Hayek versus Habermas: Round 3

In this final round of the H versus H contest I want to question the claim that communication in markets is ‘distorted’ by ‘money power’. According to this Habermasian refrain not only do markets embody and reproduce inequalities they also corrupt the democratic process by allowing those with deeper pockets to buy support and to entrench established positions. If democracy is to fulfil the ideal of ‘un-coerced discourse’ where decisions are based on the ‘power of the better argument’ rather than on the political clout that money can buy then a fundamental redistribution of wealth is required in order to launch a process of democratic renewal.

There are several aspects of this argument that need to be dealt with. First is the failure to recognise that far from ‘distorting’ social communication some inequalities (though not all) may actually aid the process of communication. As Hayek noted in The Constitution of Liberty, ‘if the results of individual liberty did not demonstrate that some manners of living were more successful than others then much of the case for it would vanish’ (p.85). In markets, for example, it is precisely the unequal discovery of profit opportunities by more alert actors that facilitates the spread of the most successful production and consumption models via a process of imitative learning. Habermasians themselves seem to acknowledge the inevitability of unequal influence by suggesting that those who give better arguments should exercise greater influence over the allocation of resources. If inequalities resulting from the exercise of the ‘better argument’ are acceptable, however, then it is not clear why inequalities which result from persuading others to purchase goods are not. Indeed, as noted in my first post there is a strong case that markets may be more egalitarian than deliberative democratic processes precisely because they do not rely exclusively on formal argumentation. Procedures that privilege the use of explicit reasoning systematically exclude those who are less able to engage in articulate persuasion but who may still possess valuable knowledge embodied in the exercise of entrepreneurship or a practical skill.

Read the rest of the article on the Pileus website.

Mark Pennington is the author of Robust Political Economy: Classical Liberalism and the Future of Public Policy

Where collective decisions are necessary, on practical grounds, then it may be that some kind of democratic procedure is the least objectionable -- though, as arguments during the recent referendum campaign showed, there are several, somewhat different, forms of 'democracy'. Given the undesirable aspects of temporary majorities potentially riding roughshod over minorities, however, I would prefer to minimise the extent of (politically) democratic decisions. In general, I much prefer the 'daily democracy' of voluntary market exchanges. The great advantage of political democracy, it seems to me, is that it gives the adult population a chance to 'throw the rascals out' peacefully from time to time. (Of course, that is one of the main objections to the European Union -- that the European Commission seems to be an alien tyranny, mostly comprising foreigners who cannot be thrown out.)

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