Tech Central Station, December 23, 2003



This was Coase's fundamental insight:

"If a workman moves from department Y to department X,

he does not go because of change in relative prices,

but because he is ordered to do so." Accordingly, economic

activity will be conducted within a firm when the costs of

bargaining exceed those of command-and-control.

From this perspective, Coase's argument doesn't look like

a very good analogy for political parties does it?

-- Steve Bainbridge

Everett Ehrlich garnered fifteen minutes of blogosphere fame by mentioning Howard Dean, the Internet, and Nobel Prize-winning economist Ronald Coase together in the same article. It drew reactions from Clay Shirky, William Abraham Blaze, and others.

Professor Bainbridge is correct that the Coase theory of the firm is not a good analogy for Internet politics. I want to propose another analogy: Germany from 1928-1932.

Toward the end of the Weimar era, the German center collapsed, and politics degenerated into a battle between Communists and Nazis. It was literally a street fight, with beatings overtaking ballot boxes.

On the Internet, too, the center is relatively weak. Instead, the political Web sites that draw enthusiastic crowds include the left's MoveOn, whose name derives from the Clinton-era anti-impeachment mantra; and the right's Free Republic, once described by Jonah Goldberg of National Review Online as "knuckle-scrapers," suggesting a picture of ape-like creatures walking with one hand brushing the ground and the other holding up a political placard.

Replacing the Macarena

Ehrlich and other pundits argue that the Howard Dean phenomenon was caused by the candidate's discovery of how to use the Internet. I believe that it was the other way around. It was the militant leftwing movement on the Internet that created Dean. Members of the movement with whom I am familiar are actually rather lukewarm toward Dean -- many would prefer someone more radical.

Howard Dean emerged as a candidate of the left-wing militants the way that the Cha-Cha Slide emerged as a staple on the Bar Mitzvah circuit. It's not that the Cha-Cha Slide means something to Jewish culture. It's just that there is a Bar Mitzvah circuit that needs a silly dance. When the Macarena craze finally died out -- thank goodness -- something else came along to take its place -- unfortunately.

The political movement of affluent, college-educated, angry liberals needed a candidate for the same reason that Bar Mitzvah DJ's need a way to pull people onto the dance floor. Howard Dean is the left's Cha-Cha Slide. He did not create the parties that dance to his tune. He just replaced the Macarena.

The Missing Coalition

Perhaps the most interesting aspect of the Howard Dean phenomenon is the relative absence of the usual elements of the Democratic coalition. He has not energized labor, African-Americans, or other traditional party enthusiasts. Instead, while he has received a smattering of endorsements from some interest-group leaders, the expectation is that most of their funds and energy will go to other political races.

What explains the relative unimportance of the traditional Democratic coalition to the Dean campaign? Perhaps the Internet plays a role, by providing alternative channels for raising funds and mobilizing voters. Pretentious references to Coase aside, there is some truth to this.

However, my view is that the main factor that allowed Dean to emerge is that the Democratic interest groups have effectively decided that they are going to sit out the 2004 Presidential race, presumably because they see little hope for victory. My guess is that if the economy were a serious liability for President Bush, then Dick Gephardt would be a more formidable candidate. Labor unions, seeing an opportunity for victory, would back Gephardt more strongly.

Mobocracy?

The Dean movement likes to refer to itself as a Smart Mob. I believe that there is no such thing. If the future of politics in America is to swing back and forth between Freepers and MoveOn'ers, then I fear that we really will turn into Weimar Germany.

In my view, the genius of our nation's founders was not that they gave people the opportunity to vote. It was that they created a Constitution with limited government. If those Constitutional limitations still held, then we would be safe from whatever fads the Internet might facilitate. We would not have to fear what Alexis de Tocqueville called the "tyranny of the majority."

Instead, our Constitutional protections have largely broken down. A mass movement led by a popular demagogue would have the potential to curb individual freedom.

Some libertarians will argue that individual rights already are in tatters. I am not one of those pessimists who believe that freedom is on the decline in this country. As I see it, there have been many steps backward, but in other respects we have seen improvement. But that is a debate that falls outside the scope of this essay.

My concern here is the combination of weakened Constitutional protection and Internet-facilitated extremism. In my lifetime, I believe that what has protected our country from extremist demagogues has been the need for coalition-building in the two-party system. To build a winning coalition at the national level, each party must lean toward the center.

The Internet might change the dynamic. It appears that in 2004, the Democrats will be taken over by left-wing militants. My view is that this is because the centrist forces in the party are poorly motivated. The question is whether this could happen to both parties at the same time. If so, then some day we may see an election in which each party is captured by a narrow, rabid constituency. I hope that the Internet does not end up fostering such a mobocracy.

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ARNOLD KLING is a TCS Contributing Editor and the author of "Moore's Bailiff", an occasional series on technology trends and developments. He holds a Ph.D. in economics from the Massachusetts Institute of Technology. He was an economist with the Federal Reserve Board and later with Freddie Mac. In 1994, he founded Homefair.com, one of the first commercial sites on the World Wide Web.