Knowledge And Decisions

The constrained options which make trade-offs necessary are likewise often implicitly or obliquely denied. This is obvious in political statements to the effect that “if we can afford to do A, why can’t we afford to do B?” With constrained options, the very fact that we did A reduces our ability to do B. Sometimes the implicit denial of constrained options takes the form of attacking as undemocratic any failure to achieve majority preferences — or perhaps even the preferences of some minority subset which has earnestly pursued its goals through legitimate channels. But constrained options are as inherent under democratic government as under any other form of government; perhaps more so, since each subset’s desires must be balanced against other people’s desires. Another symptom of ignoring constrained options is a quickness to condemn official “overreaction” to an emergency in terms which suggest the existence of a wide spectrum of smoothly blending options, when in fact the choices available at the time may have been few, discrete, and all unpleasant.

The effectiveness with which knowledge is transmitted and coordinated through social processes depends upon the actual characteristics of those specific processes. But again, a basically simple, general, and obvious proposition is beclouded by rhetoric — in particular, by the practice of characterizing processes by their hoped-for results rather than by their actual mechanics. Consider, for example, the following proposition: once the legal authorities have defined, combined, and assigned property rights, the subsequent recombination or interchange of those rights at the discretion of individuals shall be illegal. Would great numbers of men and women voluntarily risk their livelihoods and their lives to create this institutional arrangement? History says that they have, for that institutional arrangement is socialism. The hoped-for results — variously described as “social justice,” “ending the exploitation of man,” or more generally, serving “the people” — have largely defined socialism for those attracted to this movement. The same has been true of “civil rights” movements, “public interest” law firms, or even “profit making” businesses. But unless we believe in predestination, the crucial question in all these cases is, what is there about the specific institutional process that necessarily implies the hoped-for results? The rate of bankruptcy among newly formed “profit-making” businesses suggests that the question is as appropriate in narrowly economic enterprises as it is in more idealistic social ventures.

Defining social processes by their characteristics as transmitters of knowledge in incentive form not only reduces the opportunity for rhetoric to evade hard questions; it helps reveal the reason for various apparent social anomalies. For example, the historic disappointments and mutual recriminations among successful insurgents are easier to understand once insurgency itself is defined as attempts to change institutional incentive structures. By definition, the initial insurgents began under a different set of incentives from those which they seek to create. Once they achieve their goal, the new incentive structure tends to attract and select successors with different characteristics, as well as perhaps modifying the characteristics of some of the original insurgents. This has been the history of Christianity, Marxism, the contemporary civil rights movement, regulatory agencies, and numerous other insurgencies highly disparate in terms of hoped-for results and alike only in successfully changing incentive structures for society — thereby changing the social process selectively attracting their own subsequent membership and leadership. People who chose to be Christians under the persecution of the Roman Empire were not the same as people who chose to be Christians after Christianity had become the state religion.