Knowledge And Decisions

Time also insulates, if only because it raises the cost of intellectually connecting cause and effect, either in prospect or in retrospect. This insulation is more effective in situations or processes where continuous time can be broken up into discrete units and each unit judged separately — as in a political term of office. Where time effects are continuous, and are continuously experienced even within discrete decision-making periods, as in economic decisions whose present values reflect future prospects, insulation from feedback is much harder to achieve. If a farm has been made unusually productive during the current year by devoting all efforts to cultivation of the current crops, to the neglect of care of the soil, fences, barns, animals, etc., the future cost of that neglect will be reflected in the current sale price of that property. In this situation, effects are quickly and cheaply transmitted back and forth across continuous time. By contrast, an overseer in charge of a farm for a discrete period of time is insulated from time effects that fall beyond his tour of duty, if the owner is absent — whether that absentee owner is private or governmental. This too has been borne out by experience in such disparate settings as the antebellum South and the Soviet Union.¹⁶

The knowledge-transmitting capacity of social processes and institutions must be judged not only by how much information is conveyed but how effectively it is conveyed. A minimal amount of information — the whimpering of a baby, for example — may be very effective in setting off a parental search for the cause, perhaps involving medical experts before it is over. On the other hand, a lucidly articulated set of complaints may be ignored by a dictator, and even armed uprisings against his policies crushed without any modification of those policies. The social use of knowledge is not primarily an intellectual process, or a baby’s whimpers could not be more effective than a well-articulated political statement. Again, simple and obvious as this may seem, it contradicts not only general depictions of “society” as a decision maker but more specific demands for intellectual input into specific decisions to make them socially better. The key question is not the intellectual question of what to decide but the institutional question of what social process shall decide, in the light of the characteristics of that process and of the problem at hand.

Some knowledge is so widespread, so widely applicable and so certain that it is not worth the cost of repeatedly verifying it in each specific instance: people do not want to be murdered, to have their children kidnapped, to be defrauded, or to be jailed without trial. Laws can incorporate such desires into enduring social institutions backed up by governmental force. The high degree of consensus makes the benefits large and the costs relatively low, since only those who ignore the moral consensus need be dealt with by force. In areas where the consensus is less certain, the benefits are smaller and the costs of enforcement higher. Beyond some point, for some range of decisions, it is socially more effective to allow each individual to use his own discretion. His own discretion does not mean that he will decide every case ad hoc, for the individual is free to structure new constraints for himself and any agreeable others via contracts, club rules, association bylaws, and rules of games and sports. The boundary of the law merely defines the limits of private discretion — whether it is exercised individually or in concert.

However elaborate, or even rigidified, these private arrangements become, they can resemble governmental institutions only in outward form. The government remains an organ of force while voluntary organizations can achieve compliance only insofar as the benefits they offer exceed the costs they impose on their members — whether in dues, fines, or restrictions on their behavior. But if the government decides to pursue a given policy, no such limitations on its costs apply, because all taxpayers are financially liable, regardless of their individual weighing of costs and benefits. Insofar as there are costs to finding out costs (for a nonmarket activity), these knowledge costs insulate government costs from general comparison with benefits by the voters at large.