More Concentrated, Less Direct, and More Anonymous

Friday, February 11th, 2011

In Unchecked and Unbalanced, Arnold Kling argues that knowledge is becoming more diffuse while political power is becoming more concentrated. Foseti disagrees:

I unreservedly agree with Kling’s argument with respect to knowledge. Knowledge is becoming more complex and diffuse. Kling focuses on the financial industry. Knowledge has become more specialized, and therefore more diffuse. Kling also repeatedly cites the example of the internet as a inherently diffuse source of knowledge.

Unfortunately, with respect to power, I have some disagreements with Kling. Let’s take his favorite example of TARP. Under TARP, Congress allocated close to a trillion dollars to buy “troubled assets” (my favorite term from the financial crisis) from failing banks. Kling uses this example to show how much power Congressmen have — they can spend trillions!!

But, a closer look at TARP reveals who really had the power. Congress was essentially blackmailed by the financial bureaucracy into passing TARP. Did Congress want to destroy the global financial system? Of course not. So, they only had one choice — pass TARP. The financial bureaucracy told Congress to dance and Congress did. There was clearly a crisis, did Congress have any better ideas? Of course not — please don’t be ridiculous.

Once passed, what did TARP actually do? In short, it gave a trillion dollars to the bureaucracy to spend as it saw fit. The bureaucracy had changed its mind by the time TARP passed. Instead of investing in “troubled assets” the bureaucracy now wanted to invest directly in what we might call “troubled banks.” Nothing in the bill prevented bureaucrats from totally changing how the money was spent (a good indication of who was really in charge). TARP was therefore immediately used to inject capital into banks and into auto companies in a decision that could only make sense to the bureaucracy (if the plebes don’t like bank bailouts, maybe they’ll be happier if we bailout some plebe companies, and who’s more plebe than GM?).

So, if I’m right, it’s overly-simplistic to describe what we see as a concentration of power. I admit that in some ways power is more concentrated — someone is clearly exercising a huge amount of power. But who and how? If we don’t know, are they really that powerful? The exercise of power is also not particularly direct. TARP was — perhaps more than anything else — an unorganized mess. Whoever was exercising power was doing so in an incredibly haphazard and disorganized way. I think these facts — that we don’t really know who is exercising power and they don’t seem to be able to exercise it very directly or effectively — are as salient as the fact that the power has become more concentrated.

How do we explain how power has gotten more concentrated, less direct, and more anonymous? Foseti turns to Moldbug, who ranks the preferred sources of policy within a large bureaucracy like the government:

  1. The Law
  2. Science
  3. Public Opinion
  4. Committee
  5. Personal Authority

For instance:

Congressmen, like everyone else, don’t want to exercise responsibility, so they consult the law, which doesn’t help. Next they consult science. Fortunately, the financial bureaucracy is staffed with many economics PhDs who will be happy to scientifically demonstrate why not bailing out the banks will cause ruin.

The specialists can use “science” and who is a Congressman to question science? Science demands $700 billion dollars! So Congress wrote the check. (Notice that science trumps public opinion).


  1. ScubaSteve says:

    Except that Wall Street bankers are part of the same elite/political class that is concentrating power. Congress and Wall St. are both “insiders” as Kling calls them.

Leave a Reply