Competition and eu-competition is the lifeblood of emergent order

In a recent Freakonomics podcast encore, host Stephen Dubner explores How a Bad Radio Station is like our School System.

About 5 minutes into the podcast, Dubner asks Joel Klein, former chancellor of the New York City Public School System, why the standard model of education — “25 students in a box” — hasn’t changed.

I found Klein’s answer interesting:

How many psychiatrists does it take to change a light bulb?  The answer: Only one, but the light bulb has to really want to change.

And the answer to your [Dubner’s] question is that the school system really does not want to change.  It wants more resources.

What I found interesting about Klein’s answer is that it describes organizations in general, not just education.  Businesses, charities, churches, clubs, families, associations and government organizations, once established, do not really want to change and they want more resources.

A common discussion is why private is better than public — why a business or private charity is better than a government program, for example.

For me, it’s not so much the private/public distinction that matters.  It’s the degree to which the organization is subjected to competition or eu-competition.

Aside:  I’m using eu-competition for lack of a better word (there may be a better word that’s just not coming to mind.  Let me know if you can think of one).  I got this idea of using the eu- prefix from this EconTalk podcast with Mike Munger where he talks about eu-voluntary trades.  These are trades that are voluntary, but one side has considerable more leverage than the other.

My term, eu-competition, means organizations that aren’t directly competing head-to-head with one another, but can benefit from discoveries and innovations made by other organizations.

For example, the political left often holds up fire departments as examples of good socialism at work, as if being funded by taxes is the only dimension of socialism.  What folks making this argument fail to consider is that fire departments operate in a eu-competitive environment.  While fire departments don’t compete head-to-head with each other for resources, they don’t answer to one centralized Federal Department of Fire, either.  And there are many fire departments that operate relatively independent of each other.

This means that there is greater natural likelihood for things to be done differently from one fire department to another.  For the most part, one way isn’t necessarily better than another.  But, every once in a while a fire department happens upon something that is better and before long, other fire departments can choose to adopt it if they too find that it can help.

I think what Klein said about education is true about most organizations — they are systems that don’t want to change.

K-12 education hasn’t had to change.  K-12 education is similar to the fire department example in my aside above, there are many school districts.

But, there is an important difference.   How K-12 education is operated is much more nationally centralized than how fire departments operate.

There is a Federal Department of Education that, as Arne Duncan, the current head of this department, admitted in the same Freakonomics podcast, has acted as a “compliance bureaucracy”.   This Department has the power of accountability through purse strings.  And, if it happens to be holding K-12 school district accountable for not changing, then they won’t change.

Further, there is a body of “education experts”, that have implicit power that they exercise through the Federal Department.

Also, people in general, believe in the one-size-fits-all education model.  I often hear people, even though they complained while going through K-12 of being forced into a box that didn’t fit them, say things like “we just need one standard and it needs to be a good one.”

So, education hasn’t really had the competitive and eu-competitive environment in which to change and evolve through natural experimentation, discovery, innovation and voluntary adoption of changing standards.

Almost every other organization — local government organizations, families, libraries, charities, clubs and businesses — operate in competitive and eu-competitive environments that do better counter act the resistance to change inherent in every organization.

Your wealth does not creat my poverty, part two

In the most recent EcontTalk podcast, host Russ Roberts interviews Steve Kaplan of the University of Chicago about income inequality.

I recommend it.

Early in the podcast, Roberts quips:

Recessions are bad for the rich. If you care about inequality per se, recessions are great.

Being wrong isn’t bad

I listened to two podcasts in row that happened to touch on the subject that inspired me to start this blog — changing one’s mind.

I’ve always been fascinated by events, arguments, rhetoric, conversations and observations that get people to reconsider their previous ideas on how things work and possibly change their minds.

The first podcast was a Dennis Miller Show podcast of his interview with David Horowitz from September 28.  Miller and Horowitz were discussing the liberal mindset and Miller makes what I think is an apt description of folks who have difficulty changing their mind (and not just liberals).

Miller says (emphasis added):

I don’t view it as a craziness. People are too easy on them when they say they’re crazy. I view it as an obstinacy, a non-curious obstinacy that infects their lives.

I can’t tell you how many people have said to me, ‘how could you work with O’Reilly?’  I go, ‘You ever watch the show?’  They go, ‘No! I wouldn’t watch that show!’

Non-curious obstinacy.   I like that description and I like Miller’s example.

When you encounter folks with a non-curious obstinacy, it’s not worth discussing whatever it is they are going on about beyond asking if they’ve ever given it a try or if they can describe specific examples on which they’ve based their conclusions.

More often than not, the answer is ‘no.’   If so, you can respond, ‘let me know when you can provide specific examples and I will be happy to discuss it then.  Now, let’s talk about something else.’

The second, a Freakonomics podcast, The Folly of Prediction.  The show host, Stephen Dubner was speaking with guest, Phil Tetlock, psychologist at Penn.  Tetlock has extensively studied folks, especially ‘experts’, who make predictions about things ranging from the economy, the stock market, politics and sports outcomes.  Dubner asks:

  …we’re getting into the nitty gritty of what makes people predict well or predict poorly.  What are the characteristics of a poor predictor?

Tetlock answers (after a brief pause):

Dogmatism.

I think an unwillingness to change one’s mind in a reasonably timely way in response to new evidence.  A tendency when asked to explain one’s predictions, to generate only reasons that favor your preferred prediction and not to generate reasons opposed to it.

Dogmatism (def. The tendency to lay down principles as incontrovertibly true, without consideration of evidence or the opinions of others).  That’s another word for non-curious obstinacy.

Folks don’t like to be wrong.  I didn’t like to be wrong, though I have gotten better in this respect.  I still don’t like it sometimes, but I get over it.  We’re trained from a very young age that being wrong is not a good thing.

But, I’m not sure why.  Being wrong shouldn’t be a bad thing.  Just about all learning in life is done based on trial and error.  That is, we try something based on how we think it should work, and then we find out that we were wrong.  We then try it differently, until we find something that does work.

We tend to learn these lessons best where we pay the costs or consequences for being wrong.  I’ve only turned the wrong way down a one way street once or twice in my life.  Now I’m pretty good at checking the signs and flow of traffic before I turn.

We tend not to learn the lessons as well when we don’t pay the direct costs or consequences for being wrong.  Politics is a good example.  I can vote for someone because I like the way they dress or speak, or because he’s ‘better than the last guy’, or because he’s cool, or I better identify with the others who are voting for him.  And, if I’m wrong, I don’t really care.  We were all wrong.  But, we don’t really even have to admit that.  There are plenty of ways for us to explain it away…”things were worse than we thought,” or “at least we had good intentions, we were trying to help, unlike the other side who is only for the fat cats.”

Are You a Rational Ignoramus?

More good stuff from this podcast on Public Choice with Don Boudreaux and Russ Roberts.

Are you rationally ignorant?  We all are in some sense:

Rational ignorance. First, the term sounds weird. Surely ignorance is always irrational. All it means is that knowledge is a scarce good. It’s not free. If it were free, each of us would be geniuses and fully informed of everything in the world. Huge amounts that we don’t know.

There is problem in some cases because that rational ignorance many people have about politics, government and political candidates effects us all.

If you vote like a moron, there’s no cost. You don’t even know if you are a moron. If enough people vote moronically, will get moronic candidates. The point is: at the time of voting, that act–and it’s the individual act of voting that we’re talking about–there is no consequence to anyone of voting A, B, or not voting at all. Therefore, people are quite unconstrained in being able to express whatever fantasies, romantic notions, anger that they feel.

Another underappreciated aspect of voting for candidates–understood by public choice scholars but underappreciated by the public–underappreciated because it’s called the people’s “choice”–we choose. By attaching the term “choose” or “choice” to candidates and the process of electing candidates we transfer to that choice process the same good feelings we have about choosing in a supermarket. Too much difference between those choices for the political process to have that good name.

Thomas Sowell addressed the same topic as the last paragraph in the three paragraphs I posted of his yesterday.

Some might respond to the “moron” paragraph, and say that if you make a bad choice in an election you’ll know and you’ll vote differently next time.  Maybe, maybe not.  Your bad choice may not directly impact you enough for you to notice.

There is not that individual feedback loop in the voting process. If you have a family of three kids and you buy a sports car, you are going to find out that that was a bad choice.

But in politics, you can keep buying the same flavor over and over again; it doesn’t achieve its goals; it impoverishes the people you think it’s helping, and you can be a proud supporter of that candidate forever. Even after they are dead. You can be oblivious, no incentive to look deeply into whether that was a wise choice. Part of your identity, your reputation, your self-esteem; very different process.