The following paragraphs are from pages 60 through 61 of Thomas Sowell’s Intellectuals and Society.
For several years, I’ve theorized that any problem can be sourced to a problem with a feedback loop. Supernanny knows this. Kids aren’t bad. The feedback the parents provide their kids is usually to blame. Overweight people choose to ignore the feedback the scale or BMI provides. Moral hazard is a feedback problem. Car accidents are usually a result of a feedback problem, whether it be with a driver or with the vehicle system.
In these paragraphs, Sowell eloquently writes about feedback problems, markets and goverment. He uses the term consequential feedback. I wish I would have thought of that.
He begins by building a case that intellectuals become a feedback problem by using their command of language to misrepresent reality in ways that might sound good to people–like saying you can eat as much as you want without gaining weight. He also exposes their rhetoric for what it truly is, an argument for using force to supplant voluntary interactions among free people (pp 61-62):
…prescriptions for active government intervention in the economy have abounded among intellectuals, past and present. John Dewey, for example, used such attractive phrases as “socially organized intelligence in the conduct of public affairs,” and “organized social reconstruction” as euphemisms for the plain fact that third-party surrogate decision-makers seek to have their perferences imposed on millions of other people through the power of government. Although government is often called “society” by those who advocate this approach, there is no concrete institution called “society,” and what is called “social” planning are in fact government orders over-riding the plans and mutual accommodations of millions of other people.
On this blog, I often comment about true measures. These are feedback loops that are hard to deny. Sowell writes about true measure in his next paragraphs. Consequential feedback is a true measure. I like how he describes it, “inescapable” and “unmistakable.” Women who frequent bars understand that they must provide unmistakable feedback to suitors who do not interest them.
Despite whatever vision may be conjured up by euphemisms, government is not some abstract embodiment of public opinion or Rousseau’s “general will.” Government consists of politicians, bureaucrats, and judges — all of whom have their own incentives and constraints, and none of whom can be presumed to be any less interested in the promotion of their own interests or notions than are people who buy and sell in the marketplace. Neither sainthood nor infallibility is common in either venue. The fundamental difference between decision-makers in the market and decision-makers in government is that the former are subject to continuous and consequential feedback which can force them to adjust to what others prefer and are willing to pay for, while those who make decisions in the political arena face no such inescapable feedback to force them to adjust to the reality of other people’s desires and preferences.
A business with red ink on the bottom line knows that this cannot continue indefinitely, and that they have no choice but to change whatever they are doing that produces that red ink, for which there is little tolerance even in the short run, and which will be fatal to the whole enterprise in the long run. In short, financial losses are not merely informational feedback but consequential feedback which cannot be ignored, dismissed or spun rhetorically through verbal virtuosity.
I can anticipate some people already preparing their defense for politicians. “We get the final say. We vote for them or their opponent.” Sowell, must have anticipated this as well.
In the political arena, however, only the most immediate and most attention-getting disasters — so obvious and unmistakable to the voting public that there is no problem of “connecting the dots” — are comparably consequential for the political decision-makers. But laws and policies whose consequences take time to unfold are by no means as consequential for those who created those laws and policies, especially if the consequences emerge after the next election. Moreover, there are few things in politics as unmistakable in its implications as red ink on the bottom line is in business. In politics, no matter how disastrous a policy may turn out to be, if the causes of the disaster are not understood by the voting public, those officials responsible for the disaster may escape accountability, and of course, they have every incentive to deny having made mistakes, since admitting mistakes can jeopardize a whole career.
Sowell made another great argument against political decision-making in the first few pages of his book, Applied Economics. You can read that argument in a previous post on How to Get People to Respond to Other Peoples’ Desires.
Finally, Sowell questions the wisdom of transferring decision-making from those who experience consequential feedback to those who do not.
Why the transfer of economic decisions from the individuals and organizations directly involved — often depicted collectively and impersonally as “the market” — to third parties who pay no price for being wrong should be expected to produce better results for society at large is a question seldom asked, much less answered. Partly this is because of rhetorical packaging by those with verbal virtuosity. To say, as John Dewey did, that there must be “social control of economic forces” sounds good in a vague sort of way, until that is translated into specifics as the holders of political power forbidding voluntary transactions among the citizenry.
This very much reminds me of the Four Ways to Spend Money, from Milton and Rose Friedman, which I wrote about in a post entitled It’s the Thought That Counts. Type I spending is consequential, so you try to get the biggest bang for your buck. Spending types II through IV removes some of the consequences for getting bang for your buck, and therefore reduces how careful you are about spending the money. Types II-IV remove consequential feedback.
Excellent work Sowell.