Market for Government Control?

Picture of chocolate

Which is preferable: democracy, or monarchy?

In the debate between monarchy and democracy, the winner depends on the ideology and the crowd. I, however, am cautious in giving an opinion; not because I’m ambivalent to one or the other, but because the very question of “democracy or monarchy” presupposes that neither will arrive spontaneously. For example, as an economist, I would not argue abstractly as to whether firms should be “worker-owned” or “investor-owned." Economic literature (thinking of Hansmann) tells us that either method of ownership could be preferable, and firms will likely sort into the style of ownership that best incentivizes relevant parties.

In discussing various government-forms, why should our approach differ? When we try to decide which government-form is “better," we should be figuring out which government-form is more institutionally fitting to specific examples. My first thought on the issue of democracy vs. monarchy is: why have monarchies sorted out, and democracies in? The typical answer of non-economists is that “people demand freedom," or “democracy spreads." These are unconvincing. “Freedom” is too abstract and intangible; while some may derive psychic profit in freedom, it is unlikely that wordplay alone stirs regime change. Additionally, I find it interesting and especially relevant that many areas (towns) of high productivity and production in medieval Europe naturally sorted themselves into republics and “free cities”; Genoa, Venice, Ragusa, Pisa, and many German cities come to mind.

At the very least, these observations are enough to question whether any government form is “objectively” best, or even better. Though, I am further curious as to what makes monarchy undesirable for areas of higher economic output (such as free cities, and most of Europe/America by the 19th century). I don’t claim to have any definite answers (and I encourage any reader to offer their own thoughts), but I first appeal to Higgs’ regime uncertainty. We can generally assert that areas with more entrepreneurship also have less raw despotism; we know that without one decision-maker, the cost of decision-making rises. In a pure monarchy, no entrepreneur may truly anticipate what the despot decides; that would require mind-reading. Ceteris paribus, we would expect to find less despotism in areas with more entrepreneurship, because the cost of uncertainty rises.

It may seem counter-intuitive to claim that monarchies feel the effect of lost entrepreneurship, but they certainly did. In some instances, it is clear that regime uncertainty contributed (at least, in part) to revolutionary change; I would argue the American Revolution reflected this. Monarchs’ revenues may also suffer from lost market activity and innovation; many free cities gained their status because emperors recognized losses. I recently read a paper by Smith, Crowley, and Leguizamon that described how death was functionally used as a term limit on Venetian Doge’s; this is interesting, as it shows how a merchant-republic spontaneously arrived at an arrangement limiting the largest source of regime uncertainty.

Regardless of why democracies became prevalent, I still conclude that the pattern of monarchies failing is an important clue in discussing when/where monarchies are “preferable." Ceteris paribus, if one were to institute a monarchy in a democratic nation like the United States, it would be unreasonable to expect the monarchy to last. Why? Because monarchy failed before. My question to self-proclaimed monarchists is: why isn’t there already a monarchy if it were truly better?