Knowledge And Decisions

Among the social costs of an arbitrary discreteness of time in a given system is an ease of misstatement (high costs of voter knowledge) through choice of temporal units. These include not only short-run maximization at long-run costs, but also highly variable interpretation of long-run trends. For example, as of 1960, the growth rate of the American economy could be anywhere from 2.0 percent per annum to 4.7 percent per annum, depending upon one’s arbitrary choice of the base year from which to begin counting.²⁶ The growth rate of the American economy was a major political issue in that year’s presidential election campaign, and the high cost of voter knowledge was therefore of major potential political impact. Since the “normal” growth rate had been about 3 percent, economic growth under the incumbent administration was either above or below normal, depending on the year from which the counting began. Nor was this a peculiarity of 1960: for the previous presidential election year (1956) the corresponding range of growth rates would have been from 2.1 percent to 5.1 percent depending on the arbitrary choice of base year, and for the election year before that (1952) the possible range was from 1.3 percent to 5.3 percent.²⁷ Any of these administrations could have been either a great success or a great failure by this criterion, depending upon the arbitrary choice of temporal units. Internationally, the Soviet government has long impressed many people around the world with Russian economic growth rates based on 1926 as a base year, when the same statistics would have translated into far lower growth rates if 1913 had been chosen instead. Considering the enduring world-wide comparison of Soviet type systems with Western and other alternative systems, the high cost of temporal knowledge can have very weighty consequences for mankind.

CATEGORICAL VERSUS INCREMENTAL DECISIONS

Political, and especially legal, decision making tends toward categorical rather than incremental decisions. Partly this is due to the fears engendered by the overwhelming power of government, which is allowed to function only under numerous safeguards — which is to say, numerous limitations on the discretion of individual decision makers. These fears come not only from the public subject to governmental power in a democratic system, but also from leaders — democratic or nondemocratic — who fear political repercussions from decisions made by anonymous lower level officials too numerous to monitor, as to their exercise of discretion. Numerous and relatively inflexible rules reduce the cost of monitoring, by reducing the basic question to whether or not established procedures were followed. Individual discretion may not be wholly banished as a consideration, but “a government of laws and not of men” is in part a cost saving device. Looked at another way, in a world of zero cost knowledge (omniscience), there would be no need for any rules to guide either the initial decision maker or any higher officials who might subsequently review his decision. Both the initial decision and any subsequent review of it could be in general terms of how intelligently some issue could be resolved. But initial and reviewing officials and the general public all accept some trade-off of discretionary flexibility for institutional dependability and insurance against discriminatory use of the vast powers of government. “Red tape” is an implicit premium paid for this “insurance.”