I've summarized some of the problems with democracy. Since the value of a single vote is marginally zero, voters have no incentive to curb their irrational beliefs or cure their ignorance. Politicians have every incentive to favor special interests over the average citizen, causing all of us to be much worse off. All voting systems are imperfect and can lead to highly variable results with the same populations and preferences. Strategic voting and agenda setting can influence election outcomes much more than even a large number of votes, causing everyone to be worse off.
Here are some proposals to "fix" democracy, given this knowledge.
1) Remove more options from the whims of democratic policy. This is Bryan Caplan's preferred option. He thinks the economy is too serious to be left in the hands of ignorant, dogmatic voters. He thinks something like an economics committee would make much better decisions. Nobel laureate and public choice father James Buchanan would prefer the amendment method. He supports a balanced budget amendment, which would make the costs of special-interest voting bear more immediately on voters' wallets.
2) Limit suffrage. Some want to raise the voting age, some want to impose income or land-owning restrictions. I don't think these are particularly good ideas. An education requirement sounds a little better, but education is fairly subjective. Some even think something as simple as solving a quadratic equation would be a better test than none at all. It sounds very elitist, and it is. But some of us don't think, "We should preserve the badness of democratic policy because doing otherwise would be elitist" a very convincing argument.
3) Futarchy. This is Robin Hanson's idea. Prediction markets are betting markets on future events. People put money down on, say, X being the outcome of an election, and get a return if they're correct. Hanson proposes we use these to "vote values, but bet beliefs." That is, he thinks we should use democracy not to elect representatives or to pass laws, but to elect a consensus on values. For instance, society could vote to increase the incomes of the poor. Then a betting market for policy would kick in: people would bet money on which policy would accomplish that goal. Whichever policy gets the best odds after a set period of time automatically goes into effect, and after the time allotted in the terms of the original bet, a measurement is taken and the success of the policy is assessed--again, based on the terms of the bet.
The benefit of futarchy is that people actually have to put money down to influence policy. If Caplan is right about rational irrationality, a futarchy would have more rational policy as it would be very costly for people to have input in the political system. Another benefit is that we wouldn't have to rely on the wisdom of politicians; the market would quickly skyrocket the odds of policies with the best wording. Technically, anyone could propose any policy.
The biggest problem should be obvious: lots of policy effects are hard to measure, let alone attribute a cause. Hanson thinks, however, if our final metric is broad enough (ie, high GDP), some correlation should be available.
"Predictocracy" is another government structure that's been proposed to take advantage of prediction markets. In predictocracy, betting markets make the full range of government decisions, except when the markets decide to relegate a decision to another mechanism. For a discussion about the pros and cons of each, see here and here. The final purpose, however, is to institute a mechanism by which people have to pay for forcing potentially wrong beliefs on others, to aggregate people's true, willing-to-stake-money beliefs, to find out not only what people believe but also how confident they are in those beliefs. Another nice benefit is that prediction markets do away with the problem of agenda setting. Competition, rather than an agenda setter, determines when and how policies go in effect.
4) Less agenda setting. This one isn't discussed as much in some circles, so allow me to get righteous for a second. The DNC and the RNC are illegitimate institutions and should be abolished. They have no constitutional authority. What elements of their authority derive from voters only derive from a small portion of the voting population--and not based on an arguable restriction like an education requirement, but an arbitrary one, the status of voter registration. Yet they wield enormous power over the outcome of U.S. elections. They have enough power to deny voters the ability to nominate a Constitutionally eligible candidate.
"But Colbert's run was a joke!" you say. I say, so? Colbert has the Constitutional right to make that joke. Where did the DNC get its authority to deny him a political presence? And if they have the authority to do that to a jokester, they have equal authority to do it to a serious candidate. Since when did politicians' motives determine how our democratic proceedings should evaluate them?
Back when people feared the Obama v. Clinton nomination run would end in a superdelegate vote, some in the DNC worried that this would be an undemocratic outcome. Did it not occur to them that, uh, in that case they should immediately change the system--that the potential for the DNC to override democracy is enough to render the DNC illegitimate in a democratic system?
Far be it from me to vehemently defend democracy--I've been attacking it for several entries, after all. But the presence of the DNC and the RNC, unlike the other "democracy substitutes" I've proposed, do nothing to fix any of the pathologies of democracy. They only enhance the problems of agenda setting and strategic voting. I can see that they fill some sort of organizational purpose, but they also unjustly influence and even override voter preferences.
5) Stop worshipping democracy. This is the easiest to accomplish. None of the problems of democracy will change if you don't first admit that democracy isn't sacred. I couldn't possibly say this better than Caplan:
One good thing to come out of the bailout: Barney Frank gave me another nice example of what I call "democratic fundamentalism."If you don't want politics in this process, you probably shouldn't be handing it over to 535 politicians. That's democracy.
The first sentence, of course, is rhetorical: Don't hand things over to 535 politicians?! Ridiculous!
The second sentence is where the fundamentalism shines through: So what if we paid $100B in pork/bribes to pass this bailout? Since we did it democratically, you have no business criticizing us.
Notice: If someone said, "So the economy's tanking. That's capitalism," everyone would assume the speaker wanted to limit capitalism. But when someone says, "That's democracy," we assume the speaker wants to end the conversation. Democracy is truly the sacred cow of the modern world.
And there's no reason for it to be. Stop encouraging uninformed people to vote, stop insisting that voting for a scumbag is morally or civically important, stop defending the outcomes of democracy even if they're demonstrably terrible, and stop voting for nincompoops. Do these things until you and everyone else are no longer offended by the question of the sanctity of democracy. And then, fix democracy. If you don't like any of the above answers, use the evidence and ideas available to you to come up with better ones. But don't pretend it isn't broken or can't be fixed.