There is a statement like, "America is a Republic, not a Democracy".  The idea is that you can't trust the masses to make the right decisions.  You need to have a constitution that insures basic rights, and also elect representatives who will factor in the wants of the public, but then act for the greater good.  The argument is that direct democracy produces mob rule, and the minority people could be harmed in the process.

Well, what then are markets?  Aren't markets like a direct democracy, where people spend their limited resources and vote?  The only difference I can see is that some people have greater influence on markets, because they have more money.  So, is that the only reason why markets can be trusted is that some people have a greater degree of voting in them, than others?  If you could have a direct democracy where some could end up with more votes, would then it be able to be trusted more?

I ask this, because the Tea Party political side seems to argue more for free markets, but then also will argue direct democracy is bad, and America is a "Republic".  Just curious if anyone here believes markest are good but direct democracy is bad.  If so, why.  Please explain.

A "free market" still need rules to operate well. If "free market" meant a "no rules" market, free markets could quickly become monopolized through anti-competitive behavior from a behemoth company or a consortium.

Clarification here: I had debated whether or not I should go with "markets" or "free markets". I decided to go with free markets for more ideological idealism and a stronger view. If one wants to replace "free markets" with "well run and well regulated markets" please feel free to do so.

The basic question is: If direct democracy can't be trusted to make sure a country runs well, then why would a country dominated by markets provided the best possible outcomes?

Well that largely depends on your definition of "best possible outcome"...

but it's a very simple one.

Economically.

The market is reactive.  It reacts to what people want.

Direct democracy is proactive.  It votes on what people thinks it will want.

Direct Democracy is only as effective as the market when people have 100% insight in what they want, what they will want in the future, and laws change immediatly in regards to this.

In terms of social justics.  It's often because markets are fragmary and elective.  If Gay marriage were a product in the free market gay marriage would of happened decades ago.   Slavery in a direct democracy just requires a majority to not care about a minority.  In the free market it would require slaves to assent to slavery.

The general answer is... the Free market allows individual choice in the face of majority opinion while direct democracy forces everyone to go along with the majority.  Niche markets are valued in a free economy, as are niche viewpoints, because you can make your buisnesses in the "niche."

Though I'm not sure what Tea Party people your talking too... in general I think the tea party wants the federal government's power reduced because it is a republic.  Elite pushing their agendas on people and concentrating power at the top.

Well that's not entirely true at all.  There are times when democracies are reactive.  Actually a lot of political movements in countries lately are reactive.  Economic downturn occurs and political movements arise based on that for some political change.  The Tea Party is a prime example of reactive politics among a relatively free people.  In 1920s Germany, the Nazi and Communist parties arose in reaction to the outcome of World War I and the state of the economy at the time.  Although for all of these scenarios, we are of course not arguing in a pure direct democracy, as none has existed (for the most part) in a typical nation that we see currently.  However, I highly doubt that people in a Republic who have the opportunity to freely vote would be too vastly different in a Rousseau style democracy where they are active in the political world.  They will vote proactively on principle (as many do in this nation for tough social issues like abortion) and reactively on events that take place (such as how people acted and voted after 9/11).  So I disagree heavily with the idea that people only vote on principled notions of ideology or normative actions, as modern day Republics which give people large amounts of freedom participate in politics both proactively and reactively.

I also disagree that markets are only reactive, but my knowledge of how free markets work or exactly what kind of market we wish to engage in is limited.  I am doubtful that market participants are only reactive to what consumers want as this wouldn't seem like a very good business model.  I would think a good mix of surprising people with something they didn't think they want or need has benefits in a market as well especially if this is a participant in the market who isn't as popular as a market leader.  For purpose of the site we are on, in many ways Nintendo's Wii system could be seen as a proactive measure in a relatively free market of entertainment.  

However, to answer the question, I would agree with Kaz that direct democracy and free markets are two different things.  The tyranny of the majority can occur in a direct democracy which is why it should be avoided wholeheartedly.  However, in a free market, there isn't too much worry for such a thing.  Yes there is the problem of a monopoly, but once again this goes against free market principles and ideas and actually changes the market as a whole.  It no longer is a free market when a monopoly exists which may or may not provide some social commentary on the state of the current market when it comes to oligarchies that exist in the American economic system.  However, direct democracy not only allows but insists on rule by majority and thus a tyranny is perfectly part of the system.  If 51% of the population wants to put the other 49% in concentration camps, then it is perfectly legal within the system.  If a monopoly overruns a free market system, then the system has been usurped.  Unfortunately, free markets allow this to happen although it is not its intention.  

I personally don't like the idea of direct democracy or free markets because the masses just can't be trusted.  Whether those masses be the people or the wealthy business men, they can't be trusted to rule properly for the whole.  However, direct democracy allows this as legal, while free markets only allow it due to its own weakness.  When a tyranny of the majority happens, it is a good direct democracy.  When corporatism happens, it is the bastardization of the free markets.  That is why I make a distinction.