Explaining that post that didn’t make sense

Writing a post that doesn’t quite compute is one of the perils of blogging, so let me expand upon a point I was trying to make here.

I once heard someone (a cursory Google search fails to reveal his or her name) explain the benefits of the modern financial system thusly: “In my father’s day (and I’m paraphrasing here), his good name did not carry weight beyond the town in which he lived. Now, credit scores and modern communications technology have made it so a bank anywhere in the world can gauge my father’s reliability. His good name, in other words, has been universalized.”

Of course, it’s not really his good name that we’re talking about here. Whatever reputation so-and-so’s  father enjoyed in his hometown was personalized, and a credit score or a computer algorithm doesn’t take that type of thing into account. It can tally up withdrawals, deposits or car payments and then spit out a reasonably accurate assessment of your financial reliability, but that’s not the same thing as a reputation for probity. Sometimes that’s a good thing – reputations, after all, are occasionally hooey – but sometimes it’s not so good. A human might understand the extenuating circumstances that made you late on your payments a few months back. But a credit score won’t, and so our good names have turned into financial balance sheets that are both far-reaching and brittle.

This shift away from personal interaction isn’t something that’s restricted to government or a particular industry. Businesses prize scale and efficiency, and it’s more efficient to design a computer program or implement a universal set of customer service protocols than to train a workforce to be genuinely responsive. Amazon’s approach to customer service is a remarkable example of this trend – instead of responding to individual complaints, they tally and categorize queries they receive from customers and post responses to the most frequently asked questions.

In government, memories of a genuinely horrific program of segregation – aided and abetted by local custom – have accelerated the trend towards centralization. In the context of American history, a defense of localism or personal discretion sounds like a thinly-veiled excuse to empower bigots with no oversight. As a consequence, our civil servants are either detached from the communities they serve or no longer empowered to make the sort of decisions that require a light human touch. I may have unfairly singled out DC’s head of consumer and regulatory affairs for criticism on this point, but his unwillingness (or inability) to reconsider city-level regulations highlights the difficulties of a system that prizes uniformity and centralization over flexibility and personal discretion.

There are genuine advantages to centralization, scale, and efficiency that I won’t get into here – the benefits of a professionalized civil service or a banking system that allows you to withdraw money from an ATM anywhere in the world should be obvious to just about everyone. But there are also downsides, and what I meant to suggest in my original post is that perhaps it’s time for the pendulum to swing back in the other direction.

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27 thoughts on “Explaining that post that didn’t make sense

  1. I think that a lot of the problem came from insistence–both by corporations and by government–on standards over solutions. Or, rather, the shift in business education to the idea that “a standard is a solution”. It’s a matter of looking at the success of kansai and learning the wrong lesson. (The Japanese weren’t successful because they had a plan, they were successful because they worked their asses off and took personal pride in doing a good job.)

    When put so much emphasis on following the standard”, you give people the idea that following the standard is their job.

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  2. People love bureaucratic discretion, until the bureaucrat says no to them (environmental regulation) or say yes to the powerful once too many times (financial reg). At which point there’s an outcry to move to a less discretionary system. Or, as pops up here on a regular basis, a push to lift all regulation altogether and remove the State from the process altogether.

    Now, there is no one true best way of dividing power between legislators and bureaucrats. But analyzing whether the system is achieving its intended goals is a lot more difficult than, as Megan McArdle put it, asking whether agencies “work”. What do you mean by “work”?

    Here are a few possible fact patterns of “not working”: Are agency decisions regularly overturned by courts? Does it take years to obtain a decision from an agency? Do multiple agencies have overlapping jurisdiction? Is the level of expertise / cost needed to apply for an agency ruling consistent with scope of the agency’s jurisdiction?

    And then there’s the libertarian question: why does this agency exist in the first place?

    Sometimes the answer is to give an agency less discretion, sometimes the answer is to do a better job of hiring competent personnel and training them and every once in a while, the answer is to dissolve the agency.

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    • “And then there’s the libertarian question: why does this agency exist in the first place?”

      The problem is that the lockstep libertarian answer is always “it shouldn’t.” That’s the problem with rigid minarchist ideologues, and rigid ideologues in general. A liberaltarian or a conservatarian, maybe not.

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    • This is actually a useful question; because, for a regulatory agency, “no activity” is not necessarily a failure mode. If nobody submits anything to the FDA for review, then ipso facto no unsafe drugs will be sold to consumers, and so the FDA’s stated goals will be met!

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  3. “But there are also downsides, and what I meant to suggest in my original post is that perhaps it’s time for the pendulum to swing back in the other direction.”

    One of my projects for this year is to make an effort to speak on the phone each and every person who writes something on the internet that catches my interest. So far this year I’ve spoken to about a dozen people, so of whom I agree with, some of who I do not; some of whom I hope to speak with again, and some of whom I’m sure I will not.

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  4. “perhaps it’s time for the pendulum to swing back in the other direction.”

    May I suggest a different approach? You’re right, of course, that this is what happens. But it’s mostly because one side argues for centralization because arguing for centralization is “what we do;” the other for locality for exactly the same reason.

    Is there anything wrong with deciding that sometimes centralization is good and/or necessary, and sometimes it’s unnecessary and counterproductive, and look at each situation with that in mind? Does it always have to be about which guys’ set of philosophers win?

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    • > Is there anything wrong with deciding that sometimes
      > centralization is good and/or necessary, and sometimes
      > it’s unnecessary and counterproductive, and look at
      > each situation with that in mind? Does it always have to
      > be about which guys’ set of philosophers win?

      Now THAT is what I want to know.

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      • The ancient philosophers called it “wisdom,” and that’s why philosophy is the love of it.

        Laws, rules, and regularations are at best still only approximations of what is wise. The problem—or at least the question—is whether our bureaucrats are more or less wise than their legislators, and us, who elected them.

        I think of Tom showing Willie the ship in The Caine Mutiny, “Designed by geniuses to be run by idiots.”

        Jury’s out on who is who.

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        • > Laws, rules, and regularations are at best still only
          > approximations of what is wise.

          Sure. Note: any one individual’s perspective of wisdom is also only an approximation of what is wise.

          > The problem—or at least the question—is whether
          > our bureaucrats are more or less wise than their
          > legislators, and us, who elected them.

          This sort of misses RTod’s point, and my second.

          This isn’t the question.

          It is of course a problem that the rules are only an approximation of the wisdom. However, the inefficiency caused by this approximation is in general a cost with the top-down approach.

          The converse problem with the bottom-up approach is coverage. You will have more native efficiency, but you won’t hit everybody. This is a cost with the bottom-up approach.

          Let’s call these approach costs. In some cases, they are negligible when looking at both approaches, and thus the top-down or the bottom-up costs will be equivalent or within a delta of “ignorable”, and thus we can take either approach.

          In some cases, one will be substantially greater than the other, and in these cases it’s probably best to take the approach with the lower approach cost.

          These map, very well, into the security domain. There are two default approaches in security – default-allow and default-deny. In the first case, you have to enumerate badness to secure the system, and in the second you have to enumerate goodness to make the system usable.

          Depending upon the exhaustive list of goodness/badness with each approach, you can see pretty trivially why one approach is better than the other in individual instances.

          Default-allow for a park. Generally, we want everybody to be able to use it, and the misuses of a park are pretty minor. It’s not worth securing the park to keep graffiti out of the restrooms.

          Default-deny for the bank vault, for obvious reasons.

          Neither approach is universally optimal. Why do we always approach our political discourse as if this is not the case?

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            • The bureaucrat can be un-pessimized, but in many cases won’t be. That’s the cost of bureaucracy. However, it is still the case that many times this cost is worth the benefit of the service you’re trying to provide.

              You’ll wind up with some helpful people at the City Planner’s office, and some downright unhelpful people, and some in-between. We can actually take steps to make that better, but we’ll never make it to optimal.

              And yeah, I *absolutely* agree that in some cases we don’t need a large audit structure (which usually comes attached to a large bureaucracy); things like a license to cut hair are of minimal use.

              Building permits are actually a great specific case. Here in Pasadena, you need a building permit to install a water heater. This means that an inspector needs to come out and check to make sure that you’ve double-strapped it. I understand the root logic (we don’t want water heaters flopping all over the place in the event of an earthquake), but the mechanism of the normal permit office is way too heavyweight. You don’t need an inspector for this, at worst you need a digital photograph or three uploaded to the city website. Heck, a few lines in your homeowners’ policy will probably accomplish the same thing and keep the building code lean.

              Yes, some people will bypass the security; you’re not trying to get full coverage, it’s not necessary to serve the root purpose.

              The original purpose of the permit office is supposed to be there to make sure you’re not building something that is going to fall over. Have the highly paid inspectors and the support personnel necessary to manage their time properly focus on the high value operations.

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              • I don’t think we disagree. I live a few miles outside Pasadena and just put in a water heater with considerably less fuss, thank the FSM, or whatever the evil god of government is.

                I’m just considering the conundrum on its merits outside of ideology, except that people are people, and bureaucrats are people [more or less].

                The third world does come to mind, where individuals have ultimate discretion. Of course, corruption is a way of life, the exception not the rule. This is the problem of not minding the rules.

                I’m certainly delighted when a civil servant is both wise and helpful. But such people are the exception, not the rule, hence my disposition to take my chances with the rules.

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                • I think our problem is that the bureaucracy increasingly resembles an inverted pyramid – civil servants at the top enjoy the the most power and influence but are also the furthest removed from the people they govern and interact with. I’d prefer to widen the base of the pyramid by ceding more discretion to state and local officials.

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  5. I think the pendulum would generally swing back in the other direction if these absurd regulations weren’t all enforced by statute. The inefficiencies which you mention represent entrepreneurial opportunities lost because of artificially elevated barriers to entry for would-be entrepreneurs.

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  6. My wife and I went to Wal-Mart last night looking for a thingamagig and a geegaw we needed. What I was struck by, aside from being really fishing lost in the place for about an hour, was that it seemed as if they must expect to lose a good amount of merchandise to shoplifting. I have never shoplifted, but I was almost tempted to start because there was almost no staff anywhere in this huge airport terminal of a building and the handful of teenage employees I saw clearly wouldn’t have cared if I did. I don’t know if the impersonal nature of it failed to take into account my good name and reputation or was just pushing me towards vice. Impersonal institutions have no commanding authority to them.

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    • They don’t really need a lot. Most people just don’t shoplift.

      And most amateur shoplifters are pretty easy to spot; people generally look guilty when they steal stuff. The pros you’re probably not going to catch with normal methods, so you just write that off unless it becomes an epidemic in one store, and then you put the procatchers there.

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    • Actually Wal-Mart has tv cameras everywhere in their stores, and someone in the back room watching them. Also valuable things have tags that activate door sensors.
      So they watch but you don’t know you are being watched, the miracle of closed circuit TV

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