An Agenda For a Democratic Economy

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The art of governance requires managers to make “good” decisions that align with accepted standards. Today, the central standard of management is to evaluate the costs and benefits of each option to demonstrate that the selected choice is objectively “good” – with benefits outweighing costs. This approach is prevalent in any decision-making structure where someone makes choices on behalf of others, be it a company, public administration, or non-profit organization.This norm is fundamental to contemporary capitalism, but it is grounded in another institution: the market. According to the neoliberal doctrine, the market’s primary function is not as an exchange platform but as a price-creating device (Cayla 2023). This understanding of the market is rooted in the late 19th-century neoclassical framework and was introduced into the public discourse by Ludwig Von Mises’ contributions to socialism (Mises 1920, 1922). For Mises, the market mechanism is indispensable for calculating the real value of goods, necessitating private ownership of the means of production. Eugene Fama, fifty years later, held a similar view, stating that “the ideal is a market in which prices provide accurate signals for the allocation of resources” (Fama 1970: 383).However, this norm appears less applicable to contemporary challenges. The subprime crisis of 2008 and the eurozone crisis (2010-2015) illustrated that market prices can disappear or reach levels that jeopardize the economy. Central banks have had to manipulate market prices, such as long-term interest rates, via quantitative easing measures.Other emerging problems, such as the growing scarcity of natural resources, may not be resolved by price signals. More fundamentally, environmental issues such as global warming will force decision-makers to consider other dimensions in collective choices than the standard cost/benefit calculation based on short-term market prices.The market's strength as an institutional device is that it “naturalizes” the price system and places it beyond the political sphere. This makes prices acceptable to all parties. However, managing scarce resources may require considering the various possible uses and users of such resources, necessitating the re-introduction of politics into the value calculation process. This would push decisions towards a path that has been previously and collectively decided.This contribution intends to discuss the requirements for such a post-neoliberal doctrine and how to integrate democratic elements into the assessment process of economic decisions.ReferencesCayla, David (2023) The Decline and Fall of Neoliberalisme. Rebuilding the Economy in an Age of Crises, London and New York: Routledge.Fama, Eugene (1970), “Efficient Capital Markets: A Review of Theory and Empirical Work”, The Journal of Finance, Vol. 25, No. 2: 383–417.Mises, Ludwig von (1920) [1990], Economic Calculation in the Socialist Commonwealth, trans. S. Adler, Auburn, AL: Mises Institute.Mises, Ludwig von (1922) [1951], Socialism: An Economic and Sociological Analysis, New Haven: Yale University Press.