Voting and Markets

by Don Boudreaux on February 11, 2014

in Myths and Fallacies

Reading Sheldon Richman’s recent warning against sacralizing voting soon after having read this quotation from Deirdre McCloskey’s forthcoming volume, The Treasured Bourgeoisie, prompts this unoriginal, but can’t-be-made-too-often, point: If a great virtue of democratic majoritarian voting is its perceived satisfaction of the preferences of as many people as possible, then markets generally outperform democratic majoritarian voting by a wide stretch.

Forget here about the impossibility of designing a voting system that processes and aggregates individual-voters’ preferences to generate outcomes that are “the People’s will” in the same way that choices and actions of a flesh-and-blood individual generate outcomes that are that individual’s will.  (Anthropomorphizing the collective is a grievous intellectual error that, innocent as it might appear, invites ethical atrocities.)  Instead, recognize only the straightforward fact that in the vast majority of cases, market decisions satisfy the preferences of a much larger number, and proportion, of people than does even the best designed, corruption-free, and most inclusive system of collective voting.

Go to a supermarket and observe a dozen different shoppers.  Each shopper will have in his or her shopping cart a different selection (and different number) of groceries to buy than will any of the other 11 shoppers.  It doesn’t matter what you think of Ms. Jones’s selection of groceries (perhaps she’s buying a bottle of white zinfandel that you find to be yucky); it doesn’t matter what any other shopper, say, Mr. Smith, thinks of Ms. Jones’s selections or what Ms. Jones thinks of Mr. Smith’s selections.  Neither Ms. Jones nor Mr. Smith needs to win your approval, to win each other’s approval, or to win the approval of any other shopper or shoppers to choose what each chooses to purchase.  The only agreement required is that between each shopper and the supermarket: if the shopper values each chosen product as least as highly as the price charged for the item, and as long as the supermarket is willing to sell each of the items at its posted price, all is well.

The “dollar votes” (as they are often called) here do not require a minority of shoppers to buy only what the majority of shoppers votes to buy.  Everyone in the supermarket (and the supermarket owner) has his or her preferences met.

If, however, supermarket-grocery selections were voted upon as we vote upon candidates to represent ‘us’ in Congress or upon whether or not to approve a bond issue to finance the building of a new sewerage system, only the majority’s preferences are satisfied.  The minority – those who vote differently – do not have their preferences, in these situations, satisfied.

Of course, of course, of course not all decisions can be made individually, as in markets.  If my students and I vote to determine the temperature at which I will set the thermostat in the classroom, only one outcome is possible.  We can agree that the majority’s preference for temperature should ‘win.’  (Query: What’s the best voting system for determining the majority’s preference?  And how often should the vote be taken?)  But even though we can agree to this unremarkable conclusion about what is arguably the best method for determining the temperature in the classroom, we would be mistaken to leap to the conclusion that majoritarian democracy is the best way to satisfy the maximum number of peaceful human preferences.

The physics of room temperature and the current technology for controlling room temperature dictate that majoritarian voting is the best that we can do in this circumstance.  Most circumstances are not like the room-temperature one.  If someone from the winning temperature majority stands up to demand that people in the losing minority, say, not wear sweaters because “the People” have decided that the room temperature be set at 66 degrees Fahrenheit, most of us would recognize such a demand to be officious and unnecessary.  Why not let individuals satisfy their preferences individually if they can do so?

The free market, compared to democratic voting, allows a far larger proportion, and number, of people to satisfy their preferences. So if you celebrate democracy because it – or insofar as it – satisfies people’s preferences, then you should cheer mightily and with far greater gusto the free market.

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