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«Introduction Even though neither theoretical arguments nor historical evidence provide reasons to believe that the ideals of liberalism may be better ...»

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There exists, in Hayek’s diagnosis, only one effective remedy to the noted structural defect in modern democratic institutions, namely to strictly separate the genuine task of legislation from the task of directing the day-to-day operation of government, and to entrust the two tasks to two distinct assemblies.69 In order to achieve the intended purpose, adequate institutional precautions must be taken to ensure an effective rather than a purely formal separation of the legislative assembly from the governmental assembly. As Hayek (1978d: 160) puts it, the separation must be institutionalized in a manner that can effectively “prevent collusion of the legislative with a similarly Hayek (1978d: 155): „Prevailing forms of democracy, in which the sovereign representative assembly at one and the same time makes law and directs government, owe their authority to a delusion. This is the pious belief that such a government will carry out the will of the people.” – Hayek (1978b: 115): “Now, I believe we are right in wanting both legislation in the old sense and current government to be conducted democratically. But it seems to me it was a fatal error, though historically probably inevitable, to entrust these two distinct tasks to the same representative assembly. This makes the distinction between legislation and government, and thereby also the observance of the principles of the rule of law and of government under the law, practically impossible.” As Hayek (1972: 73) indicates, the longer the period is for which rules are chosen the less special interests interfere with the goal of finding rules that are in citizens’ common interest: “And they are, or ought to be, intended for such long periods that it is impossible to know whether they will assist particular people more than others.” Hayek (1978b: 115): „It would seem the obvious solution to this difficulty to have two distinct representative assemblies with different tasks, one a true legislative body and the other concerned with government proper, i.e. everything except the making of laws in the narrow sense.” composed governmental assembly, for which it would be likely to provide the laws which that assembly needed for its particular purpose.”70 Hayek (1979: chap. 17) has worked out quite detailed institutional suggestions for how an effective separation between legislative and governmental assembly may be achieved, and much of the discussion on, and critique of, his proposal for reform has focused on these specific suggestions rather than on the principal thrust of his argument.71 Indeed, with his ambition to come up with a specific “institutional invention” (1973: 3) Hayek may have, in effect, done a disservice to his principal cause, because he invited critics to focus on the entirely secondary issue of institutional specifics and to draw attention away from the essential and primary issue, namely how legislation, i.e. the choice of the “rules of the game,” can be prevented from becoming subservient to the short-term interests of day to day government. If Hayek is right with his diagnosis that the insufficient separation between legislative and governmental functions is at the root of major defects in the currently prevailing form of democracy, as in my view he surely is, the challenge is to find effective institutional remedies. How the separation of legislative and governmental functions that Hayek calls for can be best institutionalized is an issue that a liberal theory of democracy must carefully explore, just as it must explore potential other institutional provisions by which the generality or non-discrimination constraint may be more effectively implemented.72 Conclusion The principal claim of this paper is that liberalism and democracy should be viewed not only as compatible ideals, as Hayek has suggested, but as complementary ideals. I Hayek (1978b: 117): “The purpose of all this would of course be to create a legislature which was not subservient to government and did not produce whatever laws government wanted for the achievement of its momentary purposes, but rather which … laid down the permanent limits to the coercive powers of government, limits within which government had to move and which even the democratically elected governmental assembly could not overstep.” In particular the role that Hayek assigns to “representation by age groups” (1979: 117) in the legislative assembly has been the target of critical comments.

Among the prime candidate surely are constitutional provisions for an effective competitive federalism.

As Buchanan (1995/96: 261) notes: “Federalism offers a means for introducing essential features of the market into politics. … The availability of the exit option, guaranteed by the central government, would effectively place limits on the ability of state-provincial governments to exploit citizens, quite independently of how political choices within these units might be made.” In addition to enhancing the exit option a competitive federalism also benefits the ‘voice option’ because “voice is more effective in small than in large political units” (ibid.: 262).

have based my argument on a distinction between three different levels at which liberalism and democracy can be compared, the level of their specific “institutional embodiment,” the level of their principal focus, and the level of their underlying normative premise. I have argued that liberalism and democracy share as their common normative foundation the ideal of individual sovereignty, and that their respective main foci, the liberal principle of private autonomy and the democratic principle of citizen sovereignty, can be best understood as applications of the ideal of individual sovereignty to the realm of the private law society on the one side and to the “public” realm of collective-political choice on the other.

That individuals should be free to choose, separately and jointly, how they wish to live in mutually compatible ways with each other must, in terms of their fundamental normative premise, be a matter of principle for advocates of democracy no less than for advocates of liberalism. By contrast, the question of what kinds of rules and institutional provisions are best suited to allow individuals freely to choose how they wish to live, separately and jointly, in mutually compatible ways, is, in terms of the liberal as well as the democratic ideal, a matter of prudence.73 It is a question that must be answered in terms of our knowledge of the factual working properties of potential alternative institutional regimes and in light of what the individuals involved actually wish for themselves. In answering this question, liberalism’s traditional focus has been on the rules of the private law society while democracy’s focus has been on the rules of the public realm.

Clearly to distinguish between the fundamental normative premise of individual sovereignty and its institutional embodiment, in the private law arena as well as in politics, can not only help to avoid misconceptions that have unnecessarily burdened the discourse between advocates of liberalism and advocates of democracy, it can also help to clarify the relation between value judgments and theoretical or ‘scientific’ conjectures within the liberal doctrine.74 Liberalism, over its long tradition, has accumulated a rich Mises (1985: 30) implicitly refers to the distinction drawn here when he notes: “If they (the liberals, V.V.) considered the abolition of the institution of private property to be in the general interest, they would advocate that it be abolished. … However, the preservation of that institution is in the interest of all strata of society.” In this regard clarification is needed, for instance, when Mises (1985: 88) asserts: “For an ideology based, like that of liberalism, entirely on scientific grounds, such questions as whether the capitalist system body of insights on how different kinds of institutions work, and which are more conducive to human welfare than others. This body of insights provides the intellectual foundation on which liberals can, with great confidence, recommend market-type institutions as providing superior solutions to most of the problems that men face in their social life. Yet, one must not forget that the institutional recommendations that liberals make are based not only on ‘scientific’ arguments about the working properties of institutions but also on the normative premise of individual sovereignty. In other words, they are made under the presumption that the measuring rod for the ‘goodness’ of institutions are the wants – or, more, precisely, the constitutional interests75 -- of the individuals who are to live with them. The arguments that liberals employ in support of their institutional recommendations are prudential arguments that can help sovereign individuals to make better informed institutional choices, not arguments that would allow one to ignore the institutional preferences – or constitutional interests -- that these sovereign individuals may have. Sometimes liberals, especially libertarians who are preoccupied with demonstrating the logical rigor of their deductions, seem to forget that their fellow citizens are the ultimate addressees of their proposals for institutional reform.

If the fundamental liberal ideal of individual sovereignty implies that individuals’ freedom of choice must be respected not only in the private law realm but at the constitutional level as well, institutional recommendations must ultimately be addressed to the individuals who are to live with them, and it is they who have to be convinced that opting for the suggested provisions is in their interest.

is good or bad … are entirely irrelevant. Liberalism is derived from the pure sciences of economics and sociology, which make no value judgments within their own spheres and say nothing about what ought to be or about what is good and what is bad, but, on the contrary, only ascertain what is and how it comes to be.” On the concept of ‘constitutional interests’ see Vanberg 2005.

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Holcombe, R.G. (2004) “Government: Unnecessary but Inevitable.” The Independent Review 8: 325-42.

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