Hayek, Arrow, and the Problems of Democratic Decision-Making

Abstract

Both Hayek and Arrow provide arguments about the inability of the vote process to yield a coherent social choice. Hayek demonstrated that planning is incompatible with democracy; its coherence requires dictatorship. Arrow demonstrated that voting fails to produce rational social choices; social rationality can be assured only when there is a single will. In both, the substitution of a single will for many wills is ruled as incompatible with a free society. Because market socialism relies upon either the existence of a meaningful, stable social welfare function or democratic decision-making to allocate resources, the complementary arguments of Hayek and Arrow imply that market socialism requires dictatorship to achieve coherence.

Keywords: Social Choice, Austrian Economics

JEL Classification: D71, B53