Tyler Cowen says he agrees that market operations will be flawed due to the irrationality of the participants, but "relative to social democrats, I tend to think that politicians are irrational actors trying to pander to irrational voters and that it can't be any other way. I am much less optimistic about democracy as an instrument for fine-tuning good policy or for that matter as a medium for enforcing progressive sentiments." This is similar to Bryan Caplan's argument for libertarianism in The Myth of the Rational Voter.
Libertarians have always been against democracy (the rapprochement with democracy being one of the key steps in the transition from classical to modern liberalism) but this new vintage of arguments is a curious inversion of the traditional line of attack. The main problem used to be the fear that voters were too rational and that the unlimited prerogatives of property had to be protected through a lack of democracy. Now the fear is that the dire consequences of democracy can best be preserved through the unlimited prerogatives of property.
Needless to say I think this is wrong along several dimensions. One point of dispute, though, is that to me the idea of state committed to neutral and effective administration of justice around laissez faire lines seems like an illusion. The alternative to reasonably effective democratic institutions and a viable left-wing political movement isn't free markets but the capture of the state by large economic interests as during the Gilded Age or, indeed, the Bush administration.
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