Democracy and Exchange

Democracy and Exchange

Schumpeter, Galbraith, T.H. Marshall, Titmuss and Adam Smith

David Reisman

Democracy is the rule of the people. Exchange is supply and demand. Individualism, agreement, tolerance and choice are the underlying values that make possible the productive collaboration of the market and the state. This book assesses the theories of democracy and exchange of five interdisciplinary thinkers who tried to unite political and economic reasoning into a single theory of moderation and pragmatic management.

Chapter 1: Introduction: Democracy and Exchange

David Reisman

Subjects: economics and finance, economic psychology, history of economic thought, institutional economics, social policy and sociology, economics of social policy

Extract

Democracy is the sovereignty of the ruled. Profoundly out of sympathy with the traditional aristocracy of birth or the new plutocracy that wants to buy its way into control, it is the commitment that the people alone can be the principal, that self-rule alone can put oughtness into authority. Exchange is the quid pro quo. It is the self-interested negotiation of equivalence and the factored-down freedom of choice. It is the market mechanism that makes the contract between the buyer and the seller the sole test and measure of value. Democracy and exchange are the two pillars of the liberal order. Each is an embodiment of individualism and equality. Each stands for tolerance, acceptance and pluralism. Democracy settles disputes through consultation and participation on the basis of one person, one vote. Exchange mediates and adjudicates through matching the revealed preference to the reservation price. Both democracy and exchange are about conflict resolution and collective choice. Each is a civilised way of saying that consent is superior to banditry, compromise to command. The subject of this book is the politics and the economics of making ordinary people feel tolerably happy with the outcomes that define their lives. More specifically, its subject is how different thinkers have perceived the relationship between the State and the market in the real-world mix where both pillars are essential if the liberal order is to hold. Perceptions are not facts, eternal truths that must be swallowed whole. Rather they are alternatives, different windows on a world...