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Magocracy literally means "Rule of the Magi". "Mago-" is derived from the old Persian word, "magus" meaning "priest" or "mage", while the suffix "-cracy" comes from the Greek "kratein", "to rule". The word is therefore a blend of Greek and Persian, as is the word "archmage".
Since a magocracy only means that the government is made up of magic-users, it can incorporate elements from other political styles. Dalaran's magocracy is a technocracy/meritocracy with democratic elements, in much the same way most city-states in ancient Greece were run. Though the foremost leaders of the Kirin Tor's archmagi councils tend to be the nation's most skilled mages, they are elected democratically by all eligible.