The Economic Case for Aristocracy

Without economic support for a public-spirited class, oligarchy will steadily corrupt virtue

The subtle shift that toward the economization of all modes of political thought that accompanied the Enlightenment is as profound as it is underappreciated. We can see this shift in one of its most profound manifestations if we contrast classical political thought on the nature of societal leadership with the neutralization of this question in contemporary political thought through an invocation of market incentives and utility maximization.

As is well known, in the eighth book of his Republic, Plato discusses five basic types of political regimes. They are aristocracy, timocracy, oligarchy, democracy and tyranny. Plato views societies as tending to cycle through regime type through time, starting with Plato’s ideal of a refined aristocracy and eventually degenerating into outright tyranny. For our discussion let us focus on only two of Plato’s regime types most relevant for our discussion: aristocracy and oligarchy.

The Normalization of Oligarchy

It is worth briefly recalling the basics of these two regime types before carrying on our discussion. An aristocracy is divided into three classes: the ruling class, the auxiliaries of the ruling class and the majority of people. The ruling class is ideally composed of philosopher-kings—that is, people educated in the virtuous practice of government in the service of the common good. The auxiliaries in Plato were the army, but this could be extended today to include the police and the security and intelligence services. The majority are the rest, who are divided into two subgroups: property owners and those who do not own property. In modern societies we can best think of this as capitalists and workers, with capitalists expanded to include the C-suite managerial class as well as actual business owners.

Oligarchy for Plato is similar in some respect to aristocracy but is a disordered form of it. In an oligarchy, the main defining feature of a person is whether they are rich or poor. Political power is effectively distributed through the concentration of wealth. That is, those who can accumulate wealth in doing so accumulate political power. Government in an oligarchy is government of the rich over the poor. Oligarchy for Plato is a highly dysfunctional system. For one, the accrual of power is tied up with the accrual of wealth and the latter tends to corrupt the former. This leads to mismanagement, with the society not being governed for the common good but rather to further the financial aims of the oligarchs. Since Oligarchy also results in the concentration of wealth, class tensions also build, which eventually accumulate revolutionary force and push the society into tyranny.

In our modern age we tend to look at the distribution of power in society through the lens of economics. Modern economics teaches that market forces tend to distribute resources in an “efficient” manner. The more we allow market forces to dictate social and political life, the wealthier and happier we will all become. This conception is pushed to an extreme in so-called public choice economics, where the behavior of political agents—that is, those in politics and the administrative state—is looked at as a manifestation of purely self-interested behavior. In doing so, the public choice theorists effectively take as a given that our governmental systems are oligarchical.

Interestingly, the notion of economic efficiency can be traced back to the Italian economist and sociologist Vilfredo Pareto. Initially Pareto seemed to fall into the classical liberal tradition of thinking that simply liberating market forces would result in optimal outcomes. But as time went on Pareto grew disillusioned with this view and started to focus on the importance of elite structures in society, which eventually led to his flirtation with the then-ascendent Italian fascist movement. This flirtation can in large part be explained by Pareto’s intransigent modernism and his unwillingness to take more classical political traditions seriously, but the very fact that the key theorist of efficiency ended up realizing the need for nonmarket-based political hierarchies is revealing.

The liberal economic framework, left unchecked, inevitably normalizes oligarchy. Because its framework deals entirely with selfish motivations and market forces, which are themselves set in motion through the accumulation of wealth, proponents inevitably assume that most of peoples’ day-to-day lives should be managed through the accumulation of wealth. In practice this obviously means oligarchy, with most of society being organized by corporate oligarchs and government even being retooled as a machine that tries to increase economic efficiency—which in this instance is a code word for: ever more accumulation of wealth.

It is not that the liberal economic is premised on normalizing oligarchy. It is simply that, as a mode of inquiry, it narrows the minds of its proponents to the extent that they cannot think of any form of social organization that is not best managed in an oligarchic fashion. Proponents of totalizing liberal economic modes of thought do not typically intend on advocating for oligarchy—although some of the more extreme theorists like Hans-Hermann Hoppe, that great sage of the Silicon Valley libertarians, do tend in this direction—rather the framework that they have adopted shutters their mind to thinking in any other way.

The Microeconomics of Aristocracy

The temptation then, is to throw out the liberal economic framework altogether. But this in unlikely to be effective. This mode of thinking is not just completely ingrained in our ruling elite, but it is in many instances quite useful. The management of resources and people is today mainly management that is best dealt with through reference to modern economics. The most promising path away from the promotion of an increasingly dysfunctional oligarchy, then, is through. To infuse our economic framework with aristocratic virtue, the most promising first step is to think through the economics of aristocracy itself.

What is the basic economics of the aristocracy? Phrased differently: what economic function do the aristocracy perform? First, we should be clear that we will move away from Plato’s ideal aristocracy, which was meritocratic in nature. Plato thought that the best and brightest—those who attended his school, naturally—would constitute the aristocracy. But in larger societies we have seen that this meritocratic system is untenable. Indeed, meritocracy itself seems to devolve rapidly into oligarchy. Actually Existing Aristocracy, to coin a term, is a hereditary affair. Aristocratic privilege is passed from one generation to the next. This does not mean that Actually Existing Aristocracies do not have a meritocratic component. New entrants are often allowed into the aristocracy, but the basis of the system is hereditary.

Aristocrats, as Plato explained, are people whose function in life is to rule. They are above, for example, capitalistic motives. They are motivated only for the common good of their societies. In this sense, we might think of them as being accumulations of human capital. But this is human capital of a very specific type. Economists often think of human capital as an input into the production process. But aristocrats are outside of the production process. They possess a wholly different type of human capital that we might refer to as “leadership capital.” The basic economic function of the aristocracy is, then, to accumulate leadership capital. This accumulation of leadership capital sits at the top of the social hierarchy and ensures that society is run in line with the common good. By running society well, the aristocracy opens the space for capitalists to accumulate wealth.

Why does aristocracy need to be hereditary? There appear to be two reasons for this. First, aristocracy is all about maintaining standards. Since leadership capital is not used up in the production process, it does not have a market value. The values of the aristocracy are independent of market valuation. So, the aristocracy must form these values for themselves and then defend them. New entrants cannot be allowed in unless they conform to these values. In a meritocracy, there are no protected values and so it inevitably tilts into an oligarchy as everything is reduced to market valuation. But in an aristocracy, if an upstart wants to pass behind the velvet rope, he or she must recognizably conform to the values of the aristocracy.

The second reason that functional aristocracies are hereditary is due to the production of leadership capital itself. The aristocracy must imbue its children with values and skills that exist outside of the marketplace. There are no market incentives for parents to imbue their children with these values and skills. Aristocrats are truly “born to rule” in the sense that, since childhood, they are surrounded by people exercising the skills and values needed to run society properly. This is why we often see pseudo-aristocracies emerge in corners of modern oligarchies. For example, we will often see political dynasties emerge. This is not so much because of some unfair advantage that the children of incumbent politicians have over everyone else, but rather because politicians and other leaders in oligarchies often instinctually try to create a hereditary line by raising their children in an aristocratic manner. But because there is no macroeconomic support system for this, the political dynasties exercise limited power and inevitably burn out.