The worst lie ever told in an Economics class is this: If everyone optimizes his individual happiness, the entire system is optimized. I still remember some bright bulb in ECON I raising his hand and asking, “So if I give a panhandler $10 and he buys liquor and gets drunk, that optimizes the system?” and the professor arguing that, indeed, it did. In fact, “Who were we to decide what was right for the panhandler?” (and all that jazz).
I should have hit “Eject” then and there and taken another course in whatever department my parachute dropped me.
In fact, I’ve come to understand the very opposite: One of the great ironies of big, complex, complicated systems is that if every individual in the system—each link--acts in his or her own best interest, then the system essentially falls apart. Or grinds to a halt. Or bubbles and bursts.
I know this doesn’t sound very lassiez-gordon-gekko, but when you depend on free enterprise to solve every single bleedin' problem in the system, well, it’s a little bit like the New Yorker cartoon where the young mom holds the baby up to the the dad and asks, “Will the Invisible Hand of the Market be diapering him today?”
The housing bubble is a perfect example. People with insufficient income got mortgages and moved into homes--good for them! Elected officials got credit for housing growth and happy constituents and votes for their reelection campaigns--good for them! Mortgage lenders got big bonuses for big production and their companies grew and got rewarded by investors--good for them! Goldman Sachs did something, or didn’t, and admitted it, or didn’t, and got bailed out and then made a boatload of money--good for them!
Good for everyone! Pass the $10 hooch. After all, who were we to decide what was right?
See how it works? You do well, I do well, they do well--and we all go to hell in a handbasket.
What the world needs, I’m pretty sure, is more despots. Enlightened ones, of course. Enlightened ones who won’t try to take over neighboring countries or stockpile plutonium-enriched uranium or have front-page sex scandals. Or wear sneakers to fine British restaurants. You know, the good kind of despots. What Plato called Philosopher-Kings. And Queens. That’s what we need. Despotic Philosopher-Kings and -Queens, sitting atop these huge systems, rapping us across the knuckles when our small-time optimization imperils the greater good.
Here’s how it would work. You have a sinus infection. Sorry. Of course, it’s in your best interest to get an antibiotic--in a week you’ll be good as new. But I have a sinus infection, too. Maybe I want some antibiotic. But, says the Surgeon General Despotic Philospher-Queen, antibiotics are already over-prescribed and we’re starting to create drug-resistant superbugs. So, she says, only I can have the antibiotic. Me. Not you. That’ll cut the system dosage in half and save the world. Good for me! Good for all of us! See how wise the Despotic Philosopher-Queen is?
Sure, you can try to bribe her. Fund her re-election campaign. Threaten a coup. But this is a Despostic Philospher-Queen we’re talking about. She knows best. From each according to his ability to each according to whom is writing the blog. Someone wins, someone loses. That’s called laissez-gordon-gekko, and wasn’t that what you wanted a few paragraphs ago when you thought Karl Marx had commandeered my keyboard?
All kidding aside, do you see how hard these systems are to tame? In order to optimize the whole, someone on the ground is going to have his ox gored.
Speaker John Boehner is the quintessential example of a man who could be Philosopher-King. Boehner leads the party committed to wringing billions of dollars out of our national budget, as big and complex a system as you could want. Good for us! After all, he’s pushing along this big House Appropriations Continuing Resolution that has massive cuts (in things like Head Start).
Sure, you can try to bribe her. Fund her re-election campaign. Threaten a coup. But this is a Despostic Philospher-Queen we’re talking about. She knows best. From each according to his ability to each according to whom is writing the blog. Someone wins, someone loses. That’s called laissez-gordon-gekko, and wasn’t that what you wanted a few paragraphs ago when you thought Karl Marx had commandeered my keyboard?
All kidding aside, do you see how hard these systems are to tame? In order to optimize the whole, someone on the ground is going to have his ox gored.
Speaker John Boehner is the quintessential example of a man who could be Philosopher-King. Boehner leads the party committed to wringing billions of dollars out of our national budget, as big and complex a system as you could want. Good for us! After all, he’s pushing along this big House Appropriations Continuing Resolution that has massive cuts (in things like Head Start).
Funny thing for a would-be Philosopher-King, though. The Continuing Resolution doesn’t cut the $450 million squirreled away for construction of the Joint Strike Fighter. The one that would be built in Cincinnati, Ohio (where Boehner grew up), and Dayton, Ohio, the largest city in his congressional district. The one the military doesn’t want. Good for Cincinnati and Dayton! Good for GE and Rolls Royce! Good for John Boehner!
Tough day for the kids in Head Start. And the military. And you, of course, and your poor sinus infection. But the folks in Dayton with jobs and antibiotics are feeling just peachy.
I got a million of em. These aren’t bad people, and they’re not doing anything illegal. They just listened to my ECON I professor and are optimizing their little slice of heaven, which is, in theory, supposed to optimize the whole system. Laissez-antibiotics. Laissez-fighter jets.
You wanna talk the medical delivery and reimbursement system? How about foreign aid? Complex supply chains? Sensitech, a company I know well, built an entire business on the fact that the various links of the supply chain for Food and Pharmaceuticals have competing interests. If everyone optimizes his link then you and I sometimes get wilted brown lettuce and saline solution instead of vaccine. Like I said, I got a million of em.
Competition of the species and survival of the fittest--now there’s a complex system that works. But make no mistake, it’s brutal. Not everyone gets legs, if you know what I mean. Find yourself with a set of lungs? Climb right up on the beach and evolve. The rest of you will have to just deal with that pesky sinus infection on your own.
Darwin--another candidate for Philosopher-King--understood that in really healthy, complex systems, lots of individuals lose.
Now do I sound like Karl Marx?
So I say: more Despots. Because, if we could solve this problem of complex systems, we’d all be much, much happier. And that's the best solution I've got at the moment.
Tough day for the kids in Head Start. And the military. And you, of course, and your poor sinus infection. But the folks in Dayton with jobs and antibiotics are feeling just peachy.
I got a million of em. These aren’t bad people, and they’re not doing anything illegal. They just listened to my ECON I professor and are optimizing their little slice of heaven, which is, in theory, supposed to optimize the whole system. Laissez-antibiotics. Laissez-fighter jets.
You wanna talk the medical delivery and reimbursement system? How about foreign aid? Complex supply chains? Sensitech, a company I know well, built an entire business on the fact that the various links of the supply chain for Food and Pharmaceuticals have competing interests. If everyone optimizes his link then you and I sometimes get wilted brown lettuce and saline solution instead of vaccine. Like I said, I got a million of em.
Competition of the species and survival of the fittest--now there’s a complex system that works. But make no mistake, it’s brutal. Not everyone gets legs, if you know what I mean. Find yourself with a set of lungs? Climb right up on the beach and evolve. The rest of you will have to just deal with that pesky sinus infection on your own.
Darwin--another candidate for Philosopher-King--understood that in really healthy, complex systems, lots of individuals lose.
Now do I sound like Karl Marx?
So I say: more Despots. Because, if we could solve this problem of complex systems, we’d all be much, much happier. And that's the best solution I've got at the moment.
Which gets us, unfortunately, to the SECOND lie we are all told in ECON I: People know what makes them happy.
It turns out we really don't know. Not hardly. In fact, we willingly make all kinds of choices that cause us great unhappiness.
So when we think we’re optimizing our links, we very well might not be. But that’s a different topic, one for guys like Dan Ariely (and some of the other folks we might, if allowed, actually elect to be Philosopher-Kings) to write about in their books and blogs.
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