Daniel J.H. Greenwood

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Beyond the Counter-Majoritarian Difficulty: Judicial Decision-Making in a Polynomic World

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53 Rutgers Law Review 781
Daniel J.H. Greenwood [FN *]

Copyright © 2001 by Rutgers University, The State University of New Jersey; Daniel J.H. Greenwood

This Article examines the role of judicial deference in a modern democracy. The Author disputes the view that judges defer to legislatures because legislatures are more majoritarian than judges. In refuting this view, the Author first outlines a theory of democracy as partnership. He then describes and discusses the main decision-making processes of a modern democracy, including aggregation processes such as majoritarian politics, economic markets, and civil society, as well as normative systems such as judiciaries, bureaucracies, and professionals, emphasizing the failure of each, taken alone, to satisfy democratic ideals. The Author contends that in order to understand and appreciate the role of judicial deference, we must distinguish judicial reasoning from these other decision-making institutions. While the boundaries between these institutions are quite flexible, often overlapping, and sometimes incoherent, the distinctions between them need not (and can not) be disregarded if we are to understand and appreciate the implicit natures and individual characteristics of each. The Author suggests that re- inflating the collapsed distinctions between these institutions will set the groundwork for a new and improved analysis of each.

TABLE OF CONTENTS

I. Introduction: Reconstructing The Law/Politics Distinction, or, What Do Judges Do?

Why do judges defer to law and regulations passed by legislatures and agencies? The standard answer is that the judiciary is a counter-majoritarian institution: judges should allow the representatives of the people to rule. But the standard answer is a puzzle: judges are also representatives of the people, and they often have a stronger claim to democratic authority than the statutes or other norms to which they defer.

A broader look at the various decision-making institutions we use--not merely judges and legislatures, but private and public bureaucracies, professionals, market and non-market competitions, voting, lotteries, and exit--suggests a different answer. Each of these institutions expresses a different, and partial, attempted solution to the problem of democratic rule in a pluralist society. Judges defer not because they are less majoritarian than legislatures, but because they are a different type of institution altogether. Deference is part of what makes a judge a judge.

Rather than elevate one institution or its associated value(s) above the others, I seek to reconstruct a sense of their incommensurability. Reconstruction is nearly impossible, however, in a post-Realist world suffering from the collapse of the public/private, state/society, law/politics, and other related distinctions. If judges are not doing anything different than legislatures, there is no point in talking about incommensurable roles. If politics is nothing more than economics (or economics is nothing more than politics), there is no point in attempting to restrict them to separate spheres. Without some distinction between state power and private power, each may be understood as nothing more than the other. I do not attempt a full theoretical explanation. Rather, I approach the problem from the back end. By describing the institutions that reflect the (intellectually) collapsed distinctions, I think we can begin to rebuild distinctions and separations that we need without reverting to a pre-Modern faith in reified categories.

The task is much the same as that faced by the second year law student: he or she knows that the law provides no firm answers, that the professor can always make you look like a fool, and that there are good arguments on both sides of every important question. But still, the successful student understands that it does not follow that there are no wrong answers, or that all arguments are the same, or that courts are (entirely) unpredictable, or, most importantly, that purely political appeals will fly in a law school exam or a courthouse argument.

We too must find a way to distinguish majoritarian politics from judicial reasoning, economic markets, and the competition and cooperation of civil society, even while knowing that their boundaries are flexible, often overlapping, and indeed sometimes incoherent. Each can be re-characterized in terms of the others, but we must nonetheless retain a sense of their separateness.

Our most important decision-making systems can be divided usefully into aggregative and normative systems. Each has characteristic virtues and vices; I hope that setting them out briefly will help to illuminate what each is trying to do, why we retain them, why we argue over how to restrain them, and ultimately, in what sense the collapsed distinctions can be re-inflated.

II. Beyond The Counter-Majoritarian Difficulty

A. The Inadequacy of Counter-Majoritarian Theory

The leading explanation of judicial deference rests on a claim that the judiciary is counter-majoritarian, and therefore suspect in a democracy. However, judges often seem to have majoritarian credentials at least as good (and often far better) than the institutions whose actions they review. Were deference in fact due to the judiciary's "deviant" status, judges presumably would not defer when they are just as majoritarian. They do not. Thus, the counter-majoritarian claim fails to explain either the actual institutional workings of our system or its theoretical underpinnings.

Within the federal government, the majoritarian credentials of judges are not obviously weaker than those of the Congress. Most importantly, judges reflect a national constituency. The President, our only nationally elected official, appoints the federal judiciary and judicial nominees (particularly at the Supreme Court level) are subject to a national debate. In contrast, Congressmen and Senators are elected by local constituencies that can make no claim to represent a national electorate. Even aside from their unrepresentativeness, those local elections may turn on entirely local issues or local constituent services with no national implications. Moreover, taken collectively, the Senate is defiantly anti-majoritarian. The Senate's one state/two votes system is compounded by the effects of seniority, so that we are often confronted with the deeply undemocratic spectacle of national legislation created or held up by a powerful committee chair answerable only to a small, one-party state. While the House seems more democratic on its face, there too the committee and seniority system can grant inordinate power to representatives from nationally unrepresentative one-party districts.

Nor does the fact that the federal judiciary is appointed make it clearly less majoritarian than its competitors. The administrative branch, of course, is not elected; indeed, much of the rule-making civil service is in effect just as tenured as the judiciary. Even in the elective branch, the advantages of incumbency seem to give many Congressmen and Senators virtual tenure--and then seniority gives the most entrenched the most power.

In our federalist system, federal judges often review state actions. Federal judges again are not obviously less majoritarian than the state officials whose actions they review. Federal judges are only indirectly elected, but the ultimate constituency behind them is national. State governments, even if they could be imagined to represent their constituencies perfectly, represent only a part of the American people. A federal judge applying national law and answerable (even if only weakly) to national institutions and national opinion may better represent the will(s) of the people than a state that is out of line with the American mainstream.

Furthermore, even aside from regionalism issues, state legislatures may have relatively weak democratic credentials. State governments admittedly sometimes have a claim to being closer to (a part of) the people. However, the combination of our national press, sound-bite television journalism, and limited attention spans suggests that often the reverse will be true. State governments may be able to act without public scrutiny. State officials may be elected in less ideologically clear or less well-reported campaigns. And that lack of scrutiny and citizen participation may lead to state governments acting under the influence of well-funded special interest groups that represent money, legal constructs or concentrated interests rather than votes. There is no a priori reason to believe that federal judges will automatically be less representative of the wills of the people (or their majorities) than these other officials.

State judges are even more obviously the majoritarian equals of their legislative and executive colleagues: in most states they are elected for limited terms. State supreme court justices usually are elected by state-wide electorate, giving them a state-wide claim to majoritarian representativeness that is stronger than that of low-visibility locally elected legislators, let alone appointed executive branch rule-making authorities.

The problem goes beyond the relative majoritarianism of judges and other governmental officials: it extends to the relative merits of case law as opposed to statutes and regulations. Federal judges are often said to be counter-majoritarian because they are appointed for life. But even life appointment is not enough to establish that the judiciary is a relatively less majoritarian institution than the political branches it reviews. The laws the Congress passes remain on the books for longer than life: a judge reviewing or interpreting a statute or constitutional provision will often have faced the voters more recently than did the text. Weak as the judge's majoritarian credentials may be, they surely are stronger than those of a statute passed by the dead.

Furthermore, some areas of law have particularly thin democratic credentials. Our national corporate law is ratified only by Delaware's legislature, which does not represent most of us even indirectly. Corporate law, in turn, sets the standards for entity liability, thus defining economic actors and determining the extent to which they are responsible for their actions--in other words, the extent to which nearly every other branch of law will be enforceable or meaningful. Furthermore, by determining the governors of our national corporations and setting their electorates and responsibilities, Delaware corporation law determines much of the character of our economy and our lives as employees, investors, and consumers. Any judge with even an indirect connection to an electorate has better majoritarian credentials than Delaware corporate law. If the counter-majoritarian problem were the source of judicial deference, judges would be well advised not to defer at all to corporate law.

Indeed, some of our law has no majoritarian credentials at all. Judges routinely defer to common law predating the institution of elections. Some of our most influential law is written by un-elected Uniform Law Reporters and merely ratified by legislatures under enormous pressure to accept what an entirely unrepresentative body did. A great deal of statutory law and virtually all of our Constitution date from periods in which the executive and legislatures did not even purport to be majoritarian: universal adult suffrage and fair apportionment are not yet forty years old in much of this country (fair apportionment has yet to reach our Senate).

Theories of tacit consent are often used to democratically justify old enactments: if the current legislature disapproved of the common law, or the old statute, it would have changed it, and so we should treat non-repeal as democratically equivalent to majoritarian approval. Whatever the merits of that argument--since most of our law-making forums are steeply stacked against action, they are few--the issue here is relative majoritarianism. If failure to repeal endows an old statute or common law principle with new democratic status, then failure to impeach should do the same for judges and failure to overturn should do the same for new judicial decisions. A state judge elected (or even a federal judge appointed by the President) within living memory and not impeached since then has the same majoritarian credentials as an old statute.

Judges defer even in these instances where the counter-majoritarian difficulty seems to counsel the opposite of deference. Furthermore, judicial opinions never suggest that more or less deference might be appropriate in situations where the judge's majoritarian credentials are relatively weaker or stronger.

Thus, elected state judges rarely suggest that their election entitles them to exercise less deference; recently appointed federal judges do not claim that the date on which the Senate ratified their nomination entitles them to be more independent than those less recently before the electorate; and state supreme courts, elected by broader constituencies, do not cite that as a justification for ignoring legislative enactments (or even other court opinions). When then- Professor Guido Calabresi proposed that judges could sometimes be less deferential to older statutes, a position clearly justified by any explanation of the judicial role that relies on counter-majoritarianism, even Judge Guido Calabresi was unwilling to apply the proposition.[FN1]

Indeed, Judge Calabresi is not unusual in his unwillingness to be explicitly activist even where majoritarianism seems to demand it: it is virtually impossible to find a judicial opinion that proudly denies deference. Aristocrats may be proud, republicans may be independent, and democrats may be self-reliant, but judges in their self-description are always deferential. No judge ever writes "I am deciding this way because it fits with my political beliefs or those of the party that sponsored my appointment" or "I was elected to change this law"--those are always attacks from the other side. The debate that was briefly mischaracterized as "interpretivist v. non-interpretivist," "original intent v. activist," or even "originalist v. non-originalist" is not about deference: nearly all of the academic proponents and even more of the judicial ones claim to be deferential. They accuse only their opponents of imposing political views in the name of law. Rather, the debate is about the norms to which judges ought to defer and the techniques they ought to use to determine and explicate them.

In short, the counter-majoritarian explanation does not seem to explain either actual judicial behavior or popular understandings of it. Judges defer regardless of their democratic credentials. They nearly always claim that they are being deferential (and generally seem to make the claim in subjective good faith) even when it seems obvious to their critics that they are not. Nor does the counter-majoritarian explanation illuminate the ultimately more significant debates over how to read the constitution: judges agree that they ought to defer to the constitution and the laws even as they disagree over what the content of that deference might be.

B. Pluralist Institutions in a Polynomic World

The failure of counter-majoritarian theory to explain the actual patterns of deference in judicial decision-making should suggest that the theory needs to be examined more carefully. But the problem is deeper than merely an ugly fact interfering with a beautiful theory. The counter-majoritarian critique of the judiciary judges the judges according to the standards of the legislature. Instead, the judiciary ought to be judged by standards of the judiciary. If judges were no more than inferior legislatures, they would indeed be a truly anomalous institution--one that should be limited more severely (and not just in constitutional review) than any but the most extreme critics have ever suggested.

The dominant views--not merely the majoritarian defense of judicial deference, but public choice attacks on regulation, populist attacks on the market, even the leading defenses of judicial activism--each rely on a uninomic hierarchy of values. Each of these theories contends that one value should be the measure of the others. Which value is hierarchally elevated varies by the theory--thus, the counter-majoritarian theorists assume that majoritarianism can be used to test all our institutions; economists take efficiency as a universal measure; Rawlsians test every primary social institution against justice as fairness.[FN2] Competing institutions are then condemned for insufficiently embodying the chosen value: judges are insufficiently majoritarian, regulators are insufficiently efficient, and legislatures are insufficiently just.

I seek to contest all those models simultaneously. Our multiple institutions reflect an underlying understanding that we have commitments to multiple, not always commensurable, values: majoritarianism and justice, community and individualism, efficiency and continuity, and so on. It seems to me that a decent society cannot put any one of these incommensurable values in a position of supremacy, but must allow them to compete and conflict, hopefully - but never automatically - ending up in a reasonable balance. The issue, then, is not whether judges or legislatures (or markets or civil society) ought to be supreme, but rather to describe the proper spheres of each.

The stakes are high. One could imagine a system that enshrined one value above others: England, for example, formally places majoritarianism above competing values. In their uninomic system of parliamentary supremacy, subordinated courts are unlikely to pose a serious threat to legislative hegemony. In a dynamic system such as ours, however, there can be no guarantee that any particular institution will be victorious consistently. Because we do not know in advance which institution ought to win any particular conflict, there can be no guarantee that the right one will.[FN3]

III. Aggregative and Normative Decision-Making Systems

Part III describes the leading decision-making systems we use. I contend that they are best understood as attempts to embody different and incommensurable values: by describing them I hope to show why each is both desirable and flawed, and most importantly, why none should be viewed as automatically entitled to rule the others.

Modern capitalist democracies have four principal authoritative collective decision-making systems: three aggregative systems and several related normative systems. The aggregative systems--majoritarian electoral democracy, the economic market, and a competitive or cooperative system often referred to as "civil society"-- each function by cumulating the values, desires or preferences of individuals, although majoritarian representative democracy, civil society and the market each aggregate in radically different ways. Normative systems applied by the judiciary, bureaucrats and professionals generally, in contrast, seek to apply a pre-existing norm found somewhere else: they do not aggregate the participants' values or preferences but rather demand that they set them aside. In Part III.A, I begin by discussing the ideal of democracy generally; in Parts III.B through III.E, I then examine each of these four principal governance systems in terms of their conformity to this ideal.

A. Political Democracy as Partnership

Democracies[FN4] express a particular understanding of equality: all citizens (but possibly not non-citizens) are equally members of the political community and accordingly ought to have equal say in its public character and future course. [FN5] Like a partnership, a democracy is a common enterprise created by and for its members; since each citizen is just as much a member as each other one, it is appropriate for each to have an equal voice in determining the common aim.

Equal membership--the partnership principle--distinguishes democracy from other governmental forms. In a democracy, citizens share the key characteristics of partners. They are the enterprise, in the sense that it has no existence apart from them, no aims or goals apart from theirs, no interest apart from theirs, and no source of authority or legitimacy apart from them. They are, thus, its governors and owners - they or their delegates can set and change its purposes and they alone are the intended beneficiaries of its actions.[FN6] (Many rights-based theories place all humans, citizens or not, on an equal basis; I understand them as claiming that we are members of a broader group: citizens of the world, as Martha Nussbaum has put it.)[FN7]

In contrast, most non-democratic governmental forms are based on notions of trusteeship or exploitation. In trusteeships, the populations are not members but protected wards. Legitimacy and claimed authority are fundamentally based on the governors' claimed ability to fulfill their designated task; if consent of the governed is a value at all (as it was, for example in many medieval theories) it is as evidence that the governor is fulfilling its protective responsibilities and not simply exploiting. Thus, traditional (constitutional or legitimate) monarchies based their right to rule not so much on the people's consent as on the king's protection of them.[FN8] Modern military dictatorships claim to be protecting the population from internal or external disorder. Communist regimes purport to be acting in the interests of the workers. Some religious regimes act in the interests of the faithful and in pursuit of a religious ideal: assuring the population's salvation. In each of these non-democratic governments the government claims to be acting on behalf of the population, but it fulfills its task without consulting the citizenry or even seeing any need to do so: were the population to disagree with the government, it would simply demonstrate the population's ignorance, not the state's illegitimacy.[FN9]

The trusteeship view of government is roughly analogous to corporate management's relationship with its shareholders. In the dominant view, public corporations ought to act in the interests of their shares, without offering shareholders a political forum in which to debate what those interests might be and, indeed, even if shareholders (who often are more saliently related to the firm in other roles) might prefer to do otherwise. Shareholders have no right to make business decisions or even to set the most significant goals of the firm.[FN10]

Similarly, the trusteeship regimes contend that the expert directors--the Party, the Ayatollah, or the General--know better than the beneficiaries how to run the enterprise. And like corporations (but unlike partnerships), the trusteeships impute interests to their beneficiaries (the Nation or the Shareholders): there is no mechanism for political consideration of conflicting claims or alternative goals.

In contrast, exploitation regimes do not claim to be acting in the interests of their subjects. Rather, they are based on the authority of force and conquest. The out-group, whether a national minority or the entire population, is ruled as subjects pure and simple. Claimed legitimacy is based on rights granted by a higher power or on the "right" of force alone. Thus, the regime may claim (as some Romans and American slaveholders did) that the subjects forfeited their lives (and a fortiori, freedom) in war and thus may be held as the sovereign's (or sovereign group's) property. [FN11] Claimed legitimacy may be founded in brute force, as in that version of the Jewish legitimacy myth in which God holds Mt. Sinai over the people's heads until they agree to accept the Torah, or the medieval views that founded legitimacy in necessity. [FN12] Or it may be formed by grant from such a force-based authority, as by descent from a Conqueror or as in Burke's picture of illegitimate origins softened by the passage of time. [FN13]

In each of these exploitation stories, subjects are not the owners but the owned. They are merely inputs to be exploited for the benefit of the ruling group, class or nation; entitled to consideration only to the extent that it is in the ruler's interest to give it to them.

This again is a corporate rather than a partnership model, similar to the relationship of a corporation to its employees. In both the corporation and the exploitation regime it may often be useful to give the employees (or subjects) a stake or an appearance of a stake, in order to motivate them to work for the good of the enterprise. Exploitation regimes often point to the benefits an empire or monarchy provides to its subjects: the Pax Romana, the mission civilatrice, the White Man's Burden. [FN14] But when the time comes to divide the pie, the enterprise turns out to view the employees (or subjects) as a cost, separate from itself. Whatever is paid out in wages reduces profits in a corporation. In an exploitation regime, all that goes to the subject or minority group (or employees) is lost to the ruling class or dominant race (or corporation). The contrast to the democratic or partnership model could not be stronger: partnership draws, like benefits to democratic citizens, are profits, not costs.

In all the various forms of trusteeship and exploitation regimes, the collective good may be controversial: the good of the nation or the state need not be obvious or agreed-upon. But it is not to be found by asking the subjects, any more than a publicly held corporation could determine its goals by consulting its rank and file employees or the actual human shareholders. Rather, in a trustee regime, some form of elite--political, philosophical, or religious--will debate and decide the issue for the population. In an exploitation regime, the ruler or dominant class, nation, or race will decide in its own interests without independent concern for the subjects. [FN15]

In contrast, in democracies as in partnerships, these distinctions between the collective enterprise and its participants are improper. Partners are certainly inputs to the firm, like employees. But they are also the firm itself; benefits to them are not costs to the firm. Similarly, citizens are expected and required to contribute to the common enterprise, but the good of the citizenry is the good of the democracy. The government in a democracy must take the good of the people as its own: they are partners, co-owners of the enterprise, not contracting opposites to be given as little as possible in an arms-length negotiation. The first defining characteristic of a democracy is that it is government for the sake of "us," not an ideal or another group.

1. The Teleology of Democracy and its Competitors

A democracy has no goal or interest apart from the self-defined goals of its citizenry. This does not mean that a democracy is necessarily valueless, neutral or uncommitted. Some may be: the ideal of our First Amendment points in that direction, towards a liberal state floating above and separate from the commitments of its citizens, creating an open forum in which private citizens debate, discuss and define as individuals without collective intervention or resolution. [FN16] In such a liberal democracy, the state honors individual visions by taking none of them as its own.

But democracies need not be liberal in that sense: when citizens are deeply committed to particular visions of the good life, specific cultural heritages, or understandings of justice or morality, they may seek to have those visions and commitments supported and fostered by the government. While that may be, in some forms, un-American, it is not un-democratic. On the contrary, the continuing efforts to create, maintain, change, and challenge a collective identity surely are a legitimate and common subject of democratic politics. A committed state can still be a democratic one in my sense. France's commitment to French culture or Greece's to Greek culture are not liberal, but so long as they are endorsed and defined by the majority of the French or Greek citizens in an open politics, they are democratic.

The commitment of a democratic state, however, must come from the commitments of its citizens. The state's ideals must remain grounded in the citizenry, and it remains legitimate only so long as it takes its guidance from below rather than the other way around. Accordingly, committed democracies remain distinctly democratic only so long as their commitments stem from an ongoing and open politics in which each citizen is a full member.

In any real community, the goals and commitments of individuals will both conflict and change. Necessarily, then, the state's commitments, if any, also will be both controversial and timebound. For this reason, while democracies (and partnerships) can delegate rule to representatives, full rule by the experts in the corporate style is impossible. The partners must first set the goals before experts can try to implement them--and in a dynamic polynomic world, the setting of the goals is an ongoing controversy, not a past moment to be interpreted. Democracies are polynomic systems, in which multiple values conflict, and conflict requires debate, struggle and compromise before expertise has any place.

So a second defining characteristic is that a democracy has no telos except to the extent that its citizenry does. Given the multiplicity of individual ends, a democracy cannot have any unified, eternal or overarching value against which all its actions can be tested, other than the enterprise of promoting its citizens' values as they are or can convince each other they should be.

Other forms of government, in contrast, may express different norms. A republic could be dedicated to a specific view of virtue, culture or religion, as in Khomeni's Iran or ancient Sparta. Theocracies (including the atheist varieties) can be controlled by law (or a historic Mission) that is understood as unchanging or independent of the will of the faithful. Nationalist states may be populist and even popularly controlled without being democratic in my sense: they take as their goal the imputed interests of a collective nation, without necessarily giving full (or any) weight to the views of some (or all) the inhabitants of the state. But even non-liberal democracies can have no fixed teleology: they have no separate existence from their multifarious citizens.

I contend, then, that democracy requires some mechanism for the citizenry to participate in a never-ending process of setting goals and mediating value conflicts. Any attempt to end that debate is anti-democratic: a move towards a trusteeship, in which given or set values can be explicated and applied by mandarin experts without any need for popular participation. Thus, in our context, claims that the Founding Fathers decided some issue for us--that we are foreclosed from changing their minds--are profoundly anti-democratic. Democracy as partnership excludes any theory of constitutional adjudication that assumes that fundamental value decisions were made at some distant point in the past and now can be elucidated without reference to the beliefs and desires of the current citizens or without convincing them to set aside those beliefs or interests. That kind of apotheosis of the Founders elevates an ideal or telos above the actual people who compose our democracy, suggesting that the government is for the Founding Fathers (or their goals), rather than for us. [FN17]

2. Equality of Membership in Democracy as Partnership

In democracies, as in default-rule partnerships, [FN18] each citizen is equally a member. Only if we are equally members can we claim that the state reflects the values of each of us or that it is a common enterprise both of and for the citizenry.

To be a partner in the enterprise means that the enterprise must take the partners' goals and good as its own, and that the partner must always be an end of the enterprise and not merely a means. No member should be seen as merely a tool to other members' ends: to be only a tool or a means is to be denied the status of principal in the enterprise. Just as a partner is a principal of the enterprise (and an agent as well), [FN19] citizens of a democracy also must be treated as ends of the enterprise--even when they are, as they always will be, its most important tool. [FN20]

Thus, the concept of democracy as membership requires that no member be treated unfairly as a tool for some end of which he or she is not a part and that no member be deprived of an equal say in setting collective ends. More powerfully, equal membership demands a strong form of mutual identification: we, collectively, must take the ends of each of us, individually, as our own.

The understanding of equality of membership I have outlined can be sharply distinguished from stronger theories of distributive egalitarianism. [FN21] Although equality of membership can be understood as foundational to distributional egalitarianisms, I believe equality of membership is based on more limited and less controversial premises than many classical egalitarian theories. At the same time, it demands both less and more than the more familiar theories: distribution alone may be neither necessary nor sufficient to satisfy its demand of mutual concern.

The egalitarian distribution theories insist that, at least in the first instance, equality of "respect" or "humanity" entitles individuals to equal distributions of assets, [FN22] primary goods, [FN23] economic starting points, [FN24] or happiness.[FN25] Of course, most theorists then propose circumstances under which such equality might be abandoned, usually on the ground that all (or each) would be made better off by doing so.[FN26] The equal voice principle I invoke seems far less controversial.

Each of these distributive egalitarian theories is a development of Aristotle's principle that justice consists in treating equals equally. [FN27] Egalitarians generally invoke some factor in which they think all humans are equal: equally entitled to respect, [FN28] equally human, [FN29] equally able to articulate reason, [FN30] equally able to feel pleasure and pain, [FN31] or equally able to kill each other. [FN32] But these ritual beginnings seem insufficient. The quasi-empirical premise is false on most understandings--Eichmann and Beethoven are not entitled to equal respect, different people have different capacities for pleasure and pain,[FN33] the distinction between humans and other animals seems artificial and tautological [FN34] or if taken seriously distinguishes among humans as well, [FN35] and reasoning or questioning ability is quite variable and missing entirely in infants. [FN36]

But if the premise of equality is invalid, the Aristotelian principle leads--as Aristotle himself thought--to a defense of aristocracy, not egalitarianism. [FN37] It is as unjust to treat unequals equally as it is to treat equals unequally. So as a matter of logic the egalitarian theories often seem no stronger than their premises, which seem weaker than the conclusions.

The Aristotelian principle leads to more democratic results if the equality we share is equality of membership in a common enterprise--principally the state, but in a weaker sense, the human project. Equality of membership means that the collective enterprise ought to consider the good of each member as its own good. The collective, under this view, ought to see each member's good as a collective good, each member's bad as a collective bad. This "partnership principle" underlies each of the distributive egalitarianisms and gives them much of their force, it seems to me, although it is not equivalent to any one of them: they share a core of seeking to express the commonness of our common enterprise, our joint membership, while differing in their understandings of in what membership consists. [FN38]

In democracy as equal membership, the Aristotelian principle that equals should be treated equally (and unequals unequally) applies straightforwardly. All the citizens are equally members, each entitled to be treated as an end, not merely a means, of the state. They are not likely to be equal in abilities, talents, skills, moral worth, connections, nobility, or even common decency: but they are equally members and therefore entitled to equal membership. In what equal membership consists is a more difficult issue, but, at a minimum, it should include both a say in setting the goals of the enterprise and mutual recognition--of each member with respect to each member--that the joint enterprise is for mutual benefit. "All for one and one for all." [FN39]

Distributive egalitarianism is neither necessary nor sufficient in a system of full membership. I take it that the various egalitarian theories are controversial precisely because they each capture parts, but only parts, of the fuller concern that commonality, fully understood, would demand. Since what we are equal in is only membership, the Aristotelian Principle does not demand Rawls' difference principle, let alone stronger egalitarianisms, so long as material wealth differences do not translate into membership differences (and it demands more than the difference principle if they do). [FN40]

On the other hand, distributive equality may not be enough. When each member is an end of the collective enterprise, sometimes it is necessary to go beyond equality to principles of friendship or family--to concern rather than disinterestedness--which call for more or less than egalitarianism. But in most cases, each of the theories of distributive egalitarianism calls for greater mutual concern than we often see in ordinary politics. And that, I propose, suggests that the leading theories of justice each tap into a common source: a view that democratic societies are like partnerships of their citizens.

3. Implementing Democratic Equality

Democracy, then, is an attempt to express a belief that we--all citizens--are in a common enterprise, in which we each should treat each of us as one of us. It is the notion that the state is a partnership of all its citizens: we are suppliers of inputs to the enterprise, recipients of its output, and the enterprise itself. Citizens are the ends of the state as well as its means, but as co-owners or partners they should never be mere inputs to be exploited, competitors whose gain is seen as the enterprise's loss, or beneficiaries whose best interests stand separate from their perceived interests. The enterprise should direct itself to promoting the good of each of us.

While the principle is simple, its implementation is difficult. A corporation views payments to its employees as an expense: by doing so, it affirms that employees are not members. Democratic states must do otherwise. But if this limitation condemns the worst abuses--Jim Crow and other forms of exploitation or second-class citizenship--it hardly mandates any particular positive program. [FN41]

The positive content of equal membership is a central subject for political debate and likely to be controversial. Some will view the rights, obligations, and privileges of membership as minimal, if perhaps not as minimal as the Supreme Court did in defining the privileges and immunities of American citizenship for the freed slaves in the Slaughterhouse Cases. [FN42] Others will take a thicker view, requiring that a common enterprise as broad as a state encompass and respect all the aspects of the citizens' joint and several personalities. Those debates are closely linked to, and cannot be resolved independent of, the debate the members must have over the scope of the common enterprise and its goals. The equal membership principle demands that each member have equal voice in that controversy. It does not demand any particular resolution.

Each of us is a means to the happiness and other ends of others: the principle should not be understood to encourage some kind of aspiration to isolated self-sufficiency. Similarly, the collective good (or more likely goods) will be controversial and often impossible to achieve. [FN43] Our goods may be individualistic or private, in the sense that each us can be imagined to achieve what is good for us independently of others. Or not: one could argue (with Hannah Arendt) that the public space is all-important, so that individual good is only achievable without a strong collective concept. [FN44] I do not mean to step into that difficult debate.

Furthermore, the collective can--indeed must--recognize that different individuals have different and often conflicting needs, desires, and goals (moreover, that even single individuals have differing and conflicting needs, desires, and goals). In a full democracy, we will take each other's ends as our own, but that alone is not enough to resolve the contradictions among those ends (any more than self-interest alone is enough to resolve the contradictions among our own individual ends).

In short, democracy as partnership is broad enough to encompass most communitarians and libertarians, utilitarians and Kantians, Rawlsians and egalitarians. But it cannot accommodate strong nationalisms that would limit membership in the democracy to members of the nation (understood as different from the population of the state), nor cultural nationalisms that see the state as promoting a set of cultural or religious values that (even if ratified by the people) bind the state outside and beyond them, nor secular or religious theories of false consciousness that contend that a single good applies to all.

Even mass support would not turn Khomeni's Iran into a partnership. In a democracy, members are not employees, nor agents (even of God or History), nor factors of production. Rather, citizens, not God or the National Mission, are the owners of the enterprise. This does not mean that citizens may not view themselves or their co-religionists or co-movementists as tools of a greater mission or means to God's ends. It only means that once a state is harnessed to such goals independent of the current views of its citizens, it is no longer a democracy. This theory, then, shares the anti-capture understanding of the liberal state: a democratic state must be able to change its commitments as its citizens do. But democracy as partnership goes further: the state must have some mechanism for acknowledging that its citizens' commitments differ at any point in time and not merely across time.

The fundamental claim of democracy is that the state must belong to all of us, in the sense that it (and we) must treat the good (or needs, or goals) of each (or all) of us as its goal. Accordingly, a democratic state should never treat any of its citizens as mere tools towards someone else's goals. Membership means that no citizen should ever be seen as a competitor in a self- regarding game: the citizen is part of the state, not competing with it.

But democracies attempting to realize the equal membership ideal face a basic problem. None of the four leading governance mechanisms we have can, by itself, meet this need. Each, taken individually, has major flaws. I examine their strengths and especially their weaknesses seriatim.

B. Democracy, Majoritarianism, and its Problems

Majoritarian representation, the most familiar aggregative system, uses voting and legislation to summarize (and sometimes to transform) the views of the various participants. Participants use discussion, rhetoric, organization, coalition building, persuasion, and generally politics to attempt to convince each other of the merits of positions--as they do in each of the systems I discuss. The distinction of majoritarianism is that in the end, decisions are made on a basis of one person, one vote (or one representative, one vote), and a majority rule for each particular decision.

1. The Majoritarian Difficulty

The characteristic problem of the modern democratic system is that majority rule is not necessarily particularly fair. Indeed, odd as it may seem at first glance, majority rule is not always compatible with the partnership ideal. The point of democracy is to make clear that we are all (equally) together in a common enterprise. Ideally, it should endorse procedures that ensure that we should all benefit (equally) from the common enterprise. Majority rule does not do so clearly. [FN45]

a. The Winner-Take-All Problem

All other things being equal, a majority ought to prevail over a minority on any given issue. The alternative, after all, is that the minority prevails, and that makes no sense at all. On the other hand, when a majority wins, even if by only a small margin, usually it wins the whole issue or even a whole set of issues.

And when the same majority repeatedly wins over a range of issues, what seemed obviously right becomes obviously wrong. Fairness, at least absent some special consideration, seems to require that a group of 51% get about 51% of the victories, 51% of the goods, 51% of the turns, win on 51% of the issues and so on. If a 51% majority gets 100% of the goods, majority rule violates this proportionality between the margin of victory and the result, or between the size of the group and its social weight.

Critically, the mere fact that the majority is a majority is not enough to justify departing from proportionality. One could argue that those who contribute more, or need more, or deserve more should get more, but it is hard to make any coherent argument for why those who are slightly larger in number, simply by that fact alone, should get anything more than a slightly larger share. A majority that uses its power to take a disproportionate share is using the minority as a means to the majority's ends--exploiting them rather than cooperating with them as partners. I will refer to this problem of majority overreaching by the familiar terms "majority tyranny" or the "winner-take-all problem." [FN46]

The Athenian democrats famously rejected majoritarian election on the ground that it violates equal citizenship. [FN47] Fairness, in their view, requires an equal chance of serving; they selected representative officials by lot (as we do, at least to some degree, in jury selection [FN48] and the military draft). Using lottery rather than popularity as a selection mechanism is a way of emphasizing the equality of the participants, especially in light of the obvious problems of competence and efficiency it raises. In more complex organizations, we may reject lottery (and even popularity) as selection mechanisms for reasons of competence or efficiency. But the Athenian concern remains: mere support of the majority, without more, is no justification for taking an unfair share.

Similarly, in our business law--where well-funded representatives of different interests have both the incentive and opportunity to debate and negotiate deals they perceive as fair--we reject the idea that a majority or their representatives can do whatever they want. In partnerships, the basic rule is unanimity (much as in classic social contract theory, in which fundamental rights are determined by a hypothetical agreement to which all rational citizens could be imagined to have agreed). [FN49] Majority rights are sharply constrained by the requirement that all fundamental changes require unanimous consent, [FN50] and even more so by the inalienable right of any partner to cause dissolution at any time for any reason, which guarantees that any decision which any partner views as highly significant must be unanimous. [FN51]

Corporate law uses fiduciary duties to achieve similar limitations on majoritarianism. [FN52] Voting majorities of the corporation have no right to change the fundamental corporate goals or norms. [FN53] A voting majority cannot decide to allocate corporate funds to itself and not the minority. [FN54] Elected board of directors are barred from treating those who voted for it differently from those who voted against: directors have a judicially enforceable fiduciary duty to act in the interests of minority shares just as much as majority ones, and indeed, in the interests of all the shares regardless of the views of the shareholders. [FN55] Proportionality, in this law, is more fundamental than majoritarianism.

Perhaps most evocative of all, where nothing is at stake but our sense of right and wrong we also reject unbridled majoritarianism. A kindergarten teacher who allocated important positions--class monitor, eraser collector, and so on--by pure election with no rotation principle would clearly be in derogation of duty. We teach kids to take turns--not to act as baboons would (or some aristocrats would have their inferiors do), by deferring to grabbing by the strongest, most popular, or best connected. [FN56]

More generally, in any common enterprise when decisions cannot be made unanimously, fairness and equal consideration or joint membership seem to call for an allocation based on something like proportional sharing or taking turns: you win some, you lose some, and in the end, everyone comes out with some roughly similar proportion of their needs and desires fulfilled.

Majority rule, on the other hand, is winner-take-all; majoritarian systems can easily violate the fairness or proportionality principle, especially if the majority is readily identifiable and it acts in its own interests rather than the interests of the community as a whole (or the losers perceive it to be doing so) across a range of issues. [FN57]

For this reason, most defenses of majoritarian democracy assume away fixed majorities. Majority rule is most attractive when different people will be in the majority on different issues in rapidly shifting pluralist coalitions. [FN58] Then, assuming that majority rule is restricted to logrolling, pork barrel, or distributive issues, and that all groups are allowed into the pluralist bargaining game, majority rule by coalition building can be imagined to be likely to result in a rough proportionality rather than winner-take-all.

Rough proportionality is, of course, a difficult problem. Consider the well- known problem of the utility monster: the person whose needs (or desires) are so great that to satisfy even a small portion of them would require most of the available resources. Or to similar effect, consider the difference between two versions of the proportionality principle: "those who do not work, neither shall they eat" vs. "to each according to his needs." Different understandings of proportionality give rise to different--and incompatible--distribution principles. Only a miracle--like manna at Sinai--will make them coincide. [FN59] Thus, we are told that each Israelite ate what he or she collected (the work objectively contributed affects desert), that each collected according to his or her other abilities (subjective effort is also relevant), that each gathered according to his or her eating (needs are relevant) and according to his or her desires (manna, on one account, tasted like the food each most wanted). [FN60] And then, it also met the criterion of equal division: "when they measured it by the omer, he who gathered much did not have too much, and he who gathered little did not have too little." [FN61] The Rabbis quite correctly viewed the happy coincidence of all these disparate measures of the correct distribution as a miracle of importance at least equal to the provision of manna itself. [FN62]

Even were we to agree on a single understanding of proportionality, determining whether it has been met requires examining a pattern of decisions rather than particular ones, an extremely difficult task. The difficulty of defining the notion of proportionality in any careful way in this context probably means that anyone who is inclined to feel exploited will be able to justify doing so, at least to his or her own satisfaction. Conversely, the complacent can justify even particularly greedy grabs as a possible result of political give and take and the compromise necessary to lead to proportionality. [FN63]

Moreover, fairness is not necessarily the only value at stake. We might want to give up on the proportionality principal because it involves too many meetings or negotiations, [FN64] or for the sake of faster economic growth. [FN65]

Indeed, in a true common enterprise, fairness and proportionality tend to be replaced as principles with friendship. Friends will often give disproportionately, following a different command that is not an equality principle at all--"love your friend as yourself." [FN66] In a political system such as ours, friendship can best be expressed through voting--but only if voters vote based on the interests of everyone, not just themselves. This is the power behind the notion of "republican virtue" or Rousseau's general will [FN67] (at least when those theories are not just a cover for excluding part of the population from the people, converting a nominally democratic regime into an exploitation or trusteeship one). With a sufficiently friendly electorate, majority rule would be a device for reaching a collective decision, but emphatically not a justification for voters' acting self-interestedly.

b. The Might-Does-Not-Make-Right Problem

Locke began his defense of the majoritarian principle by invoking the greater power of the majority: "it is necessary the body should move that way whither the greater force carries it." [FN68] But majority strength alone cannot be enough to justify majority rule. Majorities cannot transform wrong into right.

It is easiest to see that majority approval cannot make injustice into justice when the majority decides to exclude a "discrete and insular minority" from the political community: no one thinks that the apartheid of South Africa was worse than the Jim Crow of Georgia (but not Mississippi) simply because in South Africa and Mississippi but not Georgia whites were a minority. [FN69] There may have been other reasons why Jim Crow or apartheid was more or less reprehensible in different jurisdictions, but majority approval surely is not one of them.

But the problem is broader than active discrimination or extreme situations. Majority approval alone does not make an otherwise immoral, unfair, or unjust rule fair or acceptable: it just shows that the majority is immoral or unjust. [FN70] Thus, for example, neither side of the abortion debate accepts that even a definitive majoritarian ruling would decide the justice of the issue: a majority voting the wrong way simply shows itself to be wrong. [FN71]

Majority rule, then, always threatens to degenerate into tyranny of the majority. Unless each group or individual consistently receives a roughly proportional share of the victories, the principle of equal membership seems to be violated. [FN72] Unless the majority acts justly, justice is not served. [FN73]

c. The Boundary Problem

The "majoritarian difficulty"--its potential violations of the principles of fairness and proportionality and that might does not make right--is compounded by the fact that a majority only exists within a given set of decision-making boundaries, and losers nearly always can imagine an alternative set of boundaries in which they would have won. Majorities should win, but majoritarian theory alone cannot explain why the majority that determines whether Boulder has a gay-protective civil rights law should be the majority of Boulder, the majority of Colorado, the majority of America, the majority of the United States Supreme Court, or the majority of the signatory parties to the International Declaration of Human Rights. Nor can it explain whether the election on the future of Northern Ireland should include only Northern Ireland, all of Ireland, all of Great Britain, or each Irish religious community voting separately.

Once the losers have seen that alternative boundaries will result in different majorities, though, the decision no longer seems to be the result of a majority decision. Rather, the decision--and indeed the majority itself--is the result of morally arbitrary line drawing. [FN74]

2. Democracy's Discontent

These problems--the majoritarian difficulty, the might-does not-make-right issue, and the boundary problem--limit the extent to which democratic systems can justify relying on majoritarian decisions. Perhaps as a result, majoritarian systems tend to develop mechanisms to limit the power of majorities. These mechanisms include ideological demands that majorities set aside their own interests; multiple jurisdictions (so that different groups will be majorities in different fora, thus limiting the problem of majority tyranny but accentuating the boundary debate), removal of particularly salient issues from the majoritarian political agenda (as, for example, the original United States Constitution did with slavery and religion), and voting systems that lead to broad coalitions (whether within each of our two parties or in a post-election parliamentary multiparty coalition) with strong pressure to "log rolling" pluralism, in which even small groups get a share of the pie.

When democracies do not develop these limiting mechanisms internally, they tend to be subject to extreme fissiparous pressure as minorities seek to redefine the boundaries in order to become majorities. Thus, countries with well-defined minorities develop well-defined secession movements; on a smaller scale, sects--whether religious or political--split over major decisions. [FN75]

C. Markets and Their Failings

One way to avoid the majoritarian difficulties is to avoid making winner-take-all decisions. Political structures can limit winners' victories, as we have seen, through the structures of pluralism and federalism, including coalition building, logrolling, multiple jurisdictions, proportional voting, and so on. Alternatively, the majoritarian political process can defer to alternative decision-making procedures that do not suffer from the winner-take- all problem. One way to do this is through markets (another is through the classic liberal device of the limited, libertarian state).

Markets, like majoritarian elections, aggregate individual preferences. Because they aggregate, both markets and elections are (partial) expressions of the equal concern principle of liberal democracy as partnership. But markets aggregate individual preferences quite differently from majoritarian democracies. And the equality they express is not an equality of membership in the first instance, but an equality of dollars.

First, markets aggregate without a single collective or political decision. That, of course, is their great virtue. Each asset-holding individual can decide what type of sneakers she wishes to buy, and a functioning market will aggregate these individual decisions, assure that sneakers are produced to match the demand, and give the individual "voters" the information they need to make an intelligent decision (in particular, in an imaginary fully competitive market without externality problems, the price of the sneaker would reflect its cost to society, allowing individual consumers to make informed individual decisions about the social trade-offs involved). All this is done without anything resembling the time-consuming and divisive debates of democratic politics: within the market, there is no collective decision, no need for collective compromise, and no majoritarian winners and losers.

Because we each can get the sneakers we individually want, the majoritarian (winner-take-all) problem seems to drop out. In a fully competitive market, each individual purchaser should be able to obtain his or her preferred mix of goods, given objective constraints of the purchaser's resources and the social costs of production. Even if the majority always votes for white sneakers, the minority can have red ones. Accordingly, a market "majority" (defined, of course, by purchasing power rather than numbers) is more likely to win something like proportionality rather than total victory.

If this first difference between markets and democracy seems decisively in the market's favor, the second is less so. Market "voting" is by buying. Thus, "votes" are allocated per dollar rather than per citizen; markets are based on the principle that all dollars are the same rather than the political principle of equal membership of citizens. [FN76]

Relatedly, the market understanding of equality is entirely a-historical: one dollar is equal to another regardless of its ancestry or past history. Treating citizens' dollars as equal may often be a way of affirming their common membership--by comparison, for example, with aristocratic and caste systems in which some people are barred from transactions regardless of their assets. Thus, equality of dollars is clearly a step forward from Jim Crow, in which even African-Americans who could afford to do so were barred from buying admission to segregated facilities. The link is not automatic, however. In the next subpart, I consider the relation of market equality to democratic equality.

1. Market Impersonality versus Democratic Concern

Many of the conflicts of modern politics follow from the conflict between market norms and more political forms of the democratic principle of equal membership: whether, for example, electioneering (or medical care) ought to be seen as an attribute of membership in the political community, directly subject to the equal membership of citizens principle, or whether it ought to be seen as part of the economic marketplace, subject to the equal dollar principle. [FN77]

a. Affirmative Action from Market and Political Perspectives

Much of the affirmative action debate is easily understood as such a conflict of norms. In an ideal market context, the personalities of the buyer and seller are irrelevant: one hundred shares of IBM sold by a felon is the same as one hundred shares of IBM sold by a saint. All that matters is the product and the price. Furthermore, the market principle is explicitly a-historical--dollars are fungible without regard for where they came from. This is an expression of the market norm, that is, equality of dollars: my dollars should be as good as yours regardless of their provenance or mine.

The market ideal is anonymity. Anonymous buyers and sellers, as in the stock market, must treat each other equally, without regard for personal characteristics other than the product for sale and the cash offered. Outside of the stock market, of course, the product being sold often includes personal characteristics--qualifications, credit-worthiness, and the like--making anonymity impossible. But the market model suggests that we should attempt to approach the stock market's anonymity as much as possible: we should try to set aside all personal characteristics other than the qualifications that are specifically for sale or hire.

If contracts ought to be awarded to the lowest bidder in an impersonal market in which we do not look behind the product or service offered to the moral qualities of the transacting party, market ideals suggest a sharp distinction between qualifications and irrelevant extraneous characteristics, such as the candidate's history or race. On this understanding, the problem with racism is that it brings an irrelevant personal consideration (race) into a market context: similar products (candidates) are treated differently. Race almost never will be a relevant qualification; considering it seems a paradigmatic violation of the principle that economic decisions should be made without regard to the personal characteristics of the market actor. Thus, the market anonymity norm clearly leads to race-blindness.

Furthermore, on this view, affirmative action is closely related to the harm it seeks to avoid: affirmative action, by treating minority contractors differently from others, treats one individual's dollars, products, or qualifications as different from another's. Under the market understanding, affirmative action can only be justified as a specific remedy for offsetting racism: if racism leads to systematic undervaluing of minority group members' qualifications, then a countervailing thumb on the scale might balance out matters.

On this model, though, past discrimination is essentially irrelevant and cannot justify current discrimination. Defenses of affirmative action must be in the present tense: some form of current discrimination is leading to current undervaluing of the qualifications (or money, or characteristics) of minority candidates. [FN78]

Defenders of affirmative action, in contrast, often see the issue as one of politics, not economics. Members, not their qualifications or cash, are central to this model. On this political rather than market view, the issue is one of equal concern for members of the political community. It seems evident that some members, and even more clearly some groups, historically have not benefited from our common enterprise to the same degree as others. Indeed, Jim Crow is best understood as a simple rejection of the Fourteenth Amendment promise of equal citizenship: [FN79] African-Americans were excluded from membership.

In a mutual assistance association, it is entirely appropriate for those who lost out on one deal to win on another: indeed, to create "rough equality" it is mandatory that those who were disfavored in the last round be favored in the next. We teach our kids to take turns, after all. On this view, preferences for the formerly disadvantaged are not violations of equality but the only way to achieve it. Thus, minority race itself, as a signifier of past discrimination, may not be irrelevant but the most central personal characteristic of all.

On this view, there is no need to demonstrate that the current city council is (consciously or unconsciously) discriminatory: if a minority group has finally won control, it is entirely appropriate for it to favor those who were disfavored in the past. Turn-about is fair play--now it is someone else's turn. History is not irrelevant but utterly central; pedigree matters. On this view, even innocent beneficiaries of past discrimination are beneficiaries nonetheless. Those who have less than their fair share ought to have a chance to make up for the past. In short, on the political view, "race-blindness" instituted midstream is an unfair change of the rules when the other side might finally be able to win--merely a continuation of the old discrimination. [FN80]

b. Market Equality versus Democratic Equality

Market equality can be explicitly opposed to democratic equality. Markets treat dollars as equal. People in markets are equal only to the extent that they have equal dollars. Democratic principles, in contrast, require that we treat members as equals, and dollars are not members. Often, of course, markets will be useful, if partial, tools to implement equal membership, and generally treating members' dollars as equal furthers the goal of treating the members themselves as equals. But there can be no assurance that they will always do so; the proper place of markets in a democracy must always be debated.

2. Market Difficulties

Markets also have other distinctive problems.

a. Aggregation Errors

The first set might be referred to as aggregation errors. Unlike majoritarian politics, markets do not invite citizens to consider the common good or offer the possibility of a politics of friendship. On the contrary, markets often preclude any but self-interested considerations. [ FN81] People pursuing their individual interests sometimes will be led, as by an invisible hand, to remarkably perverse results: markets for lemons, monopoly distortions, excessive production of negative externalities (such as torts or pollution), underproduction of public goods, strategic betrayal of the prisoner's dilemma variety, "arms races" or Frank's "big antler problem," [FN82] and so on. In these cases, the market fails as a aggregative system within its own framework, much as a democratic voting system does when its results are determined by Arrow's paradox, or agenda manipulation. [FN83] That is, they reach results that seem clearly wrong simply as aggregations of the relevant individual preferences, without reaching deeper problems of how those preferences were formed or whether they are all that count.

A classic utilitarian thought experiment suggests we imagine an entire society as if were a single person who experiences all the pain and pleasures of all the individuals in the society. A proper aggregation would then be one that such an aggregate person might experience. These first market failures aggregate in a way the single being never would: for example, the aggregate person would immediately seek to eliminate nearly all zero-sum status competitions, would alter the price and production functions of monopolies, would act as if all externalities were internalized, and so on. Rawls' objection to utilitarianism, that this type of aggregation does not take seriously the differences between people,[FN84] is not, I think, relevant here: entirely self-regarding individuals would agree that they would be better off without any of these market failures. That is what I mean by calling them aggregation errors: the people whose views or actions are being aggregated would pick a different collective and individual result if they could escape the imperatives of the particular market failure.

Markets fail in yet a different way when, with or without political guidance, they efficiently produce goods that many might consider "bads": cocaine, cigarettes, Saturday Night Specials, kidnapping for ransom, or more controversial items such as violent movies, vacuous television, high levels of geographic mobility, or (at least with sufficient side-subsidies) suburban sprawl. In these circumstances, some--nearly everyone in some instances--would prefer to live in a society where these "bads" were not produced even in the face of consumer demand.

b. Collective, Non-Aggregative Results

A distinct set of problems involves unfortunate results that do not stem from aggregation. As in the case of the extreme income inequality of the last couple of decades, the market may produce a dangerous or disturbing result that is important even though it cannot be understood as an aggregate at all: no one "voted" for inequality even though inequality is an explicable result of individual actions within a particular market framework. And other externalities--pollution, traffic jams--may be similarly unintentional but predictable results of particular market rules.

c. The Majoritarian Difficulty and Boundary Problems in Markets

Markets also raise difficult political issues parallel to the might-does-not- make-right and boundary problems of majoritarianism.

First, the fact that a market generates a result does not make it moral, right, attractive, or even natural--just as majority approval cannot transform moral wrong into moral right. In the first group of market failures, the market participants would reject the collective result if they could do so--but as the examples of efficiently produced "bads" demonstrates, it is possible that a market might properly aggregate to a result that, nevertheless, is bad from a perspective outside of aggregation. Market results can be judged by external criteria and often will fail.

Second, markets have issues analogous to the majoritarian boundary problem: like democracies, markets function within set parameters and generate different results based on those parameters. A market in which highways, gasoline, and utility connections are highly subsidized, publicly provided goods; schools, parks and welfare services are provided by local jurisdictions with only easily evaded taxation powers; job training and urban landscapes are purely private, externalizable, costs; and mass transit and cultural institutions are expected to break even, will predictably produce different land use than one in which those rules are reversed. Under different legal rules about union organization, CEO compensation, corporate board elections, minimum wage, employee tenure, or income consumption and wealth taxation, the same market participants would reach radically different levels of inequality. It is not so much the market nor its participants' tastes but these background rules--analogous to the political boundaries of political democracies--that make the difference between Paris and Houston, Denmark and the United States. For this reason, all modern democracies restrain, direct, guide, and manipulate the markets they live by.

1. The Boundary Problem I: Background Conditions to Make Choices Voluntary

The most important boundary for markets is the boundary between voluntary and involuntary transactions. The former are the ones the market honors; the latter are theft, oppression, force, fraud, hostage taking, and other crimes. [FN85] Strong policing of this boundary is necessary for markets to function effectively or efficiently. [FN86]

A voluntary transaction is one to which parties agree, under some set of background conditions--excluding promises of broken kneecaps, for example. Presumably, each party agrees to the transaction because it concludes that it is receiving at least as much as it is giving. This, of course, is the familiar argument for why markets are fair: assuming the background rules sufficiently define voluntary agreements, each side has agreed to the deal, each side views itself as better off after the transaction than before it, and the world as a whole has improved in a pareto optimal way. After the transaction, both parties are better off, no one is worse off, and coercive or otherwise improper exercises of power appear to be non-issues.

In this picture, competitive markets cannot be coercive or redistributive unless something is wrong with the background conditions. Background rules do make a difference, though. If King John cannot police Sherwood Forest and Robin Hood offers his rich victims a deal the terms of which are "your money or your life," a nobleman who turns over his assets has made a choice to do so and presumably views himself as better off than if he had taken the other alternative. Thus, he has sold something for equivalent or better value, and the transaction appears to be pareto optimal. Yet it surely is both redistributive and coercive, whether or not it is efficient: any reasonable nobleman would prefer not to be offered the transaction at all. [FN87]

The challenge for market theorists is to define a set of background rules that clarify the differences among Robin Hood's proposed transaction, a railroad that proposes to be paid not to emit sparks that will burn the farmer's field, a dock owner who refuses to allow port in a storm, a monopolist that refuses to serve a customer except at an exorbitant price, the grocer who offered Jean Valjean a choice of "your money or no bread," [FN88] or an employer who proposes a transaction of "my terms of employment or no money," so that Robin Hood's transaction is not voluntary and at least some of the others are. If the line is drawn too far towards Robin Hood, protection rackets will be efficient and the market will resemble civil-war era Beirut, Hobbes' state of nature, or Dickensian London more than anything anyone would want to live in; [FN89] if it is drawn too far in the other direction, the market will disappear altogether.

More generally, the attractiveness of free trade, voluntary agreements, and the capitalist system generally depends intimately on the legal understanding of "voluntary"--the boundary between binding agreements and coercive illegitimate overbearing. Any persuasive account of voluntary transactions will have to exclude at least some facially permissible market transactions. At some point, a combination of sufficiently poor pay, bad working conditions, and lack of other alternatives, whether due to the prospective employee's limited skills or her limited mobility, begins to look like duress: at the limit, a prisoner's employment contract is not "free" in any meaningful sense. [FN90]

Baby selling, organ selling, and self-enslavement are not permitted in decent market societies, perhaps because it seems hard to believe that any normal person would sell their baby, internal organs, or self except under duress, that is, when faced with a set of choices that no one should have to face. [FN91] But these dramatic cases only illustrate a more general point. In practice, we highly regulate all voluntary transactions, or, more precisely, it is only by virtue of regulation that we can define which transactions are "voluntary." The background rules regarding duress, fraud, property, warranties, disclosures, and so on, define the voluntary space.

Even within these broad rules, we regulate the most important markets even further. For example, ordinary labor contracts are sufficiently disturbing that we do not enforce them by injunction; unions can form only under highly constricted conditions; businesses can obtain partial exemptions from usual liability rules by incorporating, but if publicly traded are subject to an extensive prior-restraint speech system in order to allow a free market in securities to function; necessities such as education, roads, gasoline, farm products, water, and utilities (and in other countries, medical care, pensions, and trains) are often highly subsidized or otherwise regulated, as are aspects of our cultural heritage such as baseball stadiums, libraries, Western ranchers and military bases. [FN92] Whatever moral power voluntary agreements have, it is not strong enough to make them irrevocable or fully freely negotiable even where the contracting parties do seem to have a range of options. [FN93]

Voluntariness, in short, seems to be the key to many judgments about the proper range of market transactions. And the key to voluntariness seems to be in the range of choices available: the more the individual has a wide array of alternatives, including practical alternatives to even considering the transaction (no, Mr. Hood, I'd rather be held up by the guy who is offering to pay the rich ...), the more the transaction seems voluntary and the more pareto optimality seems attractive. Other aspects of voluntariness involve judgments about the particular object of choice, or efforts to restrict the range of variation so that bargaining can efficiently focus on just a few salient choices.

2. The Boundary Problem II: Protection Rackets and Free Markets

The individual's range and objects of choice are not the entire story, however. Collective (political) moral and legal judgments about legal entitlements also determine market results. The usual understanding of the Coase Theorem [FN94] is precisely wrong: the accepted background rules, not personal preferences, are the most important factors in determining how social resources will be used.

Consider Coase's famous example of the conflict between a rancher and a farmer. [FN95] Farmers grow grain; ranchers' cows eat the farmers' grain. Coase argues that, in the absence of transaction costs, it does not matter whether this conflict of uses is viewed as the farmer interfering with the rancher or vice-versa. That is, the resources will be used in the same way whether farmers have a property right to recover the damage that free roaming cows cause or ranchers have a property right to let their cows run free. Regardless of who receives the property right initially, it will be traded until it ends up in the hands of the party that values it most highly. This is Coase's Invariance Principle: marginal costs and consumer preferences, not legal entitlements, determine the social allocation of resources.

As Coase emphasizes, the Theorem's invariance principle applies only in a world of no transaction costs. When transaction costs are high, as they usually are, no trades will take place. Thus, allocating the property right to the farmer means more grain and fewer cattle, since the farmer's costs of production will be lower and the rancher's higher than with the reverse allocation.

When transaction costs are low, Coase argues, resource use will be the same regardless of who receives the initial property right, because one party will have the cost of liability as a cost of production and the other will have an equal opportunity cost of a lost liability claim as a cost of its production. The Coase Theorem states that when (as in a world without transaction costs) costs and opportunity costs are the same, the marginal costs of production are the same under the two property regimes and therefore the social allocation of resources will be the same. [FN96] The property right has no effect - the final allocation is driven only by relative marginal costs (and, ultimately, consumer preferences).

But costs and opportunity costs differ in a number of important ways, not the least being what Coase refers to as the income effect. Farmers for whom ranchers are an opportunity cost have a higher income than farmers who must pay them to go away: the former receive payments while the latter must make them.[FN97] This means either that farmers are richer than were the opportunity costs reversed, or, in a world of perfect competition, that the price of grain will be competed down. In the latter case, it seems fairly obvious that we will have more grain and fewer cattle, as the marginal consumer becomes vegetarian. Even in the former case, however, as farmers become richer and ranchers poorer, given the diminishing marginal utility of money, ever richer farmers should require ever larger bribes (or opportunity costs) to deflect them from their preferences, just as ranchers will be ever less able and willing to provide them. If farmers have values (or tastes) that differ from those of ranchers (and that go beyond wealth maximization), the initial allocation thus again will affect whether the final allocation reflects farmer values or rancher values. The invariance principle should be quickly defeated by the income effect in a multi-period world.

Next, as Thaler and others have pointed out, the Coaseian story also relies on the false assumption that farmers and ranchers treat opportunity costs as the same as real costs, or what seems to be the same thing, have a single indifference price at which they are willing to buy or sell: at $10, the farmer is indifferent between retaining, selling or acquiring the right to be free of cattle intrusions. [FN98] But indifference prices exist largely only in economics textbooks.

In real life, people generally have very different prices for buying and selling: ordinarily, they insist on more to sell something that they own than they would be willing to pay to acquire it. [FN99] Think, for example, of what your reaction would have been if someone had offered to buy your newly acquired house on the day of the closing for the price paid (including closing costs, compensation for time and so on) plus $10,000. Surely it would be a rare person indeed who would accept this opportunity to make a free $10,000, even if they had just paid precisely the maximum they were willing to for the house. Even on Wall Street, our most competitive and lowest transaction cost market, everyone assumes that there is a wide range of prices in which investors should "hold" stock: that is, the price is too high to purchase more, but too low to sell.

Accordingly, there is no reason to believe that a farmer would be willing to pay as much to acquire a right to exclude cattle as she would demand to sell that right. Whenever this "hold" position exists (Thaler refers to it as the "endowment affect"), [FN100] the initial allocation of property rights will have profound effects on the ultimate resource use regardless of income effects or transaction costs.

Thaler's insight suggests an additional reason to doubt that Coase's Invariance Theorem will apply in any approximation of the real world: farmers and ranchers will take radically different views of the transaction depending on whether they are persuaded it is voluntary. And whether the transaction is voluntary depends on their views of the initial allocation of property rights. [FN101]

Thus, a farmer who believes that common law trespass rules reflect the natural law of property (and apply to cows) should take a very different view of the transactions Coase contemplates than one who believes that the enclosure movement was one of the great crimes against humanity or that cows have a God- given right to eat what they find. [FN102]

Imagine, for example, that Coase allocates the initial right to the rancher: cows may wander, and farmers who would like to preserve their grain must fence or pay ranchers not to release the cows. A farmer committed to the law of trespass is likely to see the rancher's claimed right as an oppressive outrage. The rancher is using the farmer's property without paying for it. [FN103] That is theft. Then, he compounds this injury by demanding that the farmer pay him to stop. That is just a protection racket. And while it may sometimes be rational to pay protection money, it is never voluntary. This farmer, whether or not she pays the protection money, should seek legal protection to bar a fundamentally unjust transaction.

In contrast, imagine a Coaseian allocation of the rights to the farmer, and ranchers who accept the claims of the anti-enclosure movement. Once again, Coase's proposed sale of the initial rights will appear not voluntary but coerced. Cows, and buffalo before them, have wandered the West since long before there were farmers; no one should have to pay bribes simply to continue to practice the profession of his fathers. The farmer's attempt to exclude grazing cows is no more than a land-grab--a violation of the rules of the game and a forcible taking that reasonably can be resisted in kind. Violating the rancher's right to run his cattle on land he does not own is not much better than rustling. [FN104] The rancher is more likely to cut fences, join the County Independence movement or demand that Coase be removed from legal authority and the rule reversed than he is to pay the farmer in order to keep what is his anyway. [FN105] On this view as well, Coase's proposed trade is not voluntary but theft.[FN106] Whether participants view their initial entitlements as reflecting a just legal system or, rather, as no more than oppression in the guise of law, will affect how they respond to the initial Coaseian allocation of rights and what the end results of market transactions are likely to be (including whether they will seek to go outside the market to overturn market results). [FN107]

The point here is one often made in criticism of simplistic Benthamite criminal law schemes. Bentham (and modern successors) model criminal law as a simple matter of negative reinforcement provided by the government to discourage undesirable behavior.[FN108] But negative reinforcement has radically different effects depending on how it is understood by the recipient: if even a dog knows the difference between being kicked and being tripped over, people also know the difference between fair kicks (punishment) and unfair ones (arbitrary oppression). Faced with arbitrary oppression, many people respond by increasing resistance, not by conforming to the oppressor's ideal. In the Intifada, Revolutionary America, late apartheid South Africa, and perhaps even late Soviet Russia, an increase in (illegitimate) governmental force only led to further opposition. [FN109] This is also true in this civil context. People will only treat market transactions as voluntary to the extent that they view the underlying background rules and allocations as fair. Perhaps this is why gross increases in CEO salaries are often said to be followed by increases in petty employee theft: one abuse generates another.

In another layer of complexity, the endowment effect is likely to interact with this "righteousness effect." Given any set of preexisting moral or legal beliefs, Coase's initial allocation will tend to "endow" the in-group with a stronger sense of its righteousness. [FN110] Again, the final allocation of resources is more likely to be determined by the initial one than by social costs or individual preferences imagined to exist outside of a particular history, a contestable legal context or a changeable set of market boundaries.

Voluntary market transactions, then, only exist within a commonly accepted set of background rules of property and related law. Coase notwithstanding, the background rules, not the market, will largely determine the ultimate allocation of resources. This is because of transaction costs, income effects, endowment effects, and the fact that only the rules and the participants' acceptance or rejection of the rules will determine which transactions are considered voluntary and legitimate and which are not. From the point of view of one participant, paying bribes to the other in order to induce them to respect the former's pre-existing property rights is just a protection racket, not economic efficiency. The farmer would be better off if the rancher would just disappear (or if the sheriff would prevent his cows from trespassing), and vice-versa.

The distinction between protection rackets and free trade sets the boundaries of the market. On the one hand, pace Coase, that boundary can no more be determined by purely market forces than democratic majoritarianism can determine the boundaries of the polity. On the other hand, much as political boundaries can determine the results of majoritarian elections, so too will the moral/legal accounts of the boundaries of permissible market transactions determine the results of market transactions. And much as the boundary problem makes majority rule a mere artifact of arbitrary (pre-democratic) decisions, so too the malleability of the market's background rules, which cannot themselves be defended on market terms, undermine any claim that the market's results are necessary consequences of market processes. In each case, the system's results can be manipulated beyond the system's own parameters.

3. Voluntary Markets, Private Power, and Redistribution

Markets also raise critical issues that are quite different from the majoritarian and boundary difficulties. The coercive power of markets is radically different from that of democratic politics.

Markets function by voluntary self-interested transactions. For current purposes, two aspects are most important. First, markets cannot restrain private power, whether properly exercised or not. Second, voluntary self- interested transactions readily redistribute from the needy to the privileged, but never the other way around. This point is simultaneously obvious and somewhat obscure, so it may be worth exploring in more detail, particularly since the normal framework of undergraduate economics excludes it.

a. Voluntary Transactions and Upward Redistribution: How the Rich Get Richer

In a well-regulated market economy with an adequate safety net, most people, most of the time, will have sufficient alternatives that market transactions will be voluntary in the necessary sense. In this part, I mean to set aside the Jean Valjean and the baby-selling problems. Even assuming that the background rules discussed above have been set in a reasonable way, markets will create serious problems of power.

Here, I mean to emphasize the opposite of Jean Valjean: for the reasonably well off, a market economy offers so many choices that there is rarely any reason to accept an unattractive deal. That is, markets do not coerce participants who have an array of choices. Since markets do not limit the freedom of action of those with choices, they do not regulate. Rather, markets allow those with market-attractive resources to do just as they please.

It follows then that markets never redistribute income, power, privilege, or wealth from the better off to the worse off. This is true in a tautological sense if "better-off" is defined as having more of those resources that the market values: those individuals always have a wide range of choices and can simply decline to participate in redistributive enterprises.

If "better-off" is understood in any other sense, it is a generalization to which there will be many exceptions. Most notably, markets are not respectful of past status hierarchies: even before the coming of the messiah, in market economies "those who are last, they shall be first." [FN111] Markets will mercilessly take from those with bad luck or poor timing regardless of current status. They also allow some individuals in the right place at the right time to convert that place advantage, particularly if it is accompanied by good ideas, initial wealth, hard work, and good luck into sometimes startling wealth. On a broader scale, kids who perform well (or poorly) in school (or are lucky or unlucky in their choice of career) are likely to have significantly higher (or lower) incomes than their parents.

Of course, one should not exaggerate the mobility of our market society. Since place advantages often build on themselves, markets do not churn the income distribution as much as popular myth sometimes suggests. At the middle class level, having well-off parents is a strong predictor of doing well in school. [FN112] At the very top, many rags to riches stories turn out to be, rather, riches to super-riches: George Bush, Bill Gates and Donald Trump are prominent examples of self-made men who were born to very wealthy families. [FN113]

However, to whatever degree markets churn their participants' positions within the income distribution, they will not set out--as political systems occasionally do--to reduce the gaps between rich and poor, to ensure that the better-off turn over some of their wealth to the worse-off in a systematic way, to ensure that everyone receives a decent minimum, or to prevent the very rich from fully exploiting their relative advantage. It is extremely difficult to use markets as a tool for achieving distributive justice (or, for that matter, social stability). People with choices simply will choose not to give up their privileges; markets will not require them to do so. Markets are therefore a poor tool for downward redistribution.

Markets do, however, redistribute upwards routinely. Given the diminishing marginal utility of money, it takes more money to make any given transaction attractive to a wealthy party than to a poor one. The rich guy, after all, can always go hang around on the beach; the poor one has to eat. If it takes more to attract the rich than the poor--because the former have more options and can be pickier--it seems to follow necessarily that even when market transactions are voluntary (in the sense outlined above, namely that market players have sufficiently attractive alternatives to the particular transaction), and even when each of the players are better off with the transaction than without it, the wealthier participant--the one who can walk--is likely to end up with relatively more than the less independent participant.

Thus, pop business advice books point out that the key to negotiation is being willing to walk; the one who can walk will always get the better deal. To attract and keep successful CEOs, companies believe they must offer million- dollar salaries, and then still more--multimillion-dollar stock option plans re-priced to retain their value even if the company's stock does not--to provide these expensive executives with an adequate "incentive" to do the job they were hired to do. To attract and keep essential line workers, it is generally assumed that far less is necessary. [FN114]

If indeed it is the case that the rich can demand more of the surplus created by trade, whether in a particular negotiation or more broadly, the market redistributes upward in this sense: market transactions, ceteris paribus, are likely to lead to increased inequality. Precisely because each party to the transaction must receive something of at least as much subjective value as what they give up, the market assures that those with more, get more. Nor is this contradictory to economic efficiency: if everyone is better off (in terms of the value of the goods they command), the transaction is efficient in the usual sense of the word.

These efficient market transactions, by making the wealthy wealthier faster than the poor, increase the gap between rich and poor. That gap, in turn, is often as important as absolute numbers: relative wealth often matters more than absolute wealth. [FN115] In hiring, for example, the master's wealth relative to the servant's is far more important than the absolute amounts concerned. And in politics, it has long been recognized that radical inequality threatens republican democracy.

A critical failing of markets, then, is that left to their own, markets tend to accentuate, not mitigate, preexisting inequalities. A functioning market is a sort of reverse Robin Hood: it gives more to the rich than the poor. The counter-Coaseian problem discussed in Part II.B further increases market-created inequality. The party issued the initial allocation of rights will have a permanent, ever increasing, head start: first, because the endowment effect makes wealth in the hands of the endowed party worth more; second, because the endowed party will be accepting bribes rather than paying them (the income effect); third, because in the second period, the endowed party, now wealthier and therefore with a diminished marginal utility of money, will require a still larger bribe to give up its rights; and fourth, because the endowed right effect will create an aura of legitimacy for the initial unfair endowment. In the first instance these effects (along with standard transaction costs) mean that a sub-optimal number of trades will occur. Further, however, they mean that the trades that do occur will tend to further enrich those made wealthier by the initial endowment in a cascade. As the aphorism goes, the rich get richer. [FN116]

More generally, the more open and competitive a market is, and the more resources a market participant commands or the more options that participant has, the less the market can coerce the participant. That is the sense in which markets promote individual freedom. But individual freedom is not always the same as collective freedom; otherwise we would all be anarchists. When freedom is relative, as it is in markets, the increased freedom or wealth of the rich means fewer options for the poor. Markets tend to accentuate initial inequalities, not reduce them.

Since "voting" in market systems is by purchase decisions, property rules that give wealth to one party rather than another also determine whose views count for more in the next round. Functioning democracies tend to dilute victories over time, as the winners in one round lose in another; in contrast, markets tend to accentuate small initial victories into ever-larger conquests, as the rich get richer ever faster in a cascade. There is no avoiding the conflict between democratic norms of equal respect (which often require taking turns) and the a-historical market norm of treating all bidders the same.

D. Civil Society: Aggregation by Membership and Governance by Exit

Democracies consist of more than just majoritarian politics and economic markets. Voluntary associations--the civil and political associations that de Tocqueville saw as the distinctively American contribution to democratic life-- remain critical to American self-governance. [FN117] Albert Hirschman has explained the key decision-making structures for this sector; his "exit," a market-like aggregating process, is the key mechanism in the "market" for voluntary associations as well as corporate law and some regulatory law. [FN118]

Hirschman describes an evolutionary process of governance by selection. [FN119] When individual decision-makers find the product of an organization (or the organization itself) attractive, they join. If they find the reverse, they exit. Organizations prosper or fail to some degree based on the extent to which they are able to attract members, much as producers in a market succeed or fail depending on whether they are able to attract customers. In each case, the organization can be controlled without any direct political mechanism: even an organization with no representative institutions whatsoever may represent its members if they are free to enter and exit, just as companies may be able to produce what their customers want without any formal mechanisms for customers to voice their preferences. [FN120]

Like markets, control by exit is control by Darwinian selection: those organizations that adapt, succeed. Like biological evolution, success and adaptation in this context are defined tautologically. "Adapted" means no more than able to survive (and prosper?) in a given environment--it may have only limited implications as to ability to survive in some other environment and none at all as to beauty or morality or any other value. [FN121] Survival of the fittest means just that those that are able to survive, survive: what they are fit at is survival under the conditions in which they survive (and fittest only by comparison with those who do not survive). Nothing more: in civil society, as in markets and elections, survival or success do not necessarily equate to desirability.

In a system of organizational selection by exit, survival has two important implications. First, the current participants are satisfied enough (or find the alternatives sufficiently unattractive) to remain in the organization. It follows that the organization, whether by design or accident, is meeting some need of its members (or they are constrained from leaving for some reason). Second, the members are numerous (or wealthy) enough to sustain it.

Hirschman's most important insight is pointing out that where exit is both simple and unconstrained, internal democracy may be relatively otiose: those who are unhappy with current policies are more likely to depart than to protest. [FN122] This is, no doubt, a key reason why corporate shareholder elections so rarely are contested and so often result in voting results that look more like Leninist plebiscites than democratic debate. Shareholders control corporations largely by a Hirschmanian process, following the "Wall Street Rule" (sell, do not protest, if you do not like what management is doing) when they dislike policies and bidding up the shares of firms they find well run. [FN123] Internal electoral politics are largely unnecessary to assure alignment of management and (current) shareholders since those who disagree with management will simply leave. [FN124]

Exit differs from market in that voting is at least partly per participant, rather than per dollar, and it is more democratic to that extent ("partly" because the organization may be more interested in dollar support than numbers of members). Corporations, however, are a significant exception to this generalization, since both corporate voting and exit are per share (or per dollar), not per capita.[FN125]

The coercion issue differs somewhat as well. As in markets, the key issue is choice. Whether individuals have an effective right of exit depends on the collateral costs of exit as well as the range of alternatives available. If the range of choices is wide enough, a system of exit extends great freedom to participants and largely eliminates the ability of the various institutions to coerce their members.

In the corporate law context, we rely almost exclusively on exit to limit the firm's ability to coerce its non-shareholder participants. Thus, customers have various legal rights (for example, breach of contract and breach of warranty) but the one that allows them some control over the firm is the right to take future business elsewhere. The importance of exit is most obvious in the case of (non-union) employees who, under the doctrine of employment at will, are understood to have virtually no other procedural or substantive rights on the job.[FN126] Of course, whether exit is a useful source of protection to employees depends on whether they are genuinely mobile: whether they have commitments, social or otherwise, to their current jobs, and whether they are (and know they are, and employers believe they are) able to find similar ones elsewhere.

Shares in contrast do have a few formal governance rights (both procedural and substantive). Nonetheless, free exit remains their most important control mechanism: it is generally assumed that shareholders influence the corporation mainly by driving the price of its stock up or down as they buy or sell. Ease of exit by individual shareholders means that public corporations rarely can oppress shareholders, although they often disappoint them. [FN127] In close corporations (and in end-games in public corporations) where free exit breaks down, the other rights often prove of little worth. [FN128] Finally, at the political level, the ability of corporations to exit any particular state's law virtually eliminates any possibility that states can coerce corporations by law.

The multiple associations of civil society spectacularly avoid most of the problems of majoritarianism and markets discussed above, since exit limits their power of coercion and boundaries are flexible, multiple, and largely defined by current participants. By joining or leaving groups, individuals choose their own boundaries and place their own limits on the power of the majority (or the governing elite).

But pluralistic civil society has problems of its own, parallel perhaps to the market's ever increasing cycle of inequality. First, an organization may be able to free itself from answerability to any external norms or participant support, becoming instead a self-sustaining pot of money employing professionals to promote a set of goals with no one in a position to change or restrain them. A fully funded foundation, thus, may be answerable to no human being at all: each human who works for it may view her role as requiring her to set aside her own beliefs in favor of a fiduciary responsibility to a imagined purpose. [FN129] Ordinary publicly traded business corporations are largely similar in that no one in the system has the authority to set the firm's goals. Managers are professionals, entitled only to pursue the corporation's interests as defined by external norms of profitability. Shareholders as voters are a pressure group for a particular understanding of profit, but lack authority or mechanisms for balancing that goal against any conflicting ones. Shareholders, customers, and employees can influence the firm through their market decisions, but like the shareholder electorate, have no way to express multiple roles or value conflicts. [FN130]

Second, the right of exit is not necessarily enough to free individuals from coercion by their organizations. Much as exit is of little use to shareholders in close corporations--they have the right to sell but no market in which to find a buyer--so too the right of exit may prove useless to people whose lives are bound up in important ways with institutions. We typically view municipal taxes as coercive, although avoiding them is as easy as moving: but moving (literally or figuratively, whether to avoid municipal charges, unpleasant or unfair employers or church oppression) means breaking social ties, creating new friendship and professional networks, uprooting children and other family members, and so on. Exit may come at a high collateral price and seemingly voluntary choices may, just as in the market, be more or less constrained.

Only when exit is reasonably free of collateral consequences is it right to view the coercion problems as solved. A free market in toothpaste, where most consumers can choose to exit existing relationships with virtually no collateral issues at all, is far more likely to be non-coercive than a market in local utilities or even high-priced rentals: one can avoid the water company or entrenched landlords, but only by moving elsewhere.

In short, civil society poses democratic problems principally where the organization is on autopilot and may have impacts on non-members (as in the corporate and foundation examples above) or where exit is not readily available, so that groups can impose on their constituents--corporations on shareholders as a group or on immobile employees, churches on dissidents with extensive social ties, and so on.

E. Normative Systems

Political majoritarianism, the market, and civil society characterized by free exit from a multiplicity of groups each aggregate the opinions and views of their participants. In contrast, the normative systems-- bureaucracies, judiciaries, and similar institutions--operate quite differently.

1. Normativity and Deference

In normatively based structures, professional decision-makers attempt to apply a set of normative values on behalf of clients who for one reason or another are unable to or barred from deciding for themselves. Unlike decision- makers in democratic and market systems, these professionals are expected to set aside their own values to the greatest extent possible. Furthermore, the norms they apply are supposed to be external from the process, not generated by it.

When courts and administrative agencies act as they are supposed to, they apply norms found in the law, created by democratic political processes, or even, as in some contracts disputes, created by the parties to the controversy. What they do not do--in contrast to market or democratic systems--is to apply their own values or aggregate others' views.

Similarly, professionals, such as lawyers, doctors, or corporate managers, seek to find effective ways to reach goals that are set by others, outside of the professional process. Lawyers and doctors, like other members of the free professions, are generally required to take their clients' (and the judicial system's) goals as their own: the professional sets aside her own views as to ends and confines her ex