In a recent paper, Brennan and Freiman argue persuasively that:
the argument against laissez-faire capitalism applies in a rather straightforward way against laissez-faire democracy. This should be a somewhat surprising result, since laissez-faire capitalism is widely rejected, but laissez-faire democracy is widely accepted.
All the typical market failure arguments—externalities, asymmetric information, principal-agent problems, behavioral problems—apply to democracy. For example:
democracy also suffers from obvious externality problems. Indeed, this is the main difference between markets and politics. Market decisions are usually and usually internalized; negative externalities are seen as anomalies that need to be corrected. Political decisions are generally public. For example, about 37% of those eligible
general vote, and 26% of the entire British population voted in favor of Brexit, but the effects of Brexit are borne by others, including lost voters, eligible voters who abstained, children and other citizens not eligible to vote, future generations, and foreigners.…The problem is the same as pollution from car drivers or airline passengers. We drive too much and pollute too much because we reap the benefits of these actions but pay the costs to others. Individually we are not important but collectively we are very important. If the law of externality is prima facie justified in the case of pollution, it is prima facie justified in the case of voting.
He continues to suggest regulations that can be applied to democracy. First note:
… almost everyone has accepted some form of government action that can be seen as a democratic vote or regulation. For example, some issues are put directly to voters, while others are left to elected leaders, while others are left to judges and bureaucracies, and others are removed from political consideration. The time and place of elections, who is allowed to vote (at what age), who is allowed to hold office, etc. are various regulations. Government funding for public education is part of a non-laissez-faire subsidy to improve voter competence. Many readers are interested in government regulations regarding campaign contributions, campaign expenses and even the types of speech allowed. Almost all readers reject the direct market in sound (Freiman 2014). Each of these chapters is a government regulation of democracy that inhibits laissez-faire democracy.
The author sketches a possible regulation in determining, for the argument, universal, equal suffrage—no weighted vote or knowledge test to qualify for the right to vote. Possibilities include paying citizens to pass a voluntary civics exam; track campaign promises and look for fraudulent claims; regulate political advertising more like drug advertising; and requires a supermajority for certain decisions. See the paper for more.
You could argue that the regulations would be hijacked by special interests, enforced by biased officials, or have unintended consequences. Indeed, welcome to the argument for laissez-faire.