Thursday, 29 May 2014

Why Democracy, Capitalism, Communism, Government Bureaucracy, Big Business, Peer Reviewed Science and Cults Simply Don't Work

A lot of people like to say that communism is a proven failure. In a way, I think of it as a great success. Ccompare the growth in personal income - or some other measure of personal well-being - in the United States to that a western democracy with a decidedly less free-market approach, like the Netherlands. Then compare the same measure from the USSR to another murderous dictatorship, one that had a more free-market approach, like Zaire.

The problem wasn't so much organizing the economy in one fashion or another, it was more having a murderous dictatorship. A lot of things go wrong once "don't give the murderers a reason to murder me" becomes the driving goal of the citizenry. It's not a productive goal.

That's not to say that I think communism worked or will work, I don't really think that. Still, I think that a pretty big part of the failure of the USSR to create wealth for its people was that they were butchers rather than that they had a bad model for property ownership.

But being butchers itself isn't exactly the problem either. There was a small group of people that had so much power than they could kill thousands or millions of people and no one could do anything about it. If you have that kind of power you can do anything with it, like driving the economy into the ground.

Now, Zaire - maybe I should be calling it Congo, but at the time that Mobutu was in power he pretty much got to say what it was called - is a particularly egregious example of a kleptocracy, and the Netherlands has done quite well in recent years. I'm not going to say I didn't cherry pick comparators. Go find me the murderous dictatorship that had a really good run of things, and I'll happily look at the numbers there.

People with large amounts of power, unless they are extremely careful to do otherwise, quickly find themselves surrounded by other people who tell them that everything to do, say or think is right. They have a lot of opportunity to retreat into their own heads and make conclusions about the world based on their biases without ever checking them against reality. Following the "no reason to murder me" rule, central planners in the USSR would report inaccurate numbers to the leaders to say that things were going well and that their plans were working out perfectly.

What is so attractive about a market economy is that we all know no one is smart enough to set the price of shoes to the right amount or decide how many of which sizes of shoes are needed.  The market may not always answer these questions perfectly, but it does a better job than any person could do, even with sophisticated modeling equipment.  Democracy uses the same advantage - the wisdom of the crowd - to decide which laws should govern the country.  No one is smart enough to decide which laws should be our laws, but the citizenry as a whole can use collective decision making to do a better job.

But the tendency to accumulate power in the hands of a small number of people exists in pretty much every system.  In capitalism, money makes money, property lets you charge rent a person who can afford to hire others to do productive work for them can get paid for a lot more productive work than a person who has to scan the want ads.  In democracy political parties have substantially more power than individual candidates, and the parties themselves seem to inevitably fall under the control of small juntas or individual leaders.  In communism there is already a junta and it is only so long that they will be willing to let their power be checked by principle.

Government Bureaucracy has Deputy Ministers, "czars" and commissars.  Big Business has CEOs and presidents.  Peer reviewed science has journals of note and famous scientists who can pull more than their weight in a discussion.  The tendency to centralize power seems to exist in all systems.  Why would we fight each other when we can all get along?  Who benefits from that?

Well we need to fight each other a little.  We need to disagree to make sure the thing we are all agreeing on isn't stupid.  It is the diverse opinions of the crowd that make it wise.  In the classic bull weighing example from the book The Wisdom of Crowds, the average guess at the bull's weight was closer than any of the given guesses.  Keep in mind that the fools who guessed far too high and far too low are part of that average.  When a large group of people sing a song together it sounds like the collective voice is right in tune, even though many of the people are undoubtedly bad singers.

Crowds are smart, people are stupid.  Collective decision making - markets, democracy, science - works while individual decision making doesn't.  But we let collective decision making devolve into individual decision making, and that means that nothing works and that we have to shake things up sometimes just to get rid of the outsized influence of powerful, stupid, stupid individuals.

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