Knowledge And Decisions

There are various authentication processes, ranging from consensual approval to scientific proof, and a virtually limitless variety of institutional processes for carrying out this authentication, or weeding-out, process. The fragmentary nature of social knowledge means that the authentication and feedback must involve numerous individuals, and that they must be connected by some system of mutual incentives and constraints. Feedback which can be safely ignored by decision makers is not socially effective knowledge. Effective feedback does not mean the mere articulation of information, but the implicit transmission of others’ knowledge in the explicit form of effective incentives to the recipients. A corporation’s profit and loss statement or a baby’s whimpers are such transmissions. Both galvanize people into action in response to other people’s feelings, even though one is articulated and the other not. It is the effectiveness of the incentive transmission, not the explicit articulation, that is crucial.

The degree of social rationality — how finely costs and benefits are weighed — does not depend upon the degree of individual rationality. What is individually rational within a given set of institutional incentives and constraints may be socially wasteful in the sense that more desires could be satisfied with the same resources under alternative institutional processes. Conversely, individual rationality is not a precondition for systemic rationality. That is easily seen in biological evolution, where the adaptation of organisms to environment does not presuppose planning for such a result, and certainly not by the organisms themselves. Where intention does exist among the individuals involved in a systemic process, that does not mean that their intentions determine the outcome. The inherent constraints of their situation — the limitations of resources in economics, the diversity of views in a democracy, and the cost of knowledge in social systems in general — as well as the nature of the particular institutional process through which knowledge of these constraints is conveyed to them as individual incentives, also shape the result.

Simple, general, and obvious as all this may seem, its implications contradict much social theory. Implicit denials that the trade-offs exist are commonplace, especially when what is being traded-off is something momentous, such as freedom or human life. The things for which freedom is incrementally (and sometimes categorically) sacrificed are rhetorically included in some “larger” definition of freedom, just as modifications of democracy (such as constitutions and an appointed judiciary) are included in some “larger” definition of democracy. The trade-off of human lives and suffering involved in safety regulations or homicide laws is likewise seldom faced squarely, even though every incremental change in the stringency of such laws sacrifices some people to save some others, as well as trading-off life for other considerations. Historically, the racism that arose with slavery in America was one means of denying the momentous trade-off involved between the high moral and political ideals of the country and the material gains from violating other human beings’ rights — a denial made possible by depicting those other human beings as somehow not “really” human beings in the full sense. In short, the rhetorical denial or evasion of trade-offs has occurred across the social or political spectrum, from the pro-slavery denials of U. B. Phillips to the pro-Soviet denials of Sidney and Beatrice Webb.

Sometimes the denial of trade-offs takes the form of claiming that an increase in the use of force in decision-making processes is not “really” a net increase because governmental force is simply nullifying or “countervailing” already existing private force. Thus, just as disparate benefits can be subsumed under the same word to deny trade-offs, so can disparate things regarded as negative. The postulated “power” of private organizations frequently boils down to nothing more than an ability to offer more options, or more preferred options, than their competitors, thereby gaining more voluntary transactions. But the merits or demerits of a particular expansion of government power can be evaded by rhetorically depicting it as not “really” an increase of decisions by force but only a displacement of private force, however metaphorical the latter may turn out to be under scrutiny.