March 27, 2008
Via Andrew Sullivan, Thomas Homer-Dixon:
Our global financial system has become so staggeringly complex and opaque that we've moved from a world of risk to a world of uncertainty. In a world of risk, we can judge dangers and opportunities by using the best evidence at hand to estimate the probability of a particular outcome. But in a world of uncertainty, we can't estimate probabilities, because we don't have any clear basis for making such a judgment. In fact, we might not even know what the possible outcomes are. Surprises keep coming out of the blue, because we're fundamentally ignorant of our own ignorance. We're surrounded by unknown unknowns.
To which Art Hutchinson replies:
It's tempting to think that all things are predictable given enough information, enough minds, enough time and enough computing power. It's just not true. (Which is not to say that some things are not predictable... and with incredible precision... a phenomenon that leads to overestimating the scope of problems and questions that lend themselves to such methods.)
...I liken Mr. Homer-Dixon's observations to those tragically massive car pile-ups that happen a few times of year in fog-prone areas like the Central Valley of California. Everyone is driving along at a reasonable speed, with reasonable spacing between vehicles. People are sipping coffee, tuning radios, maybe talking on cell phones. Slightly distracted, but mostly responsible. All is normal.
Then the first guy hits a fog bank and can't see squat. He taps his brakes. The second guy sees red lights and fog coming up fast and taps his brakes just a little bit harder, and so on. In just a few seconds, hundreds of cars end up in a tangled heap and people die. All because the guy in front was convinced by every one of his senses and not without justification based on experience that the visibility on the next 100 yards of road would be the same as on the last 100 yards of road.
This presents an enormous policy dilemma. On the one hand, as we are seeing in our newspapers every day, markets cannot function efficiently without information. Information asymmetries and imbalances are an important class of market failure that can often only be rectified by government regulation. And yet... without accurate information on the markets that are to be regulated, regulators cannot craft intelligent and efficient regulation. Incremental reform is usually the best approach in this sort of situation, but when you are in the midst of a crisis, incremental reform is often not an option.
If I were teaching Intro to Policy on my own this semester...
February 27, 2008
Matt Y has an unrelated but nevertheless perfect follow-up for my previous point on the importance of considering political feasibility as we debate policy.
But before I get to Matt's thoughts, some context. Christopher Maag has an interesting piece for Time Magazine comparing and contrasting the organizational styles of the Obama and Clinton campaigns. Whereas Obama's is a bottom-up, grass-roots organization built entirely from scratch, Clinton's is much more of a top-down, old school political machine that relies almost entirely on cobbling together pre-existing political networks built by local politicians. Maag's point is to demonstrate the impact these differences have had on the campaign, but Matt takes it a step further to imagine how this might impact governance:
Clearly, I think, either approach could work. But what I think is interesting is the different implications for governing. If a President Clinton wants to pressure some Ohio members of congress into casting a tough vote they don't really want to cast, she has a lot of tools at her disposal for bringing them to heel. One thing she can't do, however, is generate pressure based on her local political organization in Ohio. After all, it's not her organization, it belongs to the state and local elected officials and she just borrows it from them. Obama, by contrast, may have that option. And what's more, it's a technique that can work "behind enemies lines" as it were, against Republican members of congress whose districts don't include any entrenched incumbent Democrats with their own organizations.
Will Obama in fact find a way to extend his campaign tools to the art of governing and political pressure? There's no way to tell. But he might. And much like his approach to campaign, it'd be a huge game-changer.
This gets to one of the primary reasons why I think Obama's campaign has the potential to drive a long-term realignment of our political system. Unlike most campaigns, his is predicated on getting millions of people directly involved and engaged not just once or twice over the course of the year, but on an ongoing basis. That's something we often saw back in the early days of this nation, and most people thought the country had grown so large that it would never, ever come back. But networking technology changes everything, doesn't it? Thirty years ago a campaign like this would have been impossible. Today, it's not impossible but inevitable.
But as historic as this campaign has been, it won't actually be the hard part. Compared to getting people engaged with governance, getting them involved with a campaign is easy. But if this works - if we really can make this new form of engagement long-lasting, it has the potential to change everything about the way our system of self-government works.
Self-government only works if the people are engaged. For far, far too long, we've been anything but. Maybe, just maybe, that's about to change.
UPDATE: Here's one more example of how things are changing. It may seem small, but combined with thousands of other initiatives like this, it adds up to something huge.
UPDATE II: And if you want a clear, concise example of why these changes favor the emergence of a new Democratic majority, look no further than this. Newt Gingrich is moving to Silicon Valley. Why? He wants to "gain firsthand knowledge of the latest technological developments... that will help us communicate and organize more effectively -- before it becomes a trend."
Before?
Maybe if Newt hadn't been so busy trying to impeach a president, maybe then he would have seen this one coming. Oh wel...
I'm posting this here for my own future reference. Ezra Klein:
Behavioral research often finds that consumers act irrationally in certain situations. So given a specific set of constraints, they may underestimate future risk, prove oversensitive to loss, exhibit significant status quo bias, and so on and so forth. All problems.
Now, the government may be made up of people, but it is not made up of people carrying out transactions under these conditions. An easy example is the research on opt-out 401(k)s. We know, from the economists, that investing in 401(k)s is generally a wise idea. We know, from the statisticians, that far fewer people do it than should. We know, from the behavioralists, that far more people would do it if the default setting put you in the 401(k), rather than forced you to wander down to HR and specifically ask for it. And so folks in the government, acting with more information and in a different context than folks in an office, think up a policy to "recognize the power of inertia in human behavior and enlist it to promote, rather than hinder, saving."
At exactly which point in this process does Will fear that the same irrationality that keeps someone from creating a retirement account will foul up a regulator's efforts to ease their way into a retirement account? Similarly, at which point does an individual's tendency to discount the need for future savings screw up a regulator's ability to create Social Security? Indeed, you may not like Social Security, or opt-out 401(k)s, but whatever their flaws, they simply aren't the same flaws affecting the targeted groups. Regulators, working with the benefits of information, expertise, and detachment, can certainly create incentives that militate towards empirically desirable behaviors. The failings of individuals are, in general, different than the failings of institutions, just as the failings of the market tend to be different than the failings of the government. In any given situation, you have to decide which is worse. But they're not the same.
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