My main problem with the formalists is that I am not convinced they are trying to solve the correct problem. And as a foundationalist type, I'm not sure that solving the wrong problem will help.
Having said that, here's David Brin on the problem:
[The problem is]: the perversion of "free enterprise" away from its Smithian meaning of maximized competition and toward a meaning that Adam Smith openly, repeatedly and vociferously despised... the protection of uneven influence and collusive power in the hands of private oligarchy.
Let us be plain. Across 4,000 years of recorded history, there has been no greater enemy of open competition than collusive, wealth-centered aristocracy. By comparison, the horrific reign of Soviet communism was a brief flash (and the "nomenklatura" caste in the USSR was arguably just another owner-conspiracy class). And today's libertarian obsession with civil servant "regulators" pathetically ignores the real enemy, across 40 centuries...
..an enemy that killed every market until Smith came upon the scene, and that has done everything in its power - through the promulgation of Culture War" - to distract from the word "competition." The word that ought to be the true focus of any genuine libertarian. Any libertarian who was not a monstrously hypocritical dunce about human nature and history, that is.
There's a reason that it took 3800 years of recorded history to get growth liftoff. A good chunk of that reason is the aristocracy. (The rest is the formalist point -- violence). If you don't have competition, the people get it good and hard from whoever doesn't have to compete. Aretae's 3rd law.
Now, Brin goes on to push for a solution, and like most solutions, it's substantially less impressive than the diagnosis, but still worth looking at:
And I have yet to see anyone explain cogently why 5,000 conniving golf-buddies, appointing each other onto each others' boards and granting each other 100 $million bonuses while calling each other "geniuses" and raping their stockholders...I'd critique this on public choice grounds, but not too aggressively.
...are inherently better managers than 50,000 highly educated civil servants, answerable to solemn codes of accountability, regularly audited and subject to open scrutiny, to prevent their self-interest conflicting with the job they are charged to do. By Hayek's own calculations, the latter group is VASTLY preferable! Moreover, Adam Smith would have said so, as well.
Of course, the BEST solution is genuine competition, with only enough government regulation to ensure that the market functions well as our primary engine of problem solving creativity. If 50,000 accountable bureaucrats are better than 5,000 secretly colluding oligarchs, then 5,000,000 small and medium-scale businesses are even better. They are more likely - by Hayekian reasoning - to discover the alternate paths and most creative solutions.
I'd of course be looking a lot better had I put my words together and posted on this after my comment to Devin a week or two back. (Non-violent) Competition is the whole deal. If you don't have competition, then whoever isn't in competition wins big. If you do have competition, whoever is competing loses. And most (99%+) of what government does is prevent competition.
Posts
12 comments:
Across 4,000 years of recorded history, there has been no greater enemy of open competition than collusive, wealth-centered aristocracy.
The societies that had major, break out growth were all basically merchant aristocracies or plutocracies (19th century U.S. Britain, Dutch Republic, etc). It's the civil service states like ancient china, the Byzantium Empire, or Mughal India, or the modern EU that constrain growth. Brin is simply wrong.
There's a reason that it took 3800 years of recorded history to get growth liftoff. A good chunk of that reason is the aristocracy.
Does an aristocracy in general hinder growth? Depends how you define aristocracy. The question is to broad to even attempt to answer. All societies have elites. The question is how they are selected and what their incentives they are. If there is some incentive system that you think would better constrain elites or encourage them to enact growth enacting policies, then just state what it is. Otherwise your statement is just devoid of content.
And I have yet to see anyone explain cogently why 5,000 conniving golf-buddies, appointing each other onto each others' boards and granting each other 100 $million bonuses while calling each other "geniuses" and raping their stockholders...
...are inherently better managers than 50,000 highly educated civil servants, answerable to solemn codes of accountability, regularly audited and subject to open scrutiny, to prevent their self-interest conflicting with the job they are charged to do.
First, I am no defender of modern corporate governance. It sucks. CEO's should never be able to appoint a board member or nominate a slate of candidates. But who's fault is sucky corporate governance? Mainly New Deal civil servants who froze corporate governance in place with their regulations.
Also, as bad as CEO's are, empirically they do much better than civil servants. Even if they try and hoard profits rather than pass them on to the civil servants, the profit motive still means they try and grow their business. Even old growth companies that are full of bloat are more dynamic than the civil service agencies. GM actually does introduce new lines of cars, create new divisions, cut divisions, learn from competitors, etc.
(Non-violent) Competition is the whole deal. If you don't have competition, then whoever isn't in competition wins big.
Competition is not the whole deal. Competition requires governance structures that respond to competition. Democratic governments do not respond to competition. Bad democratic governments lose their best citizens, making government even worse. Good democratic governments are highly exclusionary because they do not want to dilute the stock of voters and corrupt their political culture. Thus democratic governments do not respond to competition. Eliminating democracy is prerequisite to making the dreams of the competitive government types come true.
Devin,
If I recall, they were all democracies, with low government involvement...and no ability to prevent competition.
As what I said, as what you said...the thing that makes for the good life is the competition. And any government who can prohibit competition does.
Does an aristocracy in general hinder growth?
Yes. All governments everywhere always try to capture the whole surplus. Some are restrained (by other powerful entities), some are not. None of them behave.
Further since competition is the ultimate leveler, the primary thing that governments do is prohibit competition, thus perpetuating their power.
more in the morning.
Eliminating democracy is prerequisite to making the dreams of the competitive government types come true.
This, I find to be an interesting hypothesis. However I am inclined to suspect that it's wrong...but not certain.
The key counterpoints are Switzerland (aggressive direct democracy, and untroubled by our problems), Singapore (limited democracy with weak freedom of speech -- nasty libel law -- as the primary limitation), Denmark (Elite-led representative democracy with strong neo-liberal reforms, decent growth rates, and the "happiest country in the world").
As far as I can tell, small states that need citizens compete, regardless their government structure. And large states with monopoly power (citizens won't leave) don't. And...well...that about sums it up.
Again, maybe we disagree about the facts of growth? As far as I know, growth is what happens when bottom-up innovation is encouraged. Bottom-up innovation threatens ALL leaders, and so we get Bastiat's Candlestick-makers petition or Adam smith's reputed saying, "Any time 2 capitalists meet, they immediately engage in a conspiracy against the consumer".
If you are in business, you win MOSTLY by restricting competition, and as an aside, by doing other things.
On the other hand, I think you're right about civil services being worse than other options. I think that's the big point that Brin misses.
At the same time...the peasants didn't get any better under China, Rome, Byzantium, 17th Century France, or ANY other pre-18th century system. They ALL sucked on the one important dimension that overwhelmingly explains modern life.
However, the systems that did the heavy lifting for world growth are rule-of-law (over rule-of-whim) democratic capitalist (Anglo-) countries. We agree that it's capitalism and rule of law that did most of the heavy lifting. But I think there's moderate evidence that says: power wielded by elites is bad ... and democracy has constrained that tolerably well.
FWIW, one of Moldbug's positions that I am unimpressed with is his equation of Communism, Fascism as democratic.
Overall...I think Democracy as a problem is an interesting hypothesis. But I don't think it's by any means demonstrated...and I think that the evidence still is heavily on the side of: democracies are worse than the very best autocracies, and A LOT better than the worst ones.
If I recall, they were all democracies, with low government involvement...and no ability to prevent competition.
Britain was not a democracy before 1887. The most of the time of the industrial revolution it was an aristocracy. It was only until after universal suffrage and the rise of the civil service state did Parliament start restricting competition and nationalizing industries. This the opposite of Brin's thesis. The U.S. was a democracy/republic/plutocracy. Universal suffrage mixed with very strong elitist, judicial system to curb the excesses of the masses. Plus legislatures were bought and sold by the rich. If you think corruption is bad now, it was infinitely worse then. Read "Satan's Invisible World Displayed". Yet the decline of plutocracy and the rise of the civil service has resulted in less competition, not more. Again, the opposite Brin's thesis.
The key counterpoints are Switzerland, Denmark
Small democracy with strong culture/human capital essentially approximate a formalist system. The benefit of the formalist shareholder system is that a) leadership ends up in the hands of the more competent and b) everyone has the same goal (maximize share value). When you have a small, homogeneous country full of smart, educated citizens, you get both benefit a) and b).
That said, because Switzerland and Denmark are run as democracies, ie, consumer co-ops, allowing in more citizens dilutes their ownership. So they do not really compete in the sense of trying make themselves attractive for productive citizens from other countries to come and live in.
These countries have sound policies, not out of competition, but because the citizens voting are generally of sound mind.
Brin's a cretin.
It's not 5,000 private-sector crooks vs 50,000 public-sector crooks. It's hundreds of private-sector entities vs one government.
Private-sector entities aren't magically better; it's just that customers will tend to route resources away from the ones that suck, often to the point where the sucky ones up and die. And even if they don't die, who cares? You don't have to buy their crap if you don't want to.
Try that trick in Cuba. Or try it in the land ruled by Brin's 50,000 holy philosopher-kings, where we all have to do business with GM and Chrysler whether we like it or not.
Hayek was not claiming that larger committees make better decisions. he was saying something else entirely. Brin either didn't read Hayek at all, or was too arrogant and stupid to understand.
Yes, Smith was right about rent-seeking. It happens, it's anti-competitive, it's bad. But Brin is hilariously insane if he imagines that giving the government ever more power and more money is going to result in less private-sector rent-seeking (and obtaining). All that money is being spent somewhere, and there's a crook lining up for every single dollar of it. But as long as customers can choose among multiple vendors, and new vendors are able to enter the market, the system (so to speak) can tolerate a lot of that kind of bullshit overhead.
And the occasional market failure proves nothing at all. The process is, again, highly fault-tolerant. It's like evolution: Sometimes fit animals die, and retards always breed. The idea of natural selection doesn't claim that the best animal always wins. It instead observes that it happens often enough, over time, for tiktaalik to evolve into Yogi Berra.
Any really robust process is noisy and halfassed.
Gordon,
First, thanks for dropping by.
I agree that Brin's solution (like most solutions to this particular monster problem) sucks.
I also agree that he misunderstood Hayek, and I didn't quote that part (on purpose).
But I do think that his view of history as a 4000 year span in which the folks who were in charge were the folks who had the money and that they screwed everyone else as much as they could get away with is pretty solid.
I'm glad to have a fellow traveler who seems to be roughly on my side for the important stuff -- competition + feedback wins.
Devin,
1. Brin's thesis is across 4000 years.
2. I agree that the level of corruption now is WAY down from 19th century.
3. I continue to insist that the reason that America didn't get much horrid law passed in the 19th century was (a) Feds were prohibited from doing anything by an honest read of the commerce clause by the Supreme Court. (b) Feds were economically constrained by ONLY having a head-tax. (c) Senators were appointed by state, thus prohibiting many laws that benefit some and hurt many. Once B + C fell in 1913, so did a.
Aretae -
I think the time it took civilization to achieve liftoff is best examined through the lens employed by Charles Murray in Human Accomplishment. I don't agree with your implication that things could have happened so much faster. There was quite a bit to be done.
Moreover, a great deal of it was accomplished under aristocratic regimes enjoying de-facto artistic and economic freedom. So I do not agree that either aristocracy equals an absence of de-facto freedom, or that aristocracy equals an absence of human progress.
I think you have reversed cause and effect. Technological and commercial progress elevated the middle classes causing aristocracy to atrophy. And ironically, middle class government is now in the process of destroying the freedom that gave it birth.
Also, I think this constant exclusion of violence from competition is unhealthy for libertarian ideology. Efficient application of violence is crucial to an organism's competitiveness. If libertarians woke up and realized this, maybe they'd accumulate some real power. The dirty way.
Bloodstains do disappear, as long as you act quickly and wash them cold.
Koanic,
I'll read Human Accomplishment. I like Murray in general, but I find that he tends to over-emphasize the value of IQ, and under-emphasize the value of other factors (perseverance).
I vote for de Soto as the best explanation: no one had the right to regulate stuff (due to power balance), so it went unregulated...therefore industrial revolution. Ditto computer revolution. It is roughly ONLY in places where NO aristocrat can make a rule saying what you have to do that innovation occurs.
Further, Innovation=Growth, and Growth=All good things in the world.
II. I've argued a bit (tentatively) for a more pro-violence previously. However, if the thing you dislike is one group of people treating others like slaves...it behooves a thoughtful person to note that the structure provides incentives. Forcing folks to do things is BAD juju, mon...even forcing them to do good things.
Libertarians are, I agree, politically impotent. That's why none of the modern libertarian front takes electoral politics too seriously. We're like the paleo guy talking about how to split up the cake:
"Don't split it, throw it away. It's bad." Generally doesn't get real far when people want to fight over who gets which piece.
"I vote for de Soto as the best explanation: no one had the right to regulate stuff (due to power balance), so it went unregulated...therefore industrial revolution. Ditto computer revolution. It is roughly ONLY in places where NO aristocrat can make a rule saying what you have to do that innovation occurs."
Murray's work emphasizes three factors necessary for innovation: de facto artistic and economic freedom, cosmopolitan ferment. and I'm forgetting the third. Perhaps it was about worldview: the Christian's mental characteristics of belief in an orderly world, of purpose and future time orientation.
The Wikipedia page is rot. You must read the book. It is as fundamental to understanding the world as race IQ differences. In fact, having read it, one can skip most incomplete commentary. His historiometric technique and contemporary discounting are very very sound.
The interesting question is, why is the pace of innovation slowing down? I am tempted to identify three factors: complexity of existing knowledge and increasing difficulty of undiscovered innovations outpacing static human IQ; mental output deterioration due to the democratic age; waning of the Christian worldview (for art).
And let's throw in a fourth - increasingly unhealthy agricultural and processed diet.
Why is innovation slowing? It's not. It's just useful innovation is slowing...and that's status issues.
Post a Comment