Knowledge And Decisions

A certain amount of foolish decision making and thoughtless inefficiency may be tolerated — must be tolerated — in any large organization, because there are only a limited number of wise, experienced and thorough people available, and they need to be put in a few key positions and their efforts concentrated on a few crucial decisions. Anyone at the bottom of an organization can spot some mistakes by his hierarchic superiors, and so can outsiders. The real choice for the organization as a whole, however, is between existing decision makers and their potential replacements for the whole range of decisions each must take. Some improvements may be possible in specific instances by having subordinates correct superiors’ mistakes, but this is not costless in terms of organizational discipline or in terms of the time spent by subordinates and superiors discussing what is and is not a mistake. In some cases — an extreme example being a combat unit under enemy fire — the time spent discussing alternatives may be more costly than either alternative itself. The closer decisions are to that end of the spectrum, the more rational it is to have unquestioning obedience, even if the superior makes no better decisions than the subordinate.

At the other end of the spectrum — an appellate court reviewing a murder conviction — full and free discussion may be appropriate, without regard to which members of the reviewing court are hierarchically senior. Whatever honorific or administrative prerogatives belong to the Chief Justice of the U.S. Supreme Court, his is just one vote out of nine in determining the substance of the law. It is not that one process is necessarily more important than the other. Human life is at stake in both cases. The difference is that the passage of a small amount of time radically increases the risks to life in one decision-making situation, while executions are automatically postponed for whatever time it takes for an appellate court to make up its mind.

The trade-offs involved in social decision-making processes parallel those in economic decision-making processes. Present costs and benefits must be traded off against future costs and benefits in interpersonal relationships ranging from child rearing to love affairs. External costs are involved wherever people living near each other have different values as regards noise or the appearance of the neighborhood. In short, the principle of diminishing returns applies at least as much to emotions as to economic processes. A mother who would be devastated by the loss of her baby may nevertheless welcome a few hours away from the infant at times, to renew her spirits. Indeed, in virtually all personal relationships — even between the most ardent lovers — there are times (however brief) when each feels the need to be alone or at least to be with others.

It is not a mere coincidence that the trade-offs of economic processes parallel those of other social processes. The economic process is only a special case of human decision making in general, so it is hardly surprising to find similar principles at work, even on very different subject matter. However, the large difference in subject matter not only obscures the underlying principles, but modifies their application as well.

Some of the social trade-offs worth special attention include (1) the sorting and labeling of people, activities, and things, (2) the role of time, and (3) trade-offs involving safety of one sort or another.

SORTING AND LABELING

One of the most basic and pervasive social processes is the sorting and labeling of things, activities, and people. This includes everything from the sex separation of bathrooms to municipal zoning ordinances, air traffic control, and racial segregation. Even the changing moods and circumstances of a given individual are sorted and labeled by those who deal with him, in order not to talk to or interact with him in particular ways “at the wrong time.” Sorting and labeling processes involve a trade-off of costs and benefits. In general, the more finely the sorting is done, the greater the benefits — and the costs. Beyond some point, making the sorting categories finer would not be worth the additional cost — for the particular decision-making purpose. For example, if we find boxes of explosives stored in an area where we were planning to hold a picnic, that may be sufficient reason to locate the picnic elsewhere, without inquiring further as to whether the explosives are dynamite or nitroglycerin, though that distinction might be important for other purposes at other times.