Originally Posted by
r3volution 3.0
An elected politician needs the political support of others in order to maintain his office, and so he will use his power to satisfy the ambitions of those constituencies. These constituencies almost invariably demand governmental interventions in the market, which benefit them at the expense of the country as a whole (e.g. corporate subsidies). Thus it is in the self-interest of elected politicians to pursue interventionist policies. For the elected politician, the costs of interventionist policy (economic damage) are externalized, while the benefits (being reelected) are internalized. Moreover, the benefits of liberal policy (economic growth) are externalized, while the costs (not being reelected) are internalized. Acting on the basis of these perverse incentives, any rationally self-interested politician will naturally pursue interventionist policies.
An absolute monarch does not need anyone's political support to maintain his throne, and so will not use his power to satisfy the ambitions of any constituency. Instead, he will use his political power to satisfy his own ambitions: namely, to maximize his own revenues. In order to maximize his own revenues, he must maximize the economic output of his subjects, of which his revenues – via taxation – are a fraction. If he understands economics, he will know that economic output is maximized in a free market economy. Any intervention would only benefit one group of subjects at the expense of another, while causing a drop in total output, which is contrary to his own interests. For a monarch, the costs of interventionist policy are internalized, as are the benefits of liberal policy, thus creating proper incentives to pursue liberal policy. The monarch will pursue laissez faire policies, not intervening in the economy except to collect those taxes necessary to finance his own consumption. Further, he will appreciate that any increase in tax revenues in the present will reduce future tax revenues (by reducing savings and thus capital investment), and so his choice of tax level will be determined by his time preference. A higher time preference monarch will maintain taxes at a higher level, sacrificing future consumption for greater consumption in the present. A lower time preference monarch will maintain taxes at a lower level, sacrificing present consumption for greater consumption in the future. An absolute monarch who holds office for life, who must ensure the continued prosperity of the state for decades to come (and even beyond his own death, if he's concerned with the happiness of his heir) will naturally tend to have lower time preference than an elected politician whose time horizon extends no further than to the next election.
What if politicians or monarchs are not materially self-interested? What if they are driven by ideology? If the monarch is an ideological socialist, he will pursue socialist policies, regardless of the material losses he will suffer as a result. If the elected politician is an ideological liberal, then he will pursue liberal policies, regardless of the losses he will suffer as a result. But we have to compare apples to apples. If both monarch and elected politicians are socialists, both will pursue socialism; if both are liberals, both will pursue liberalism. In other words, if we assume that all politics is driven by ideology, then it makes no difference whether a government is democratic or monarchical. But not all politics is driven by ideology; some is driven by material self-interest. In those cases, monarchical government will pursue more liberal policies than democratic government. Even if these cases are rare (though I would argue they are in fact the norm), it follows that a monarchical government is more likely to pursue liberal policies than a democratic government. The less rare these cases, the greater the advantage of monarchy.
Finally, we should assume that the ideology of the monarch is randomly assigned, but we should not assume the same about democratic politicians. There are structural reasons for democratic politicians to be interventionists: namely, most consistencies demand interventionism, and those politicians who refuse to satisfy them for ideological reasons tend not to be elected or reelected. Thus, even if it were true that ideology drove all politics, monarchy would be superior.
What if politicians or monarchs do not understand economics? The democratic politician who is materially self-interested will act as before, implementing interventionist policies in order to satisfy those constituencies which they benefit. A monarch will not act as before. Though he wishes to maximize his revenues, he does not understand how to do this. He will likely pursue interventionism by default, on the advice of constituencies which exploit his ignorance. Thus, on the assumption of economic ignorance, monarchy loses its advantage, and there is no difference between the two systems.
As for HISTORY, we'll return to that later, if you like.
But, suffice it to say, monarchical government has in historical fact been smaller than democratic government, by about an order of magnitude.
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