Theories of Democracy Part 2: Catallaxy

[Continuing Series on Frank Cunningham’s Theories of Democracy: A Critical Introduction (2002)]

Catallaxy is described as the economically inspired theory that citizens in a democracy vote based solely on their own desires and for the most part only participate in elections if the cost of doing so does not exceed its benefit. Hence government and representatives do not embody the “will of the people” but rather a game-theoretical equilibrium of voters’ individual preferences, and the more so the larger the voter pool is. According to such a view the market is almost always better at improving people’s lot than government intervention, hence the libertarian emphasis on minimal government and maximal capitalistic solutions.

A pollyty can be seen as approving of much of this analysis, if the pollyty is seen as a market solution to many of the problems the catallaxy analysis points out. As private associations, pollyties will necessarily be subject to the laws of market competition as well as evolutionary pressures as they apply to institutional structures: if people can leave and join pollyties as they please, then these will have to adapt their supply of offerings and structures to demand, and hopefully improve and strengthen as they do so. Moreover, since they are not nation-states, they will not be subject to the negative economies of scale that result in large governments’ voter apathy, rent seeking and onerous bureaucracies/regulations. So, if pollyties prove successful, and evolve to take on important social-financial functions, they could even alleviate current overburdened nation states, and usher in the very minimal governments that the catallaxy analysis promotes.

However, inasmuch as pollyties are solutions to the problems adumbrated by the catallaxists (these would be the Schumpeters, Hayeks, Buchanans and Tullocks of academia), they represent a significant departure from the individualist, liberal-libertarian, pro-capitalist analysis of said thinkers. For far from accepting Adam Smith’s invisible hand as the only viable solution to social and governmental problems, a pollyty aims to create a space above the market and government in which small enough, coherent and well-ordered groups can develop and sustain a “will of the people”, where representation and its evils (rent seeking, voter apathy) can be avoided, and most importantly where significant social and financial benefits can be created within the group without recourse to market forces or large-scale government intervention.

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