"There are a few ways we could look at this.
The first is – I'm being deliberate when I say leaders, and not rulers. I hardly think I need to convince you that ruling is morally corrosive, but I've come to believe that so is being ruled. It teaches people that the best thing they can aspire to is the exercise of power; and that, failing to achieve it, they should cower, or toady, or expend their talents in the pursuit of empty honors – or, failing all of that, not exercise their talents at all, lest they come to the attention of some jealous lordling. When we know we have no control over our own fate, why try to better it? Why develop the virtues of reason, judgement, concern for the public interest? One's better off staying in one's place. That's what voting for one's leaders changes. It tells people that in the end their choices matter. I'm not wedded to any particular republican system and I think there's a lot of room – and need – for experimentation, and voting directly for policies might very well play a role. Still, it can't substitute for placing the real exercise of power in the hands of those who are subject to it.
I don't see why government by one's fellow citizens shouldn't be good. Certainly I can't think of an alternative more certain to produce just laws, saving, of course, the direct personal eternal rule of a Lawful Good god. But if you're not planning to rule over all the world – I think I'd rather take my chances with a government which I can choose, whose actions I can debate, who depend on good-will of their neighbors to stay in power, over the arbitrary rule of some conqueror's great-great-grandchild. Or did you think any king or queen alive protects their subjects from unjust prosecutions and unjust wars? Or that they would, if their throne depended on it? Or that they could guarantee the same protection from their heirs?
The system you've proposed might work very well for Lastwall, which I don't think I can convince you should be governed in the republican manner. But – the real strength of a republic is that it rewards the best in people, instead of punishing it. You still want Lastwall to be ruled – and that means you want the people of Lastwall to spend their whole lives knowing that they shouldn't answer the questions that matter for themselves, and they shouldn't aspire to be better than the society that produced them. Probably that's fine. After all, it would be a tall order produce someone who surpassed you. The reasonably thing to do in your situation is to settle for that – but for the rest of the world, I think we can afford something more ambitious.
The other is that Asmodeus teaches us that we're stupid and shortsighted and contemptible, and that we can only hope to rise above our natures or accomplish our aims in the world by obeying our betters. There's a question I sometimes ask myself: do I disagree with those claims because I hate Asmodeus, or do I hate Asmodeus because I think he's wrong? Now, realistically, a man can be of two minds, but on most days I like to think it's the latter. So – what does it mean, to really believe that? I think people are better when they're free. I think that, left to our own devices, we can come up with systems of government that balance that freedom with justice. I think when you leave us to our own devices, we won't inevitably degenerate into petty tyranny – and I've seen a fair amount of petty tyranny, but much goodness too."