Not knowing how things work

I disagree with Dave Winer about so many things in so many ways that I’m reluctant to even mention him here, but I have to give him credit for stating an important truth about the current crisis:

Fact is the people who run this place aren’t qualified to run it. No one is. You can see that the legislators have basically no idea how the economy works, yet they make decisions that determine where trillions of dollars flow. The Secretary of the Treasury, a banker, has no idea how the legislative process works, and even harder to accept, doesn’t have a basic understanding of the Constitution, how the three branches of government work.  […]

So the NY Times today says the voters rebelled because no one from Washington explained to them what was going on. Folks, that’s just the tip of the tip of the problem. They couldn’t explain it because they themselves needed to have it explained to them.

I’ve read oceans of words about the current crisis and its underlying causes, but only one sentence in one article gave me something new to think about:

House Democrats summoned to a lunchtime meeting to discuss the proposal yesterday received a glossary of financial terms, such as “credit default swap” and “illiquid assets.”

Now, if you think it is foolish that people so badly educated about the workings of modern finance are rushing to decide how much money to throw at our financial problems, I agree with you. But is it really fair to expect a congressman to understand the workings of modern finance and every other area he is responsible for in such detail that he could make an intelligent decision when called upon?

Dave Winer has rightly identified the problem, but he is no different from any other pundit in thinking that he (as opposed to the idiots in charge) understands the issues well enough to chart a course through these waters. I’d like to suggest another possibility: some processes are complex enough that nobody is able to properly control them when they go haywire, no matter how gifted, no matter how well educated, no matter how popular, no matter how well intentioned. In these cases, the mistake was not to put the wrong people in charge, but to put anyone in charge.

A man can more or less properly control the workings of a farm. A man cannot properly control the workings of a national government. Somewhere between the farm and the national government we cross a threshold beyond which our reach exceeds our grasp. I don’t know exactly where the threshold lies, but I suspect it comes far more quickly than our modern arrogance would lead us to believe.

Advertisements

4 thoughts on “Not knowing how things work

  1. I would say the threshold is/was crossed at two places.
    1. Where physical assets were allowed to change to Fiat assets.
    2. Where you give more taxes to state and national governments than to local government.

    On the farm all your assets are physical and “more or less” controllable; land, buildings, equipment, livestock, seed and harvest, etc. Excess of these assets used to be traded for silver or gold. Once we allowed the government to substitute fiat for silver and gold and also later remove silver and gold backing for that fiat then we lost control. Inflation, Devaluation, Creating money out of nothing, etc took over. Once we allowed the pyramid scheme of Fractional reserve banking we lost control.

    Once we allowed ourselves to be taxed more by the state and national governments than the local governments then we crossed the threshold to no control.

  2. Questions for you:
    1: Assuming a national government isn’t controllable, what is the solution? No national government?

    2: I would guess that you think the market is too complex to comprehend, much less to control. Do you therefore argue for a completely unregulated free market, where “no one is in control”?

    3: Would you say that we can control the workings of a farm because we understand it? If so, does this mean you disagree with the agrarian premise that localism is good because we can’t ever fully understand anything as complex as a farm, and localism serves to limit the damage of our mistakes?

    I think I’m sympathetic to your position, but I’m not completely sure yet what your position is.

  3. Carey,

    I think I’m sympathetic to your position, but I’m not completely sure yet what your position is.

    I plan to write a post on the idea of taking a position, but the short answer is in my public writing I try to restrict myself to observations. Too often we assume that the only two responses to a situation are to embrace it or to reject it. Those are extremes, and I think that a bit of detachment can help us see that there are many, many acceptable and possibly worthwhile responses in between them.

    1: Assuming a national government isn’t controllable, what is the solution? No national government?

    It’s only a certain kind of national government that can’t be controlled. The real mistake, I think, came along in the 19th century when we decided we could use bureaucracy to structure and operate society as a large, intricate machine that behaves predictably. Two hundred years of experience seems to indicate that it can’t. I think that a medieval king probably had much more control within his sphere of operation, but that sphere was miniscule compared to the one we think a modern government should encompass.

    2: I would guess that you think the market is too complex to comprehend, much less to control. Do you therefore argue for a completely unregulated free market, where “no one is in control”?

    Well, to me the idea that private vices can produce public benefits is so crazy that it either has to an axiom or a lie, and the last two hundred years seem to point to the latter. So I object to the free market no matter what scale it operates at. But if you want to have a free market, I would say the smaller the better, since the larger the market grows the less likely you are to have information reliable enough to make prudent decisions, i.e. it becomes ever easier for sellers and buyers to deceive one another.

    3: Would you say that we can control the workings of a farm because we understand it? If so, does this mean you disagree with the agrarian premise that localism is good because we can’t ever fully understand anything as complex as a farm, and localism serves to limit the damage of our mistakes?

    I would say that localism is good because the small scale gives us some hope of increasing our understanding and control—and, as you point out, it visits the consequences of our efforts to learn on us and not our neighbors. Somewhere above the local scale, two bad things happen: (1) complexity outstrips our ability to understand and control, including our ability to recognize that we no longer understand or control, i.e. we think we are in charge and nothing can persuade us otherwise; and (2) since the effects of our actions begin to visit themselves on others, we persuade ourselves that this is on balance a good thing.

    In his book Imperial San Francisco, Gray Brechin easily demonstrates that the huge costs of creating the Pacific empire far outweighed any benefits that it produced. But some individuals did benefit greatly by passing on the costs to others (e.g. mining operations more or less destroyed farming by silting up the rivers and bays with their castoffs). And those individuals were leading lights of San Francisco society, who thought that on balance they were doing a good thing. And most of the rest thought so, too.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s