Knowledge And Decisions

Despite the fashionable practice of personifying “society” as a decider and actor, decision making in the real world can be understood only in the context of the actual decision-making units that exist, and the specific, respective sets of constraints and incentives within which each operates. These various decision-making units and processes are highly diverse, and have equally diverse implications. The persistence through the centuries of very different decision-making relationships, institutionally coexisting within even the most monolithic societies, suggests that there may be substantial advantages and disadvantages to each form of human organization, and that these vary with respect to different activities and decisions. Constitutionalism and pluralism in effect acknowledge and underscore this conclusion.

One of the basic distinctions among human relationships is between informal voluntary relationships, terminable at no cost beyond the loss of the relationship itself, and relationships enforced by designated institutions which can impose substantial penalties, which may range from breach-of-contract suits by a private business to execution for military desertion in wartime. The difference here is not in the seriousness or severity of the loss due to termination of a relationship. The distinction is in whether the loss is a contrived penalty to enforce the terms of the relationship, rather than a loss inherent in the loss of the relationship itself. Lovers are perhaps a classic example of an informal voluntary relationship — the loss of which may be far more devastating than, say, breaking a landlord-tenant lease agreement. Yet the landlord-tenant lease agreement is no longer a voluntary arrangement after it has been signed, just as the relationship between lovers is no longer wholly voluntary once they are married.

Informal relationships need not be so direct as that between lovers. Language is a whole set of intricate relationships, evolved rather than designed, and its “rules” are obeyed without the necessity of any organizational entity capable of imposing penalties for disobedience. For students there may be grade penalties for improper use of the language, and social disapproval might be another penalty for others, but these are mild, incidental, and perhaps ineffective deterrents — certainly as compared to the staggering costs of substantially disregarding the rules of language. Anyone who was either incapable of understanding those rules, or perversely oblivious to them, would find himself in a two-way incomprehensibility with virtually everyone. Again, what is involved is a voluntary relationship, terminable at no cost beyond the loss of the benefits of the relationship itself, though that loss may be very large.

By contrast, organized institutional relationships carry contrived rewards and penalties as compensations for following or not following the terms of the relationship and the desires of the people involved in it. Economic organizations provide goods or services in exchange for money, political organizations provide their services in exchange for votes, and administrative organizations (government bureaucracies, private “non-profit” organizations, etc.) carry out their functions in exchange for such organizational rewards as prestige and such individual rewards as pay, power, and perquisites. It is not that these incentive mechanisms define what is economic, political, or administrative. Rather, they define what is organizational rather than informal or spontaneous. Within the category of organizations, there are then economic, political, and other subdivisions. Moreover, there are also informal (non-organizational economic, political, etc.) activities, though these will not be a major focus here.