Simplistic and Naive, but Effectively True

Thursday, July 2nd, 2015

Outsiders discredit themselves when they make accusations of conscious conspiracy:

Some government bureaucracies have the very nasty dynamic that when they screw up, they create bigger problems, and thus get more funding to solve the bigger problem. Often, no one gets fired. The leaders of the problem-creating department now have more employees and thus more status and authority. Thus the system actively rewards those who work against the stated goals of the institution (again, they are not intentionally subverting the institution, they are often deluded).

The word “intent” breaks down because we do not have a handy English word to describe subconscious, institutional, or evolutionary intent. Many low-status outsiders observe the institution acting like a vampire, but they do not understand the internal dynamic, so they assume that the selfishness is conscious, when it is not. Their mistaken analysis of the internal dynamic makes them look like cranks, even though the overall observation is correct.

Because intent is so complicated, it hardly makes sense to even analyze it. To judge an institution, watch what it does. Look at the pressure that shapes its decisions.

Consider the pro-immigration Silicon Valley capitalists. I doubt Paul Graham fantasizes about bringing in hordes of programmers to push down wages, so that he can make an extra buck. That is ridiculous. But, he spends most of his time with startup founders and other investors. His grand thesis is that what is good for startups, is good for the country where the startups live (I generally agree with this thesis). So naturally, out of pure empathy, he feels pain when the founders recount some trouble getting a visa for themselves or a key employee. The social circle of elites like Graham, Zuckerberg and Gates include few workers who have been squeezed out of their jobs by H1B’s. So their concerns are reduced to a footnote and omitted from the plan-of-action.2

Consider the Yale president. President Salovey will want to champion some noble new initiatives. That is the role he was hired for. But how to pay for it? If he cuts funding for some diversity program he will have protesters at his door. If he cuts a department, professors will be outraged. If he cuts the new gymnasium renovations, they’ll lose out on matriculation from rich and prestigious elite students. Thus the pressure is always to get more money, to grow, to expand. The pressure is to raise tuition, seek more government grants, seek more tax benefits from running a giant real estate conglomerate. Does President Salovey ever lie in bed, trying to sleep, thinking to himself, “You know, the primary benefit of Yale is really having a monopoly on a social network. It is wrong to exploit that social network, to make parents take out second mortgages to get access to it. Maybe we should charge less. We could do without the new electronic media center.” Perhaps he does think that. But there is no pressure to make him act on such thoughts.

Consider the Federal Reserve. It is incorrect to claim that the Federal Reserve is run by the banking industry in a command and control manner. But the two are very cozy. The door revolves. And even if you eliminated the revolving door, the banking industry has real power because of the information asymmetry. The bankers know the mechanics of the financial system, and thus when the system breaks, the bankers get to make the plan to fix it.3 Thus policy plans that originate in the banking sector are often the policy plans that get passed. And look at the results. There were trillions in bailouts for Wall Street. Many financiers net gained from the entire boom-bust cycle, while the ordinary tax payer has net lost. Inflation has run higher than the interest on CD’s, thus taking away money from ordinary Americans each year. Favored institutions get loans at low rates to buy up coveted property. Local banks and shops struggle to compete. If you observe the results, the conspiracy theorists have a point.

Consider media companies. Do journalists get promoted for making good predictions and fired for making wrong predictions? Do clicks and advertising dollars correlate with truth value? Do foundation grants and donations from the wealthy correlate with truth value? If not, why should we expect these institutions to be giving us an accurate view of reality?

The bottom line is do not judge any person or institution by what they say. Watch what they do. Find where the pressure is. Trace their social network. Who gives them advice? Who do they want to impress? Examine where the incentives lie. Examine the selection process by which people or departments or ideas get promoted. In the long term, an institution is forged by pressure, not by lofty goals and intentions. Thus the conspiracy critique is often simplistic and naive, but effectively true.


  1. Slovenian Guest says:

    Of course, parties would never intentionally conspire. Conspiracy isn’t a crime in and of itself in U.S. law, these aren’t the droids you’re looking for, and there is not even a smidgen of corruption anywhere!

  2. CMOT says:

    Hurray! Another intellectual wannabe discovers public choice economics!

  3. Big Jim says:

    “we do not have a handy English word to describe subconscious, institutional, or evolutionary intent.”

    But we do, from Old English: wyrd. We just stopped using it because it doesn’t fit with the Christian worldview that sees everything in existence as driven by conscious intent.

  4. Puzzle Pirate says:

    This could also be described as “emergent behavior”. In the same way evolution did not intend for any particular organism to come about, the ruling class may also not intend large scale harm to the West. But the collective decisions of all of these individual actors are producing that end.

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