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Rational Choice and Its Limits

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Democracy and Financial Order: Legal Perspectives

Part of the book series: Beiträge zum ausländischen öffentlichen Recht und Völkerrecht ((BEITRÄGE,volume 273))

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Abstract

This chapter asks the fundamental question of whether the concept of a market-oriented (economic) order can be reconciled with the idea of democracy from the perspective of rational choice approaches to the law. Europe has been facing great economic challenges for the past years—sovereign debt; fiscal and monetary policy; financial market regulation; trade and investment agreements. Some observers argue that prioritizing an economic rationale in the policy response to these challenges comes at the expense of democracy by undermining its most vital preconditions (such as equality and solidarity), while their antagonists state that in fact democratic decision-making is undermining financial stability and long-term welfare of societies. This contribution will establish that both positions contribute important insights and yet display too narrow a field of vision. Combining the arguments puts the cart before the horse: Democratic decision-making undermines, among other things, financial stability—and thus long-term welfare of societies—because it follows a logic that is primarily economic.

Revised version of the original published article “Rational Choice and Its Limits” by Emanuel V. Towfigh, German Law Journal 17(5):763–778

Parts of this manuscript are based on the book “Das Parteien-Paradox: Ein Beitrag zur Bestimmung des Verhältnisses von Demokratie und Parteien” by Emanuel V. Towfigh, Mohr Siebek 2015.

I gratefully acknowledge fruitful comments by the editors, Matthias Goldmann and Silvia Steininger; earlier drafts of this manuscript have profited from feedback by Katharina Towfigh, as well as from my commentator, Agniezka Janczuk-Gorywoda, and other participants at the workshop Democracy and Financial Order at the University of Frankfurt.As always, any and all remaining misconceptions in this text are attributable to my own limited understanding only.

In some sense, this can be understood as a variant of the question whether a market economy is helpful (if not a precondition) for a democratic order; for a recent example of such an argument see von Weizsäcker (2014a), p. 13.

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Notes

  1. 1.

    See generally Issacharoff et al. (2012).

  2. 2.

    Towfigh (2015), p. 55.

  3. 3.

    See generally Issacharoff and Pildes (1998), pp. 643 f.

  4. 4.

    See Ortiz (2000), p. 754 (“[W]e might well view voters in modern mass democracy more as political consumers than as political principals.”).

  5. 5.

    See generally Levinson (1999), p. 1745.

  6. 6.

    Goldin and Vogel (2010), p. 11.

  7. 7.

    Id.

  8. 8.

    See generally Axelrod (1997).

  9. 9.

    Goldin and Vogel (2010), p. 11.

  10. 10.

    See generally Axelrod (1997), p. 11.

  11. 11.

    Goldin and Vogel (2010), p. 12.

  12. 12.

    Beschluss [Resolution], Bundesrat Drucksachen [BR] 485/12 (Ger.).

  13. 13.

    Miller and Rosenfeld (2009), p. 808.

  14. 14.

    See Pompian (2012), p. 83.

  15. 15.

    Miller and Rosenfeld (2009), p. 816.

  16. 16.

    Id. p. 808.

  17. 17.

    See generally id.

  18. 18.

    Peters et al. (2011), p. 14.

  19. 19.

    Id.

  20. 20.

    Miller and Rosenfeld (2009), pp. 837–839.

  21. 21.

    Belke (1996); Nordhaus (1975), pp. 187–189.

  22. 22.

    Olson (1971).

  23. 23.

    Levinson (1999), p. 1745.

  24. 24.

    For a more extensive set of arguments, especially with view to the field of politics, see Towfigh (2015), pp. 149–180.

  25. 25.

    Brennan and Buchanan (1988), p. 182.

  26. 26.

    Gächter (2007); Fischbacher et al. (2001), p. 397; Frey and Meier (2004), p. 1720; Keser and van Winden (2000), pp. 23–24; cf. Fehr and Fischbacher (2003), p. 788.

  27. 27.

    See generally Liberman et al. (2004), p. 1175.

  28. 28.

    See generally Gneezy and Rustichini (2000), p. 1.

  29. 29.

    Gneezy and Rustichini (2000), p. 14.

  30. 30.

    Frey and Oberholzer-Gee (1996), p. 359.

  31. 31.

    See Titmuss (1997); Mellström and Johannesson (2008), pp. 852–857; see also Engel (2007), p. 385. See generally Ostrom (2000), p. 137.

  32. 32.

    Mazar et al. (2008), p. 635.

  33. 33.

    See Falk and Szech (2013), p. 707; see also Luetge and Rusch (2013), p. 714 (criticizing Falk and Szech’s conclusions drawn from the mice experiment); Falk and Szech (2013), p. 714 (responding to Luetge and Rush’s criticisms).

  34. 34.

    The subjects did not know the mice were surplus mice from other laboratory experiments and therefore moribund, and that the experiment was not so much about active killing, but rather about extending the lifespan or saving the mice’s lives. In the post-experimental de-briefing, the subjects were informed about this fact. See Falk and Szech (2013), p. 707.

  35. 35.

    A number of additional treatments were run to ensure robustness of the observations. See Falk and Szech (2013), pp. 709–710.

  36. 36.

    See generally Brosig-Koch et al. (2011), p. 1373; Ockenfels and Weimann (1999), p. 275.

  37. 37.

    See generally Frank et al. (1993), p. 159.

  38. 38.

    See Bowles (1998), p. 75 (“Markets and other economic institutions do more than allocate goods and services: they also influence the evolution of values, tastes, and personalities.”); von Weizsäcker (2014b), pp. 28 f.

  39. 39.

    See generally Carter and Irons (1991), p. 171; Frank et al. (1996), p. 187; Frank et al. (1993), p. 159; Yezer et al. (1996), p. 177. For an overview, see Hole (2013), p. 1.

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Acknowledgements

I gratefully acknowledge valuable contributions by Svenja Huemer and fruitful comments by the editors of this special issue; earlier drafts of this manuscript have profited from feedback by Rebekka Herberg and Katharina Towfigh, as well as from my commentator, Agnieszka Janczuk-Gorywoda, and other participants at the workshop Democracy and Financial Order at the University of Frankfurt.

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  1. EBS Law School, Wiesbaden, Germany

    Emanuel V. Towfigh

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  1. Max Planck Institute for Comparative Public Law and International Law, Heidelberg, Germany

    Matthias Goldmann

  2. Max Planck Institute for Comparative Public Law and International Law, Heidelberg, Germany

    Silvia Steininger

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Towfigh, E.V. (2018). Rational Choice and Its Limits. In: Goldmann, M., Steininger, S. (eds) Democracy and Financial Order: Legal Perspectives. Beiträge zum ausländischen öffentlichen Recht und Völkerrecht, vol 273. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-55568-2_4

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