Isegoria

A theme of Dominic Cummings’s blog since before the referendum campaign has been that thinking about organisational structure and dynamics can bring what Warren Buffett calls “lollapalooza” results:

What seems to be very esoteric and disconnected from ‘practical politics’ (studying things like the management of the Manhattan Project and Apollo) turns out to be extraordinarily practical (gives you models for creating super-productive processes).

Part of the reason lollapalooza results are possible is that almost nobody near the apex of power believes the paragraph above is true and they actively fight to stop people learning from extreme successes so there is gold lying on the ground waiting to be picked up for trivial costs. Nudging reality down an alternative branch of history in summer 2016 only cost ~£10⁶ so the ‘return on investment’ if you think about altered GDP, technology, hundreds of millions of lives over decades and so on was truly lollapalooza. Politics is not like the stock market where you need to be an extreme outlier like Buffett/Munger to find such inefficiencies and results consistently. The stock market is an exploitable market where being right means you get rich and you help the overall system error-correct which makes it harder to be right (the mechanism pushes prices close to random, they’re not quite random but few can exploit the non-randomness). Politics/government is not like this. Billionaires who want to influence politics could get better ‘returns on investment’ than from early stage Amazon.

After accounting for indirect taxes and in-kind transfers, the US redistributes a greater share of national income to low-income groups than any European country.

In his final weeks at Georgetown, Carroll Quigly told the students in his “The World Since 1914″ class that there was little point in discussing the Third World when they knew so little about how their own society worked:

So I told them about the USA — really very hair-raising when it is all laid out in sequence:

1. cosmic hierarchy;
2. energy;
3. agriculture;
4. food;
5. health and medical services;
6. education;
7. income flows and the worship of growth;
8. inflation;

showing how we are violating every aspect of life by turning everything into a ripoff, because we…have adopted the view that insatiable individualistic greed must run the world.

The “Utopian” socialists were wrong, Bryan Caplan notes, but Marx was worse, as this excerpt from a piece by Joshua Muravchik explains:

He [“Utopian socialist” Robert Owen] was no obscure crank. When he arrived in the United States in 1824, he was received by a joint session of Congress that met over two separate days with outgoing President Monroe and incoming President John Quincy Adams, among the many luminaries who came to hear him out.

Owen then bought an already developed settlement on the banks of the Wabash River from a religious sect. The members of this group had developed it, and it included not only homes but vast fertile farmlands and more than twenty highly productive workshops that produced goods sold all across the country. Yet within a year after taking it over, Owen and his thousand followers had turned this little Switzerland into an Albania. All the other collective settlements, except for some that were first and foremost religious communities, had similar histories of failure.

But along came Marx and Engels, who wiped this record of failure away with one of the great intellectual conjuring tricks of all time. Owen and his ilk, said Marx and Engels, were utopians. What we needed instead was scientific socialism, which they then outfitted with great pseudo-scholarly paraphernalia: means and modes of production, historical forces, class struggle, and all the rest.

What I mean by conjuring trick is this: Owen and the other so-called utopians had an idea. What did they do? Owen and the other communitarians actually created experiments to test their ideas. Experimentation is the very essence of science. They were the real scientific socialists. Marx and Engels dismissed all experimental evidence, replaced it with an idea that was sheer prophecy, and claimed thereby to have progressed from utopia to science.

Mancur Olson’s The Rise and Decline of Nations is one of Alex Tabarrok’s favorite books and a classic of public choice. He shares four of its nine implications:

2. Stable societies with unchanged boundaries tend to accumulate more collusions and organizations for collective action over time. The longer the country is stable, the more distributional coalitions they’re going to have.

6. Distributional coalitions make decisions more slowly than the individuals and firms of which they are comprised, tend to have crowded agendas and bargaining tables, and more often fix prices than quantities. Since there is so much bargaining, lobbying, and other interactions that need to occur among groups, the process moves more slowly in reaching a conclusion. In collusive groups, prices are easier to fix than quantities because it is easier to monitor whether other industries are selling at a different price, while it may be difficult to monitor the actual quantities they are producing.

7. Distributional coalitions slow down a society’s capacity to adopt new technologies and to reallocate resources in response to changing conditions, and thereby reduce the rate of economic growth. Since it is difficult to make decisions, and since many groups have an interest in the status quo, it will be more difficult to adopt new technologies, create new industries, and generally adapt to changing environments.

9. The accumulation of distributional coalitions increases the complexity of regulation, the role of government, and the complexity of understandings, and changes the direction of social evolution. As the number of distributional coalitions grows, it will make policy-making increasingly difficult, and social evolution will focus more on distributing wealth among groups than on economic efficiency and growth.

You can gauge the book’s continued relevance from this thread by Ezra Klein, he notes, which gets at some of the consequences of the forces Olson explained:

A key failure of liberalism in this era is the inability to build in a way that inspires confidence in more building. Infrastructure comes in overbudget and late, if it comes in at all. There aren’t enough homes, enough rapid tests, even enough good government web sites. I’ve covered a lot of these processes, and it’s important to say: Most decisions along the way make individual sense, even if they lead to collective failure.

If the problem here was idiots and crooks, it’d be easy to solve. Sadly, it’s (usually) not. Take the parklets. There are fire safety concerns. SFMTA is losing revenue. Some pose disability access issues. It’s not crazy to try and take everyone’s concerns into account. But you end up with an outcome everyone kind of hates.

I’ve seen this happen again and again. Every time I look into it, I talk to well-meaning people able to give rational accounts of their decisions.

It usually comes down to risk. If you do X, Y might happen, and even if Y is unlikely, you really don’t want to be blamed for it. But what you see, eventually, is that our mechanisms of governance have become so risk averse that they are now running *tremendous* risks because of the problems they cannot, or will not, solve. And you can say: Who cares? It’s just parklets/HeathCare.gov/rapid tests/high-speed rail/housing/etc.

But it all adds up.

There’s both a political and a substantive problem here.

The political problem is if people keep watching the government fail to build things well, they won’t believe the government can build things well. So they won’t trust it to build. And they won’t even be wrong. The substantive problem, of course, is that we need government to build things, and solve big problems.

If it’s so hard to build parklets, how do you think think that multi-trillion dollar, breakneck investment in energy infrastructure is going to go?

Over the centuries, Matthew Yglesias reminds us, people have invented many different kinds of machines that help us do things and improve living standards:

But in a very general way, what most of these inventions do is let us substitute some form of power for human effort. And as long as we were totally ignoring the costs of burning coal and oil, this was a great mechanism for progress — you invent new ways to do things by burning coal and oil, so then you burn more coal and oil.

But since the mid-1970s we’ve been increasingly aware of the limits and problems with this model, and it’s put us on an energy diet. Now when we invent something cool, we often have to say “too bad the energy requirements are so high.”

But as Ryan Avent (from whom I borrowed that chart) and others have written, this is a backward way of looking at things. The turn toward conservation and efficiency was a necessary evil in an era when we couldn’t come up with a better way to deal with geopolitical instability linked to oil and pollution linked to all forms of fossil fuels.

Instead, we should raise our clean energy production ambitions. We don’t want to replace 100% of our current dirty energy — we want to generate vastly more energy than we are currently using and make it zero carbon.

What difference does it make in how you look at it?

In the “energy is a necessary evil” frame, we look at our current electricity needs and then ask, “How can we generate all that from zero-carbon sources?” In the alternate framing, you say that to the extent we can develop affordable, zero-carbon sources of electricity, we want to generate tons and tons of electricity. Ideally, we would want to replace much more than 100% of current gas, coal, and oil with zero-carbon sources of electricity and use that to literally power a bold new era of rapid economic growth.

I find that this vision tends not to be intuitively compelling to a lot of people who are accustomed to living in the efficiency era. But let’s just imagine a world with small modular nuclear reactors and advanced geothermal energy production — a world in which we have plenty of baseline power. As our ability to make batteries gets better and better, we can put them all in vehicles rather than using them to address intermittent renewables. Then when the sun shines or the wind blows, we have even more power that we can use for stuff that doesn’t need to be on all the time. It’s a world of energy abundance — Lewis Strauss’ dream of electricity that’s “too cheap to meter.”