Knowledge And Decisions

None of these categories is hermetically sealed or represents a mutually exclusive entity in any rigorous sense. All that is necessary here is to recognize a spectrum of human relationships, ranging from the most voluntary and informal (lovers) to the most organizationally structured and determined (a military draftee in combat). Different regions of this spectrum can then be discussed under different names, implicitly recognizing that these discontinuous designations apply in the real world to continuously varying complexes of characteristics. For example, a family may be regarded as an informal, voluntary relationship, because its cohesion and functioning are due primarily to incentives intrinsic to the relationship itself rather than organizationally contrived, though these contrived incentives also enter, as in family law. The family also underscores the point that “informal” or “voluntary” does not necessarily imply weaker incentives. Family incentives are in fact so powerful as to cause defiance of severe legal penalties, and the law itself tacitly recognizes this — as, for example, in not attempting to force spouses to testify against one another. Other organizational entities likewise recognize that their formal incentives are weaker than informal family incentives. Anti-nepotism hiring rules are a common form of this recognition.

Comparisons of different kinds of human decision-making relationships and processes are to some extent comparisons of different kinds of decisions as well. If this ex post fact implied an ex ante unique relationship between kinds of decisions and kinds of decision-making processes, it would be both logically impossible and socially pointless to try to compare various relationships or institutions as decision-making mechanisms. The discussion that follows not only postulates in a theoretical sense, but assumes as a matter of fact, that given decisions can be made by any of a number of institutions. In this context, the empirical fact that families do not usually make decisions about fighting a war, and bureaucratic organizations typically do not decide matters of love, are merely things to be explained in terms of institutions’ respective decision-making advantages. Under some circumstances, families have in fact made decisions about wars (vendettas, dynastic wars) and computer organizations have at least claimed to be able to make love matches. In short, the discussion proceeds on the premise that the institutional locus of particular decisions is not a constant but a variable, and concludes that it is a crucial variable from the standpoint of the well-being of society.

INFORMAL RELATIONSHIPS

Among the advantages of informal relationships as decision-making entities is their low cost of decision making in terms of the time required for deciding, the cost of the requisite knowledge, and the ability to “fine tune” the decision to the problem or prospect at hand.

By the cost of a decision is meant the cost of the process of deciding, rather than the costs entailed by the decision itself. For inter-institutional cost comparisons of decision making to be meaningful, such comparisons must be made holding constant the “quality” (however defined) of the decision. This neither postulates as a matter of theory nor assumes as a matter of fact that institutions are equally good at deciding the same things. It merely says that inter-institutional differences in decision-making effectiveness may be equally well expressed as cost differences in producing given quality decisions or as quality differences at given costs. By expressing inter-institutional differences in terms of the cost of a given quality of decisions, the discussion avoids getting bogged down in the complexities of weighing the respective advantages and disadvantages of different decisions themselves, and can focus on the cost of the process of achieving a given probability of satisfying a given set of values to a given extent.