Democracy as a competitive discovery process

Actors within democracies and markets exhibit opportunistic behavior and frequently pervasive ignorance. But the debate on whether these social systems can handle these problems is polarized. Critics of markets point to corporate greed and consumer exploitation, placing faith in democracy as the antidote; while critics of democracy highlight rent-seeking, public ignorance and limited knowledge for decisionmakers, prioritizing markets over democracy. By contrast, we argue that there is a fundamental alignment between how competition in both politics and markets ameliorate these two challenges to facilitate social cooperation. Democracy works as a ‘competitive discovery process’ comparably, though not identically, to the way imperfect markets manage to produce goods and services for consumers. Competition in democratic politics and relatively competitive markets both compel and enable key players – particularly large firms and political elites – to be alert and responsive to diverse preferences in society, thereby harnessing opportunistic self-interest and ameliorating knowledge to produce some good outcomes for society as a whole. One important feature of our argument is that we treat the discovery process in democracy and markets as a mechanism of continuous identity formation. On the epistemic properties of democracy, our contribution lies in relaxing both the neoclassical assumption of perfect competition and the Hayekian ideal of open competition by focusing on the performance of imperfectly competitive dynamics.