Originally Posted by
r3volution 3.0
For the purpose of this thread, I'm defining the "best" form of government as the one which interferes in the market economy the least. So, for instance, one which interferes only by collecting minimal taxes to finance basic law and order operations would be very good, while one which maintains an elaborate regulatory and welfare system would be very bad. I'll give you five reasons (there may be others) that a monarchy is best by this standard.
1. Cost Externalization - The state's revenues are a percentage of GDP. As the economy grows, the state's revenues grow; if the economy shrinks, the state's revenues shrink. Thus the state would seem to have an incentive to pursue good pro-growth economic policies, to grow the economy so that state revenue grow - but it entirely depends on how the state is structured. If the state is a democracy (multiple rulers) the incentives are different than if the state is a monarchy (one ruler). With a monarchy, whenever the economy shrinks and then the state's revenues shrink, the ruler's own personal revenues also shrink (since in a monarchy the state's revenues are the ruler's personal revenues). Whereas, when there are multiple rulers, it is possible for some of them to increase their own personal revenues even as the economy shrinks and total state revenue shrinks. For example, suppose state revenues are $100 and there are five rulers each receiving $20. Then three of them (a majority) decide to introduce a new program which increases their share from $20 to $30, and which also causes the economy to shrink so that total state revenues decline from $100 to $95. It is possible for the three rulers in the majority to profit from this economically destructive program only because the losses can be shifted onto (aka externalized) the two rulers in the minority (their shares dropped from $20 to $2.50). This is mathematically impossible if there is only one ruler - if his policies shrink the economy and therefore total state revenue, his own revenues must necessarily fall as well. He cannot push the burden off (externalize the cost) onto anyone else. So what does this mean? It means that a king cannot profit from economically destructive policies, while a democratic majority can: which may give it an incentive to do precisely that. To give a concrete example: a democratic majority might vote itself a part of the wealth of the minority, thus shrinking the economy overall, but also increasing their own incomes. Thus, all else being equal, a king should pursue better (i.e. more laissez faire) economic polices than a democratic majority.
2. Looting By Proxy - There are two reasons why a government might engage in economically destructive policies (e.g. corporate subsidies or popular welfare): (1) to directly benefit itself (as if members of the government owned shares in the subsidized corporation), or (2) to benefit others whose support it needs to remain in power (voters, political donors). A monarchy totally lacks the second reason; a king has no need to pass economically destructive policies to please voters or donors, because his position is not dependent on support from voters or donors. Thus, all else being equal, a king one one less reason to engage in economically destructive policies than a democratic government.
3. Time Preference - If the goal of a government is to maximize revenue, one must ask - over what time period? If a government prefers short term gains, even at the expense of long term costs greater than the initial gains (i.e. if it has high time preference), it will behave differently than if it prefers to maximize revenue in the long run (i.e. if it has low time preference). Specifically, a government with high time preference will tend to pursue more destructive economic policies than one with low time preference. For instance, one can greatly increase state revenue in the short term by greatly increasing taxes, but at the cost of lower economic growth in the longer term, and therefore lower long-term revenue for the state; whereas, if one wanted to maximize revenues long-term, one would keep taxes relatively low to encourage greater economic growth and therefore greater future revenues. A democratic government will tend to have higher time preference than a monarchy, simply because the rulers in a democracy are in office for shorter periods of time. Democratic rulers are trying to maximize their revenues durian their term in office, and don't care about the long term consequences (their successors will have to deal with that). Whereas, a king has a life term, and therefore the highest possible time-preference (if it is a hereditary monarchy, his concern may stretch beyond even his own lifetime, if he cares about what his son inherits). This was Hoppe's primary argument in favor of monarchy in his "Democracy: The God That Failed."
4. Regime Certainty - A democratic government changes routinely, while the king is there for life. Hence, in a democracy, there are likely to be more frequent changes of policy, which in themselves (whatever the nature of the changes) tend to disrupt economic activity (because they make it more difficult for entrepreneurs to plan for the future).
5. Selection Pressures - This concerns the personality of the ruler(s), specifically their morals. In a hereditary monarchy, the personality of the ruler is essentially random - it is whatever Nature gives us. In a democratic system, the rulers are not selected at random, but through electoral competition. It so happens that the most ruthless, dishonest, unscrupulous people tend to rise to the top in this system.
P.S. - All of these criticisms also apply to oligarchy and all kinds of "mixed" government (ask me how if you don't see it).
P.P.S. - Read "The Magic of Symmetrical Sovereignty" in my signature below for a nice illustration of the good incentives present in monarchy.
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