Knowledge And Decisions

A capitalist system, especially when it is actively defending itself, may offer few direct personal benefits for being a socialist and may impose various costs, ranging from social disapproval to jail, depending upon the condition of civil liberties in the particular country. Narrowly self-interested persons, or persons of weak will or timid disposition, are unlikely to be attracted to socialist movements under these conditions. But when socialism has become established, especially if in the form of a totalitarian orthodoxy, it is being a supporter of capitalism that now carries a high cost and being a supporter of socialism that offers higher reward. The mixture of people attracted to socialism should be expected to change accordingly.

It is not necessary to have the whole society change, as from capitalism to socialism in this illustration, to have different kinds of people emerge as supporters of particular institutions — thereby changing the function of those institutions. Something similar has in fact been observed to happen in a more limited way when regulatory agencies are created and then pass through a familiar institutional metamorphosis. Those who supported the creation of a particular regulatory institution typically had few self-serving goals that justified the costs and risks they incurred. Many were simply zealots for a particular cause. Once the institution has been created, however, it offers careers, power, prosperity, and visibility — attracting a new group of participants and supporters. As time goes on, these latter tend to replace the former, either because the careerists are more ruthless in seeking the best jobs or because the zealots’ ardor has cooled with time or with the achievement of a significant portion of their goals, or from the attraction of new crusades elsewhere. This transition of personnel over time often turns the agency’s policies completely around, to accommodate the new priorities of a new class of people attracted by the new structure of incentives and constraints. This “life cycle of regulatory agencies” is a common place observation among political scholars.⁴¹ Outcries of pain and anger from the supporters of the institutional change are also common — as is the case after a successful revolution, which is to say, institutional change on a larger scale. The “betrayal” of ideals is a reiterated refrain in a wide variety of insurgent movements, whether moderate or extreme. Seldom is there a recognition that the institutional success of the insurgency has itself created new incentives attracting new kinds of people and sometimes reorienting some members of the original group. Another factor is that a successful insurgency often puts leaders of the insurgents into closer contact with knowledge that was either unavailable or not so vivid when the insurgents were outsiders, and thereby forces correction of plausible beliefs that will not stand authentication.

The alternative, non-systemic or intentional explanation — that people “sold out” to opponents — has the serious difficulty that often the behavior that is characterized as a “sell out” occurs at a time when it would make the least sense to sell out. Bolsheviks who risked imprisonment, torture, and death to oppose the Czars were later discredited and executed by the Soviets for “selling out” the revolution. Analogous things have happened on a smaller scale in American civil rights movements, British Labor Party circles, and various other successful insurgent movements. The systemic explanation has the advantage of explaining not only why the general changes occur in individuals, but why different kinds of individuals selectively rise to the top after a given institutional change, as a rational response to changed incentives, however bitterly disappointing to those who failed to foresee the consequences of their own efforts. In general, it is unlikely that two very different sets of incentive structures will attract two mixes of people who are equally satisfied with any given policy.

Whether incentive structures remain fixed under conservatives or change under insurgents, they are as central to an explanation of political behavior as they are to explanations of behavior in other economic or social processes.

Chapter 6 An Overview

The use of knowledge in decision-making processes affecting social well-being depends not only on the supply of ideas — which are usually abundant — but on some process of authentication to weed out and reshape those ideas in the light of feedback from actual experience resulting from their application. Whether or not the results are socially rational depends on the proportion between the costs and the benefits, as both change incrementally. Rationality in this sense means nothing more than its basic root notion of making a ratio — weighing one thing against another in a trade-off.¹