DeLong takes Hayek to task  for not being a fan of democracy:
I have long been of the opinion that Friedrich Hayek saw more deeply into why the market economy is so productive–the use of knowledge in society, competition as a discovery procedure, et cetera–than neoclassical economics, with its Welfare Theorems that under appropriate conditions the competitive market equilibrium (a) is Pareto-Optimal or (b) maximizes a social welfare function that is the sum of individual utilities in which each individual’s weight is the inverse of their marginal utility of income.
I have also long been of the opinion that Karl Polanyi saw more deeply than Hayek into what the necessary foundations for a well-functioning and durable market economy–and good society–were.But last night I ran into a passage that makes me wonder whether Hayek in his inner core believed that democracy had any value–even any institutional value–at all. It came on pp. 171-2 of Friedrich Hayek (1979), Law, Legislation and Liberty: The Political Order of a Free People vol. III (Chicago, Il.: University of Chicago Press: 0226320901):
“Egalitarianism is of course not a majority view but a product of the necessity under unlimited democracy to solicit the support even of the worst…. It is by the slogan that ‘it is not your fault’ that the demagoguery of unlimited democracy, assisted by a scientistic psychology, has come to the support of those who claim a share in the wealth of our society without submitting to the discipline to which it is due. It is not by conceding ‘a right to equal concern and respect’ to those who break the code that civilization is maintained…”
Now it is certainly true that of the trio “Prosperity, Liberty, Democracy,” Hayek puts prosperity first and liberty second–or, rather, that freedom of contract needs to be more closely safeguarded than freedom of speech, for if there is freedom of contract then freedom of speech will quickly reappear, but if there is no freedom of contract than freedom of speech will not long survive. But the passage above makes me wonder whether democracy has any place in Hayek’s hierarchy of good things at all.
What I take Hayek to be saying in the quote (and I don’t have the book handy so I don’t have the context) is that unlimited democracy tends toward an egalitarianism and redistribution that relieves people of responsibility.
It is popular to say that democracy is horrible but better than any of the alternatives. I would say that unlimited democracy is horrible and inferior to limits that restrict the power of the state to carry out the will of the majority. Majority rule can be very nasty. As a way to govern a nation, it is not in my hierarchy of good things. It is vastly inferior to a constitutional republic, especially one where the constitution is respected.