the standards set by its leaders and its people overall. Coordination systems cannot correct for apathetic populations that do not wish to be actively engaged or to educate themselves on issues, a situation that often arises in highly successful political economies of ‘comfortable’ citizens, evidenced by low voter turnout. Nor do they correct for an individual’s own perceptions of PTC and PTB that may in fact be non-optimal for their own utility – a situation which is very common when individuals consider the short-run and not the long-run. Consider the simple example of an individual that places higher priority on the flavour and experience of smoking a cigarette than the long-term benefit of good health.
A disengaged, apathetic population will also inadvertently create conditions that negatively impact their own satisfaction overall, by allowing the build up of a large intermediary government. Unlike production of goods and services, which can be divided up amongst members of society to leverage gains from specialization, there are no corresponding efficiency gains from having one group specialize in governing the rest.
Conventional views often hold that a government intermediary of significant size, with many professional politicians and bureaucrats, is not necessarily a risk, as long as there exists the democratic option for the people to replace undesired politicians through a vote. This is not the case in reality however, because in practice there typically exist a small number of major political parties that even though competing for votes, also cooperate as part of one intermediary (professional politicians) with a directly vested interest in upholding policies that secure the PTB of all those within the community of professional politicians. As a result, the public gets to choose from a small number of relatively centrist options, which may have very different policies, but that together bestow additional benefits upon all professional politicians and bureaucrats.
Even with direct democratic participation and capitalist systems in place to foster and encourage participation and engagement, only the spirit of the population truly determines how good their government, business and social leaders will be. If the population doesn’t demand excellence and invest in achieving it, they simply won’t get it.
In today’s populous, complex and fast moving societies it seems very unlikely that any significant element of the public could directly participate in political decision-making and make intermediaries obsolete. Direct, active participation seems impractical in reality, but this is where creative structural solutions need to be explored. For example, it is conceivable that our political system might allow citizens to take a leave of absence from employment with some base compensation from government funds in order to fully participate in decision-making and policy implementation for a fixed period of time on a number of issues. Picture if you will something like jury duty, but where you are getting paid for your time, rather than bureaucrats.
This approach would allow individuals to fully educate themselves on issues at hand, share views with the public, vote on them directly and then actively drive their implementation. This approach could also potentially reduce overall costs since it replaces both professional politicians and professional bureaucrats with active participant citizens that tax and spend on a policy-by-policy basis.
Key to such an approach is that citizens do not continuously serve and that the vote not be limited to this core participating group, otherwise this group will in effect just become professional politicians and bureaucrats. In such a system each citizen would participate in a manner which reflects their personal biases, both individual and those of any intermediaries to which they belong. This allows healthy competition and collaboration across all vested interests within society and also ensures that there is no overriding professional politician intermediary subject to the ongoing concentrated influence of special interest intermediaries. Special interest intermediaries will no doubt still use their power to influence, but rather than influencing a small group of professional politicians, they must influence society at large.
Let’s not fool ourselves to believe that the broad population will suddenly become highly informed and insightful on all policy issues. Many people that are apathetic today will remain so, which neither helps nor hurts things. It is somewhat surprising that modern, free societies believe that freedom of speech must be extended to all without cost but seem not to take as seriously the freedom of active and direct participation in government without personal cost, which is just as important. Do we need a 28th Amendment to the US Constitution?
It seems difficult to imagine the developed economies of the world utilizing a system of full freedom with accountability that fully couples PTB and PTC across all individuals and eradicates the influence of large manipulating intermediaries (both public and private). To achieve this end state would require that the 4 Axioms of Freedom were fully met – resulting in a system we will refer to as a FreeAccountable society/economy. The 4 Axioms of Freedom are:
- Fully free markets
- Fully active direct democracy
- Clear property rights
- Proportionate share of societal costs, including penalties for breach of accountabilities
Perhaps we are just facing a ‘hump’ that we need to get over, in the same manner that it was once hard to imagine the fall of communism in Eastern Europe and even further back in history it was almost impossible to conceive that European feudal monarchies would one day become democratic capitalist economies.