In modern democracies, public policy decisions are usually made by assemblies of elected representatives, such as national parliaments and regional and local councils. They have a mandate from being elected by the people and decide on taxes, public services and the like, until they put themselves before the people again in the next election.
Sometimes, however, issues are put directly to the people to be decided by a referendum in which all voters can participate. This may be laid down constitutionally, such as in Switzerland and for some matters in some American states and cities. Or referendums may be ad hoc in that an elected assembly chooses to put some matters directly to the people.
These are two methods for making policy decisions: by elected representatives or directly in a popular vote. Both are democratic. Is one method more democratic that the other?
In the pure theory of representative democracy, the people elect representatives for the purpose of making policies on their behalf. When the elected representatives meet in assembly, that assembly is the people and when the assembly makes decisions, it is the people deciding. Constitutional thinking in Britain has traditionally been more or less in this line, and the use of referendums is therefore a bit of an anomaly.
What counts in favour of the pure theory is that when elections work as they should, the people elect representatives who are the more competent to make policy decisions and it is therefore in their interest to leave it to their representatives to govern.
In Britain we see this theory at work in the question of the death penalty. A referendum might well go in favour of reintroducing the death penalty but it is accepted that it should be left to Parliament to decide on the matter.
What counts against the pure theory is that elections may work out so that the assembly is not representative of the people and may therefore be biased and make policies that do not reflect the popular will.
A referendum is obviously a democratic way of making a decision, but it is not necessarily an effective corrective against bias.
First, this is not generally the rationale for having referendums. Where the method of referendum is a constitutional provision, the logic is usually that this is a way of constraining elected representatives, for example from taxing the people too heavily. Ad hoc referendums may be called for a range or reasons, some of which may be all but democratic, for example a government seeking to subvert the will of its parliament.
Second, while elected assemblies may be unrepresentative, so too may referendums. Although all voters can participate, not all voters do. A referendum is like a big survey that may get it wrong if those who vote do not make up a representative sample of all voters. In fact, referendums are likely to be unrepresentative because of selective bias in the motivation to participate.
Third, a referendum may not be an effective way of expressing “the will of the people.” We might think that people always know what they want and prefer and that it is only a matter of asking them. But if we think “the will of the people” is what they would have wanted if they had the opportunity to be properly informed about the matter to hand and to deliberate carefully with each other about it, we might suspect that a referendum is too crude an instrument and too much at risk of populist manipulation. If so, we might, in the interest of “the will of the people” put more trust in the indirect method of decision-making by elected assembly. We might do that if we thought (1) that representatives are likely to be better informed than the average voter and (2) that decision-making in assembly is subject to more rigorous deliberation.
Referendums are appealing because people participate directly. They have the ability to lend legitimacy to big policy decisions, which counts in their favour. But democratically, like the alternative method of decision-making by elected assembly, they have both advantages and disadvantages. The referendum method, although democratic, is neither more nor less democratic than the alternative. A democracy with a reasonably well functioning national assembly has, for reasons of democracy, no need for referendums. There may be various reasons for calling a referendum, of which adding democratic quality is not one.