Democracy without economic understanding

South Korean economist Ha-Joon Chang observed that democracy becomes meaningless unless every citizen understands basic economics. He was being diplomatic. Without the capacity to evaluate economic arguments, democracy doesn’t just become meaningless, it becomes a sophisticated form of institutional betrayal. The mechanics are structurally predictable. Citizens operating with household budget intuitions will consistently choose policies that sound reasonable but do not make good overall economic or fiscal choices. They will demand government spending cuts during recessions, support trade wars that destroy their purchasing power, and elect leaders who promise economic miracles through monetary manipulation. This is not voter failure, but a flaw in the system.

Two elections in 2024 demonstrated how economic complexity creates systemic opportunities for political manipulation.

The U.S. election revealed this dynamic with clinical precision. Despite measurable economic success under Biden, with inflation falling from 9.1% to under 3%, historic low unemployment, robust GDP growth, voters rejected these outcomes entirely. Young voters, experiencing inflation through used car prices and fuel costs in a country where extreme inequality leaves them financially vulnerable, gave Biden catastrophic approval ratings while supporting Trump’s demonstrably inflationary agenda: massive tariffs, immigration restrictions, deficit-expanding tax cuts, and threats to Federal Reserve independence. This represented rational responses to incomplete information rather than voter irrationality. Young voters felt genuine economic distress but operated within information environments that made acquiring economic understanding individually costly with negligible personal benefits, all while navigating competing narratives designed more to persuade than inform. Biden deployed anti-inflation measures targeting structural causes: strategic petroleum reserves, infrastructure investments, prescription drug negotiations, competition policy. Trump promised superior inflation fighting while proposing policies that economists predict would increase prices: tariffs that raise import costs, deportations that constrain labor supply, deficit-expanding tax cuts, and pressure on the Federal Reserve to lower interest rates regardless of inflationary risks.

US Election Economic Indicators

Germany provided a parallel case. Friedrich Merz built his campaign around defending the constitutional debt brake against reform, despite widespread economic consensus that rigid fiscal constraints prevent countercyclical policy and undermine growth through infrastructure underinvestment. He deployed categorical rhetoric against SPD and Green reform advocates, framing debt brake reform as fiscal irresponsibility. After winning but before taking office, Merz promptly reformed the debt brake with the same politicians he had previously criticized.

I want to give you another example that shows the real impact of false intuition and dishonest populist narratives: The fisherman who voted for Brexit to escape EU quotas. They received marginal quota increases in exchange for supply chain frictions and export losses. The visible problem, EU limits on fish catches, diminished slightly. The invisible infrastructure that moved fish from boats to buyers collapsed. Fresh catch now spoils at customs checkpoints while bureaucrats verify health certificates. Processing plants sit empty because EU workers can no longer fill the jobs. The economic fundamentals remained unchanged: Britain imports most of the fish it eats while exporting the fish it catches. Decades of integration created supply chains designed for frictionless European trade, not sovereign isolation. Infrastructure doesn’t recognize political sovereignty. Fishers eliminated a minor quota constraint while creating major supply chain failures, swapping functional access to customers for symbolic control over empty waters. They got exactly what they voted for and discovered it wasn’t what they needed.

Brexit Impact on Fishing Industry

These patterns reveal how the inability to evaluate economic reasoning creates space for populist narratives. When citizens lack frameworks for recognizing trade-offs and unintended consequences, they become vulnerable to whoever can craft the most emotionally compelling story about economic causation, regardless of empirical evidence.

This matters for democratic theory because legitimacy requires informed consent. When citizens cannot meaningfully evaluate the economic arguments underlying policies that determine their welfare, their consent becomes ceremonial rather than substantive. Democracy degrades from collective self-determination into collective self-harm. The temporal dimension amplifies this crisis. Economic policies operate on timescales that mock electoral cycles. Infrastructure investment pays dividends over decades while imposing immediate costs. Citizens experience pain now and forget benefits later, or vice versa. Electoral cycles systematically favor short-term thinking while economic prosperity requires long-term planning. This represents institutional design failure, not voter shortsightedness. Individual citizens face prohibitive costs to acquire economic knowledge while receiving minimal benefits from casting informed votes. Each person’s electoral influence approaches zero, making economic education individually irrational but collectively essential. This creates a classic institutional failure where rational individual behavior produces collectively destructive outcomes. Political competition amplifies this by favoring simple narratives over complex analysis. Citizens can visualize factory closures but struggle to recognize diffuse benefits from trade or hidden costs of protectionism without institutional support. Political systems exploit this asymmetry, promising visible benefits while minimizing discussion of invisible costs. Institutions create powerful incentives for economic illiteracy while offering few advantages to economic sophistication.

Democracy’s theoretical foundation assumes voters can identify and pursue their interests through electoral choice. Systematic economic misunderstanding destroys this assumption not through voter failure but through institutional failure to provide necessary education. Citizens cannot judge their interests when institutions fail to provide frameworks for understanding mechanisms that determine economic outcomes. This creates a performative contradiction. Democratic institutions claim legitimacy through informed consent while systematically undermining the conditions necessary for genuine informed consent. Societies demand that citizens choose policies affecting complex economic systems while providing them no institutional framework for understanding those systems. Citizens participate in elaborate institutional rituals of choice while remaining individually powerless to influence the outcomes those choices produce.

Plato already described this around 380 BC. His ship of state allegory captured the fundamental flaw of the republic:

Suppose the following to be the state of affairs on board a ship or ships. The captain is larger and stronger than any of the crew, but a bit deaf and short-sighted, and doesn’t know much about navigation. The crew are all quarrelling with each other about how to navigate the ship, each thinking he ought to be at the helm; they know no navigation and cannot say that anyone ever taught it them, or that they spent any time studying it; indeed they say it can’t be taught and are ready to murder anyone who says it can.

They spend all their time milling round the captain and trying to get him to give them the wheel. If one faction is more successful than another, their rivals may kill them and throw them overboard, lay out the honest captain with drugs or drink, take control of the ship, help themselves to what’s on board, and behave as if they were on a drunken pleasure-cruise.

Finally, they reserve their admiration for the man who knows how to lend a hand in controlling the captain by force or fraud; they praise his seamanship and navigation and knowledge of the sea and condemn everyone else as useless. They have no idea that the true navigator must study the seasons of the year, the sky, the stars, the winds and other professional subjects, if he is to be really fit to control a ship; and they think that it’s quite impossible to acquire professional skill in navigation (quite apart from whether they want it exercised) and that there’s no such thing as an art of navigation. In these circumstances aren’t the sailors on any such ship bound to regard the true navigator as a gossip and a stargazer, of no use to them at all? (Republic Book 6, 488a–489d)

Replace navigation with economics, and you have contemporary democratic issues. Economists disagree ferociously, but they converge on navigational basics through empirical evidence and scientific analysis. Economic analysis helps distinguish between policies with debatable trade-offs and those that promise impossible outcomes. Plato’s original solution was characteristically elitist: philosopher-kings who combined technical knowledge with wisdom about ultimate purposes. Modern democracy rejects this approach, insisting on popular sovereignty even when the popular will consistently produces destructive outcomes. We choose democracy because legitimate governance requires consent of the governed. The alternative is rule by force or fraud, which history suggests works poorly for most people. But consent becomes meaningless when institutions fail to provide citizens with tools to meaningfully evaluate the choices they make. A vote cast within systemically incomplete information environments is not democratic participation. It is institutional theater.

Economic policy amplifies this contradiction because economic relationships involve constraints and trade-offs that persist regardless of political preferences. Citizens can reasonably demand that tariffs simultaneously protect domestic jobs and reduce consumer prices, but economic systems do not accommodate such demands regardless of their political popularity. Democracy without institutional support for economic reasoning becomes performance art. Citizens participate in elaborate institutional rituals while remaining fundamentally powerless to influence the outcomes those choices produce. The ship wanders aimlessly while the crew congratulates each other on democratic participation, never noticing that navigation requires institutional investment in more than good intentions and loud opinions.

Democracy and Economic Understanding A Shipwreck in Stormy Seas (‘Tempête’) by Claude-Joseph Vernet (1714-1789)

Yet democracy remains worth defending, not out of romantic attachment but because of stubborn empirical evidence. Daron Acemoglu and James Robinson demonstrated that inclusive political institutions consistently outperform extractive alternatives in generating long-term prosperity. Countries with broad political participation, rule of law, and protection of property rights achieve sustained economic growth. The mechanism is institutionally straightforward. Inclusive political institutions create incentives for inclusive economic institutions, which enable innovation, investment, and broad-based prosperity. When institutions enable citizens to meaningfully participate in decisions affecting their lives, they choose policies that expand opportunity rather than concentrate power. The capacity for economic reasoning transforms this from theoretical possibility to practical reality. Citizens who develop broader intuition about economics and current debates can distinguish between policies that generate broad prosperity and those that merely redistribute existing wealth upward. Of course, economic outcomes often arrive slowly and get obscured by political noise. Benefits may be invisible while costs hit immediately. Powerful interests excel at reframing failures as victories. But institutional support for economic literacy beats institutional neglect, even in distorted environments. Citizens with basic economic intuition can at least recognize obvious contradictions and impossible promises. The solution requires reconceptualizing economic reasoning as democratic infrastructure rather than individual responsibility. This creates virtuous cycles: economically informed voters choose better policies, which produce better outcomes, which reinforce confidence in democratic institutions. Democracy becomes not just legitimate but institutionally effective.

The alternative is continuing to sail in circles while institutional navigators stand ignored in the corner. We need to acknowledge that democracy, like steering a ship, requires both art and science. But Plato’s original allegory was darker and more precise: the captain represents citizens, powerful but often short-sighted about economic navigation. The quarreling crew represents politicians, fighting for control while belittling economists evidence. The true navigator represents economists and policy experts, dismissed as “stargazers” disconnected from practical concerns.

Democracy works when economists can map the routes and calculate the currents, politicians can debate which ports are worth reaching, and citizens can choose their destination with full knowledge of what the journey entails.