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Tuesday, December 30, 2003

On Hayek and Bush

In “The Fatal Conceit,” Freidrich Hayek provides an interesting account of cultural evolution with its array of customs, mores, and traditions that, in Hayek’s view, are inextricable from and essential to our civilization. Hayek goes further to state that centrally managed economies, particularly those that tinker with the capitalist system of private property (or as Hayek likes to call it, several property), corrupt our evolutionarily developed way of life, restrict freedom, and ruin the people who live in the society. (Hayek is very dramatic about this in his own elitist Austro-Germanic I’m-the-one-who’s-really-got-it-figured-out kind of way.) He also points out how everyone from Aristotle to Thomas Aquinas to Descartes to Rousseau to Mill, Welles, Orwell, Keynes, and Einstein (to name but a few) were lame-brains when it came to social science (a term that Hayek derides) and economics. The odd thing is, you wind up agreeing with most of what he says, and he lays it all out in such charming historical context.

The tribute Hayek pays to basic free capital market structures is worthy. But hasn’t the battle, at least in principle, already been won, even if it hadn’t quite yet been won in Hayek’s heyday? Deeply socialist systems, such as that of the former Soviet Union, are no longer of any consequence. The problem now in those former socialist places is corruption and insufficient administrative and judicial protocol and tradition. Amazingly, the Chinese have so far managed a transition from a socialist system to a capitalist one. The twin sister of capitalism, democracy, is still lagging behind, but the tension is generally kept under control. Occupied lands, such as Tibet and the land of the Uighurs no doubt are somewhat more tense. Still, one would expect that China gradually will become more capitalist, more just, and more politically free; it just may take a good long while, and might first be precipitated by some crisis, the scale of which I don’t wish to contemplate.

What Hayek should have argued, like my good friend Michael Rothschild did in “Bionomics,” was that resisting capitalism was not only detrimental to a society’s vigor, but that every society would eventually adopt capitalist principles. Capitalism is inevitable. And, so is democracy, if we should live so long. In this sense, we can be optimistic.

However, our shorter term pessimism should not be ignored. But, we’ll get to that in a minute. Let us first finish with Hayek.

Where Hayek goes too far, ironically, is in the field of social science. While his theories about the nature of economic systems are profound, he discredits the power of people to impact his beloved extended order. He often refers to the spontaneous, unpredictable, almost mystic, nature of the extended order that has developed. Perhaps, as Hayek writes, in ancient Greece, a cultural evolution was accelerated by the xenos, or guest-friends – go-betweens, if you will. Customs and traditions developed that were the basis for our customs and traditions of today. But, at the moment of their spontaneous creation so many thousand years ago, was not this new behavior, before it was ever considered a custom or tradition, simply the reasoned cooperation of one person with another. Yes, behind all our customs and traditions, reason. Even if we can’t explain them now, or undo them, they were the product of reason. With a good dash of superstition thrown in now and then.

So, Hayek is wrong in this respect. After instinct comes reason, then tradition. Though I’m sure Hayek enjoyed grouping us with rats as exemplars of adaptability, he neglected to dwell on the one attribute of our exceptionalism that makes us unlike any other creature - our enormous brains.

Have you heard of Jeff Hawkins? (You can read the entire article by registering with Tech Review online.) He’s the inventor of the Palm Pilot. But, his real interest is neuroscience. In an interview, he said he would not feel fulfilled if he died without having made a significant contribution to the field of neuroscience. Anyway, he has noted that only 10 percent of the brain’s circuitry is wired for output such as seeing, contracting muscles, and breathing. Ninety percent is routed back into our brains as input. In other words, one part of our brain is sending signals to another part of our brain while simultaneously processing the experience that the output part of our brain has been part of. Why? To get feedback, of course. To process the results from one’s actions, so one can develop predictive capabilities. As they grow, humans develop incredible predictive capabilities, and are able to accurately assess complicated probabilities from scant information. (This occasionally can lead to errors since some apparent patterns might change dramatically if more information is added to the picture. That’s the whole concept behind whodunits.) In fact, being able to predict outcomes is so crucial to human success that it may be considered the equivalent of intelligence. On college entrance exams, analytical and verbal predictability (i.e, memorizing and mastering certain intellectual operations) are relied on to separate the intellectual wheat from the chaff. Of course, as discussed by Howard Gardener, these tests take no account of other intelligences, such as musical, natural, interpersonal (which is the one most crucial for corporate and political success), physical, or spiritual.

Anyway, given these wonderfully evolved, predictive brains does allow us to apply reason to our further cultural evolution, even if we should leave our cotton-pickin’ mitts off the fundamentals of the capitalist system. Not that we’ll always make all the right decisions the first time. In this regard, I again give Hayek credit: he advocates an experimental approach in the social realm, which is odd for someone who goes to such great lengths to say how messed up the experiment with Socialism was. I also wonder, in light of his more general denigration of reason, on what basis he proposes these experiments be formed if not by reason – whether collectively through the polls, or by some trusted representatives. Surely he’s not recommending a combinatorial approach to social experimentation!

Yeah, baby. Instinct was first – it developed through all our predecessor species. With the advent of our species, the one with a gigantic brain, came reason: the ability to speculate about cause and effect in most profound ways. From the application of reason, dependable patterns of behavior, mores, customs, codes, and traditions arose, and did, in fact, form of themselves a transcendant system that we might describe as culture. A very useful thing, culture. And, yet, a jealous thing as well, resistant to uncomfortable change. Only new forms of empowerment, inspiration, or catastrophic circumstance will shape culture. The capitalist economy, which serves empowerment, is very active in shaping culture, though perhaps our individual gratifications do not quite reach the point of general satisfaction. Since we do not wish for catastrophe, we want inspiration. Are we asking too much?

We can direct our own cultural evolution. How? By creating new cultural dynamics. We can never predict outcomes within narrow confines, and they will always have unanticipated consequences, but it is possible to instill changes that stick because they appeal to people’s sense of empowerment. This is what marketing is all about. Not to say that it is easy. A new grocery store product hardly affects the status quo on its own. Good thing, too. The status quo has a high surface tension, and most potential changes of significance tend to bounce right off. And it is right there that great leaders distinguish themselves. They know how to integrate a significant change into a culture.

Take the most celebrated case of leader-inspired accomplishment of the past 50 years – the Apollo landing on the moon. Which president do you associate with it? Kennedy, right? But, in fact, Kennedy had been dead nearly six years when Neil Armstrong set foot on that alien surface. (Nixon was president.) But, Kennedy had fashioned the Soviet technological threat into a weapon of social change, and the Age of Aquarius was born. Think about it for a moment. In 1969, calculators hadn’t yet been invented. We went to the moon as a consequence of the applied brainpower of engineers and scientists using slide rules! In retrospect, based on the technology of the day, the event seems a displacement in time by at least a decade. Without leadership, perhaps we would have waited for quite a long time before attempting so audacious an experiment based purely on the confidence of our reason.

How about social objectives? Can they be achieved with applied reason? Yes, there are many examples. One is the transformation of Europe after WWII with much hard work. (As one of our esteemed colleagues has noted, articles in “Life” by reporters of the post-war years sounded as pessimistic as those from Iraq today. This does not, however, equate the morality of the current circumstance to that of post-war Europe, as, in this case, we were the aggressor nation.)

Other more or less successful social experiments crafted with reason, usually catalyzed by the need for expediency, include: the creation of a social safety net that includes bankruptcy provisions, disability insurance, unemployement insurance, and emergency care; significant laws setting commercial restrictions such as the Sherman Anti-Trust Act, the Robinson-Patman Act, and the Foreign Corrupt Practices Act; major environmental legislation such as the Clean Water Act and the Clean Air Act; and even such modest achievements as the Peace Corps, Head Start, and Clinton’s Welfare to Work program which were felt most significantly at individual levels, even as they have had generally beneficial repercussions for society as a whole.

There is no necessity that all such experiments be run at the federal level. In fact, for those things that logically can be governed by lower levels of government, experimentation could be much more greatly leveraged if tax revenues were passed through to the states for them to deliver services and conduct their own experiments.

There are other issues that I disagree with Hayek about, but probably the most important one is his confusion between morals and the customs, mores, and traditions of the capitalist system. Perhaps this is a confusion to be excused given that the Socialism against which Hayek argued was moralistic in that it presumed to be able to extend the power of economic productivity to achieve moral objectives. So, he felt the need to attack it on moral grounds. In reality, it is important to recognize that a free market system, which by definition freely serves the individual consumer’s desires to the extent the consumer has the means and the compulsion to be served, is the only system which will generate robust economic growth. Not to say that it cannot be improved, for it is being improved all the time both through transcendant processes (to use one of Hayek’s terms) and by design. Further, while the free market will maximize economic efficiency, it does so without regard for costs that are not factored into the price of goods. (Perhaps it isn’t so surprising that our own human impatience for gratification is also an attribute of our transcendant economic system. It is our true instinct showing through. Our market is inclined to optimize across a short horizon.) So, we choose to impose regulations, which clearly are meant to curb some naturally evolving tendencies. Does anyone regret that, due to regulations, the air is cleaner and healthier in big cities than it was 25 years ago? Perhaps the real purist, the ultracapitalists, will say, “Oh, but think what the productive capacity destoyed by regulation might have done for society!”

In addition to imposing regulations, we assess taxes on the transactions that take place in that pure capitalist system. The transfer of goods from one owner to another, the transfer of money to workers for services rendered, the transfer of wealth from one generation to the next, and the transfer of goods across borders – all these transactions are taxed, creating some unusual and unexpected perturbations. But, the great capitalist system, like a river, usually flows right around or through these regulations and taxes, serving the interests of humans more or less, relentlessly carrying the nutrients of growth to communities that prosper on its banks. Too much regulation or tax, or the wrong kind, can choke or pollute the river, but it is awfully hard to deter it from its destiny. Treated right, even subject to constraints and purposeful redirections, the river will deliver great bounty.

Despite everything, I take heart in Bush’s recent shift to emphasize the ideals of democracy taking hold in Iraq. But, I believe there were better ways than massive military power to undo the influence of Saddam. And, because of the way we’ve chosen to do so, while it was quick, the uncertainty of outcome over the next decade is still extremely high, and, yet, the current costs are so tangible in terms of human lives and money. Was there a better way? Bush didn’t give us much opportunity to discuss this question, even choosing to wildly exaggerate the threat Saddam posed so he, like Kennedy, would have a weapon forged of crisis to lead the American people. To war. Not to the moon. War is a very serious proposition. It seems to me that to precipitate it under false pretenses should be a crime.

And now the future of Iraq is highly uncertain. While it is imprudent of the left to compare it to Vietnam, it also would be imprudent of Bush supporters to say they have great confidence that Iraq will function as a successful democracy as a result of the imposition of our will. Huge amounts of money will help – the distribution of it can create incentives that establish behaviors, habits, and, potentially, customs and traditions if people are able to accept them as the best way to get things done. The situation is likely to be fragile for quite some time to come.

By the way, regarding the question, “Where’s the data” that supports the accusation of false premises for war propagated by Bush? One does not have to see a crash to reasonably discern that a crash has taken place when one hears the sound of squealing tires and metal smashing upon metal. Ninety-nine times out of 100, the seemingly obvious is what happened. That’s how it is with the Bush administration. Pattern recognition. I could be wrong, but I doubt it. Otherwise, why the constant back-pedalling from the earlier assertions? Why the aspersions and ultimate lack of accountability around false intelligence? Bush couldn’t validate those 16 words he used in the State of the Union address about Iraq buying plutonium from Nigeria, but I doubt that he even cared whether they were true or not. They served his purpose, this man of action. He had an objective in mind, and he (or, more accurately, his handlers) had calculated what it would take to create the national fervor necessary to justify action, and the American people became unwitting accomplices to war. With the actual evidence, he never would have succeeded in getting support. And, that’s why I think he should go to jail. Of course, he won’t. How does the crime I accuse him of compare to having oral sex with an intern? Well, for one thing, Clinton’s transgression was proven – it’s truthfulness is 100 percent certain. Bush’s will not be so proven. At least not during a timeframe that matters, i.e., his presidency, whether it be one term or two. It will be successfully covered up.

For the record, I stated that Clinton should resign at the time of his sordid humiliation. Interestingly, Gore probably would be president now if he had had a year to demonstrate his competence as Commander in Chief. It gives a whole new meaning to the term pussy-whipped, doesn’t it? (Ladies and gentleman, Al Gore, the great loser of the latter 20th century! To be placed in 20th century great-loser history books with Thomas Dewey and Konstantin Chernenko, who, ascending to the top Soviet post after 40 years of loyal service, immediately fell sick and died six months later.)

The current pessimism infecting so many of our thinking citizenry is a symptom of visionlessness. What is Bush’s vision for America? What is his vision of our relationship to the rest of the world? What part of his seat-of-the-pants plan is being devoted to achieving his unarticulated vision?

The fact that Bush has finally returned to the theme of a democratic Iraq as a primary purpose is such a tiny morsel of hope to those of us who want to see people rally around a vision of a better world. We take up the crumb with fervor, and it makes us light-headed when we consume it. Oh, yes, there are those of us who hunger for intelligent leadership.

As to sending young people to war in Iraq or to the current high-threat situation there, I have no sympathy, Bret, with your position. Nor would I try to sway you to mine. It is obviously something you’ve given a lot of thought to. Does Lory feel the same?

My father served for a year in Vietnam as a helicopter pilot doing reconnaisance and medivac operations. 1965-66. When he returned, he requested a discharge, after serving eleven years in the Army, including a year in Korea in 1960. There is not a sentiment inside me that makes me wish he had stayed in the Army and gone back to Vietnam for another tour.

As for Saddam and the degree of his threat, he was a run-of-the-mill tyrant with a strong instinct for survival, a mediocre intelligence, and a crippled military capability. Check out the political situation for a Uighur or a Tibetan, or a Chechen, or a Zimbabwean, or multitudes of other Africans born into the wrong tribe or situation. In early 2003, there were many people who felt more threatened than your average Kuwaiti, Kurd, or Iraqi Shi’ite. Why didn’t we free them from tyranny?

Don’t get me wrong, Saddam was a terrible human being. I just think it’s important for our citizenry to openly debate the apparent new standard of “because it serves our interests and we are highly likely to prevail” as sufficient conditions for war. Saddam’s threat to the U.S. was insignificant, and had he actually been implicated in a plot to kill innocent Americans, he was smart enough to know that the U.S. would come at him with all its might. He didn’t count on being implicated in an ersatz plot, however. We sure got him!

There may be some possible outcome such that a perspective could be crafted that makes George W. Bush seem to be visionary, inarticulate though he may be. Perhaps that is the future that will unfold. The range of possible results are rarely dwelled upon in accounts of history, and the actual results get all the attention, so he may yet be recognized as a great leader. Perhaps the truth is that most historical persons whom we now think of as great leaders were merely bold and fortunate, and, because of the great unpredictability of things, intelligence is of little importance. In which case, one can only hope that the people of Iraq will be able to build satisfactory lives under a governmental system which has not arisen out of their culture. I hope somewhere in Bremer’s organization there are people paying attention to culture and traditions, planning how to forge cultural connections to the grafted system.

If only every place could have a Lee Kwan Yew (of Singapore) to set its initial course as a country. Lee’s administration would score middling at best on a scale of democratic rights. But, clear standards of justice and economic process were established and implemented. Leaders such as this are not common, and perhaps Lee himself owes much of his success to the fact that Singapore is a nation of tiny land mass – easily controlled. Establishing new customs and systems of professional and judicial trustworthiness throughout Iraq will not be easy as there will be many factions interested only in staking out power positions. Their fervor will tend to corrupt the system from the get-go. In fact, they are likely to hijack the system to their advantage. Even in the more organically evolved structure that followed the Soviet dissolution, look at the recent outcome of change in Russia: Khodorkhovsky thrown in jail for corruption, but the terms of the imprisonment make it clear that the Putin government is even more corrupt. The new Russia has come out of the gate with endemic corruption throughout the government and business. Yet, the capitalist system is so powerful, over time it may help that country outgrow its corrupt qualities. One might even argue that this happened in the U.S. after several decades of the Industrial Revolution. But, will Iraq get that far? Or, will the outcome be one of the less favorable ones that any rational predictor of the future might anticipate if he or she were to consider the possibilities on the bottom side of this real-life Monte Carlo simulation?

All decisions in life are gambles – most of them small ones. The stakes seem rather high on this one. Did we do our homework? Did we understand the complexities and the stakes? Did we mitigate risks? Did we develop contingencies? Did we consider alternatives? Did we address the right issues with the stakeholders?

Bush takes pride in being a man of action. Boldness means a lot to him. One gets the impression that this is true to a fault: he would rather act than talk. He’s certainly been lucky to this point in his life. I hope his good fortune is a quality that will not desert him in this situation which will determine his historical legacy.

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