by
Daniel B. Klein, Associate Professor of Economics,
Santa Clara University, Santa Clara, CA 95053, dklein@scu.edu
Acknowledgements: For valuable comments I would like to thank Milton Friedman,
Amihai Glazer, Bernie Grofman, Daniel Hausman, Titus Levi, Timur Kuran, John Majewski,
Carole Uhlaner, two anonymous referees for Economics & Philosophy, and seminar
participants at George Mason University.
The general uncertainty about the prospects of medical treatment is socially handled by
rigid entry requirements. These are designed to reduce the uncertainty in the mind of the
consumer as to the quality insofar as this is possible. I think this explanation, which is
perhaps the naive one, is much more tenable than any idea of a monopoly seeking to
increase incomes.
-- Kenneth Arrow (1963, 966).
At lunch one day a colleague and I had a friendly argument over occupational licensing.
I attacked it for being anticompetitive, arguing that licensing boards raise occupational
incomes by restricting entry, advertising and commercialization. My colleague, while
acknowledging anticompetitive aspects, affirmed the need for licensing on the grounds of
protecting the consumer from frauds and quacks. In many areas of infrequent and
specialized dealing, consumers are not able, ex ante or even ex post, to
evaluate competence. I countered by suggesting voluntary means by which reputational
problems might be handled, and by returning to the offensive. I said that in fact the
impetus for licensing usually comes from the practitioners, not their customers, and that
licensing boards seldom devote their time to ferreting out incompetence but rather simply
to prosecuting unlicensed practitioners. I mentioned cross-sectional findings, such as
those on state licensure, prices and occupational incomes. Overall, I characterized the
professional establishment as a group of villains, who set the standards, write the codes,
and enforce behavior to enhance their own material well-being. The term economists often
use for political operators who seek government-granted resources or privileges is
"rent-seekers." The term connotes villainy.
Here, my colleague posed a question that I found very disarming: "Don't you think
that the average doctor is honest?" "Don't you think," he said, "that
we might get honest doctors on the state licensing board?"
This question is a disarming one in a great many areas of policy discourse. Anyone who
believes that a status quo policy is grossly inefficient, unjust, and inequitable has to
come to terms with it. Many feel that gross inefficiency, injustice, and inequity mark the
status quo in numerous areas. Are the defenders of the status quo to be set down as liars?
Are they all cynics, soullessly clutching their parasitic rents?
Another possibility is to say that our intellectual opponents are misinformed. They
believe that what they want is good and what they say is true. But if so, why are they
misinformed? Others stand ready to enlighten them, to show them that two plus two is not
five. Why aren't they easily straightened out? If it is we who are misinformed, why
aren't we straightened out? And if both we and they are misinformed, why can't we all at
least believe the same error?
SELF-SORTING AND SCREENING
Individuals tend to seek out communities and organizations which appeal to their
beliefs and values. They gravitate to positions and responsibilities that suit their
personal aspirations and ambitions, and in such pursuits they succeed best. In The
United States of Ambition: Politicians, Power, and the Pursuit of Office (1992), Alan
Ehrenhalt argues that the political process tends to select for those who most believe in
it and make a career of it. He suggest that one advantange held by the Democratic party
(over the Republican party) is that the Democratic party is more thoroughly a party of
active government, so it better attracts "people who think running for office is
worth the considerable sacrifice it entails" (p. 224). Not only does the political
process tend to attract those who believe in it, it also tends to prosper believers.
Sometimes the community holds a belief system, or culture, that does not dovetail with
the individual's prior beliefs, in which case the individual must pursue one of the
following courses: (a) depart the community; (b) change the culture of the community to
suit his beliefs; (c) play the cynic by getting on in the community and supporting its
goals while privately rejecting the culture; (d) remain within the community but openly
voice a dissenting view; or (e) embrace the culture of the community.
For the stark case of conflicting and firmly held beliefs course (a) -- departing the
community -- is the most likely. Thus self-sorting is a major component of the formation
and persistence of organization culture. Economists such as Tiebout (1956) and Buchanan
(1965) have offered models in which people self-sort into communities by "voting with
their feet": people select the community with the local collective services, such as
swimming pools and security services, that suit their tastes. In the present case people
people also self-sort into communities -- communities with suitable collective beliefs.
Course (b), remaking the culture to suit one's own taste, is uncommon. It may occur in
young communities when a strong-minded individual finds a position of leadership. Course
(c), playing the cynic, is also uncommon when beliefs are squarely in conflict. If the
individual just keeps his mouth tight and his mind skeptical, he may feel compromised and
frustrated. To play the cynic one must make his behavior neatly chameleon. Few can.
Course (d), open dissent, is not only trying for the individual, it is unsatisfactory
to the community and often leads to sanctions or expulsion. Thomas Szasz explains the
phenomenon of screening out heterodoxy in the matter of drug policy:
Why do we now lack a right we possessed in the past? ... Why ... does the federal
government control our access to some of mankind's most ancient and medically most
valuable agricultural products and the drugs derived from them?
These are some fo the basic questions not discussed in debates on drugs. Why not?
Because admission into the closed circle of officially recognized drug-law experts is
contingent on shunning such rude behavior. Instead, the would-be debater of the drug
problem is expected to accept, as a premise, that it is the duty of the federal
government to limit the free trade in drugs. All that can be debated is which drugs should
be controlled and how they should be controlled. (Szasz 1992, p. 96, talics added.)
When beliefs are squarely in conflict, the final course of behavior, adapting one's own
beliefs, is again uncommon. If the individual tries to surrender his old beliefs for the
culture of the community, he may be surrendering precious parts of his selfhood. His old
beliefs are like the deep roots of his behavior and habits of mind, so an effort to
conform might uproot his moral and intellectual foundation.
When individual beliefs and values are well established prior to participation,
therefore, the forces of self-sorting and screening tend to create organizations made up
of people with fitting believes and values. And, perforce, expertise. Hayek commented on
this tendency:
The organizations we have created in these fields [labor, agriculture, housing,
education, etc.] have grown so complex that it takes more or less the whole of a person's
time to master them. The institutional expert . . . is [frequently] the only one who
understands [the institution's] organization fully and who therefore is indispensible. . .
. . [A]lmost invariably, this new kind of expert has one distinguishing characteristic: he
is unhesitatingly in favor of the institutions on which he is expert. This is so not
merely because only one who approves of the aims of the institution will have the interest
and the patience to master the details, but even more because such an effort would hardly
be worth the while of anybody else: the views of anybody who is not prepared to accept the
principles of the existing institutions are not likely to be taken seriously and will
carry no weight in the discussions determining current policy. . . . [A]s a result of this
development, in more and more fields of policy nearly all the recognized 'experts' are,
almost by definition, persons who are in favor of the principles underlying the policy. .
. . The politician who, in recommending some further development of current policies,
claims that 'all the experts favor it,' is often perfectly honest, because only those who
favor the development have become experts in this institutional sense, and the uncommitted
economists or lawyers who oppose are not counted as experts. Once the apparatus is
established, its future development will be shaped by what those who have chosen to serve
it regard as its needs. (Hayek 1960, 291)
BELIEF PLASTICITY
Firm prior beliefs give rise to self-sorting and screening. But very often a person
comes to an organization without definite opinions on matters relating to the
organization's purposes. In this case beliefs often adapt to the prevailing culture. The
individual's lack of opinion usually reflects his innocence of theory about those matters.
In the case of the U.S. Department of Agriculture, the theory is about how the
agricultural sector works. In the case of the licensing board, the theory is about how
licensing affects the practice of the trade.
An individual uses his belief system as an apparatus to cope with his circumstances.
Like the steel producer who chooses his inputs to maximize profits, the individual tends
to favor certain ideas and theories that render life more comfortable, more pleasant, and
more convenient, given his circumstances. The individual's current hopes, information,
opportunities, and constraints affect how readily he will take to various ideas and
theories.
By "belief plasticity" I mean that individuals would believe different ideas
if they were to pursue different goals or were to be inserted into a different cultural
environment. The set of ideas that everyone is willing to admit as "the facts"
does not always dictate unequivocally beliefs about how the facts relate to one another.
This is especially so for social and political affairs. Belief structures are plastic:
They are affected by the heat and pressure of everyday experience. People -- all people --
have different pressures and different yearning, and these give rise to different beliefs.
Were the pressures and yearnings otherwise, so would be the beliefs.
H. L. Mencken demonstrates a life-long fascination with belief plasticity as it
manifested itself in a wide variety of human affairs. What follows is a sample from his Minority
Report (1956).
The influenze epidemic of 1919, though it had an enormous mortality in the United
States and was, in fact, the worst epidemic since the Middle Ages, is seldom mentioned,
and most Americans have apparently forgotten it. This is not surprising. The human mind
always tries to expunge the intolerable from memory, just as it tries to conceal it while
current. (Mencken, 1956, p. 169)
[C]onscription in both cases [World Wars I and II] involved the virtual enslavement of
multitudes of young Americans who objected to it. But having been forced to succumb, most
of them sought to recover their dignity by pretending that they succumbed willingly and
even eagerly. Such is the psychology of the war veteran. He goes in under duress, and the
harsh usage to which he is subjected invades and injures his ego, but once he is out he
begins to think of himself as a patriot and a hero. The veterans of all American wars have
resisted stoutly any effort to examine realistically either the circumstances of their
service or the body of idea underlying the cause they were forced to serve. Man always
seeks to rationalize his necessities -- and, whenever possible, to glorify them. (Ibid,
p. 176)
I was once told by a Catholic bishop that whenever a priest comes to his ordinary with
the news that he has begun to develop doubts about this or that point of doctrine, the
ordinary always assumes as a matter of fact that a woman is involved. It is almost unheard
of, however, for a priest to admit candidly that he is a party to a love affair: he always
tries to conceal it by ascribing his deserting to theological reasons. The bishop said
that the common method of dealing with such situations is to find out who the lady is, and
then transfer the priest to some remote place, well out of her reach. (Ibid, p. 73)
The really astounding thing about marriage is not that it so often goes to smash, but
that it so often endures. All the chances run against it, and yet people manage to survive
it, and even to like it. The capacity of the human mind for illusion is one of the causes
here. Under duress it can very easily convert black into white. It can even convert
children into blessings. (Ibid, p. 3)
Men always try to make virtues of their weaknesses. Fear of death and fear of life both
become piety. (Ibid, p. 47)
THE NETWORK EXTERNALITIES OF CULTURE
Belief systems exhibit network externalities, which is to say, what is best for an
individual to believe depends crucially on what his day-to-day coworkers believe. If the
individual works in a Christian Fundamentalist church, he will find it awkward to believe
that man has evolved from apes. If he works in the U.S. Department of Agriculture, he will
find it awkward to believe in the idea that current agricultural policy is absurdly
inefficient, unjust, and unequitable. The individual would be out of sync with the
actions, attitudes, and goals of the organization. his coworkers have certain underlying
beliefs that form a web, and his opinions would upset that web. They would expect his head
to nod when it would like to shake; when they chuckle, he may be inclined to grimace. Were
he to defend his beliefs his coworkers may respond with cold seclusion or hot animosity.
The smooth workings of the organization would be upset by the cultural impasse. In fact,
sheer novelty in behavior, regardless of its nature, can cause resentment. One can become
unpopular simply by doing something other than the expected, regardless of what that
something is.
Upon entry into the organization the individual is exposed to certain information,
embedded within certain ideas. Hence, there is a strong element of information filtering.
But in addition, as the individual comes into contact with these ideas, he faces strong
incentives to subscribe to the organization line. As Adam Smith wrote in The Theory of
Moral Sentiments
Nature, when she formed man for society, endowed him with an original desire to please,
and an original aversion to offend his brethren. She taught him to feel pleasure in their
favourable, and pain in their unfavourable, regard. She rendered their approbation most
flattering and most agreeable to him for its own sake; and their disapprobation most
mortifying and most offensive. (Smith, 1790, p. 116)
To be an effective coworker, to find goodwill among peers, to fetch promotions, the
individual must act in accordance with the practices and expectations of the group, and to
so act he must think the ideas of the group, and to so think he must, except in cases of
dry cynicism, believe the group's beliefs. And coming to believe the community's ideas
will be an uncontested choice if the individual is never exposed to competing ideas.
Social psychologist Robert Cialdini (1984) sets out several principles that help
explain how people come to hold the beliefs they do. One he calls "social proof"
or "Truths Are Us." The idea is that people rely on the example of those around
them as a cue for appropriate behavior and proper thinking. He explains why television
producers use canned laughter, why bartenders "salt" their tip jars with dollar
bills (and church ushers their collection baskets), and why evangelical preachers seed
their audience with enthusiasts. He explains how members of a cult can reinforce each
other's beliefs, how a victim can suffer a drawn-out vicious assault with dozens of
witnesses and not one calling for help, how newspaper reports of suicide can spawn further
suicides, and how hundreds of people can line up in orderly and willful fashion to partake
of lethal poison, as they did in Jonestown, Guyana in 1978. If the example of observance
by others can decide and reinforce such dreadful beliefs and practices, certainly
"social proof" can do much to reinforce the "normal" beliefs and
practices of organizations such as duly created government agencies.
An example is the recruiting of individuals to the Unification Church of Reverend Sun
Myung Moon. Here I crib from a discussion of obedience by George Akerlof (1991), who in
turn cribs from social psychologist Marc Galanter (1979, 1989). The recruiting process is
made up of four steps. As Akerlof explains, "[p]otential recruits are first contacted
individually and invited to come to a 2-day, weekend workshop. These workshops are then
followed by a 7-day workshop, a 12-day workshop, and membership" (1991, p. 10). Each
step of the program increases in cultural intensity. The structure works beautifully, in
conjunction with the self-sorting process, to keep the potential recruit surrounded by
other potential recruits who obey and reinforce the practices. The recruit who enters an
advanced step of the program does not see the resistance that those who have
dropped out would have shown to the cultural intensification. Nor does he see the
resistance that those who remained would have shown had they been told in advance
what they were to become. As Akerlof puts it, "[b]ecause those who disagree most
exit, the dissent necessary for resistance to escalation of commitment does not
develop" (1991: 11).
Related here is another principle of belief formation set out by Cialdini:
self-consistency and commitment. Since people fancy themselves wise and consistent beings,
once a person has taken steps down a certain path, he is receptive to supplementary
information and ideas that support the initial decision, and he tends to turn away from
information that discredits it. As Adam Smith said,
The opinion which we entertain of our own character depends entirely on our judgments
concerning our past conduct. It is so disagreeable to think ill of ourselves, that we
often purposely turn away our view from those circumstances which might render that
judgment unfavourable. (Smith 1790, p. 158)
Isn't it likely that "Truths Are Us" and self-consistency would be operating
in the case of those rising to leadership in an organization? Consider the rise of an
individual to the state medical licensing board. Most likely such a person must first be a
prominent and not-too-innovative member of the profession -- bold innovation is often a
sign of irreverence. Then perhaps he would find a position in the professional
association. After gaining the confidence of influential people in the establishment, he
might finally join the state licensing board. Through these steps the individual would be
increasingly enveloped by the inner culture of the profession. With each step outside
viewpoints would be cleaved away. Dissenting pleas from powerless outsiders are politely
dismissed and privately derogated. Herbert Simon (1976, p. xvi) says, a person "does
not live for months or years in a particular position in an organization, exposed to some
streams of communication, shielded from others, without the most profound effects upon
what he knows, believes, attends to, hopes, wishes, emphasizes, fears, and proposes."
The incentive to maintain and advance one's prior commitments to the profession would be
enhanced; to challenge or innovate would cause disruptions both personally and in the
day-to-day workings of the organization. As James Q. Wilson (1989, p. 110) says, "the
perceptions supplied by an organizational culture sometimes can lead an official to behave
not as the situation requires but as the culture expects." And only those amenable to
the necessary commitments would climb the ladder.
The same reasoning is adaptable to any organization, whether communal, commercial,
nonprofit, or governmental. But the most important application is to government
organizations, since they have the most far-reaching and peremptory power. As Hayek (1944:
104) said, "the power which a multiple millionaire, who may be my neighbor and
perhaps my employer, has over me is very much less than that which the smallest fonctionnaire
possesses who wields the coercive power of the state and on whose discretion it depends
whether and how I am to be allowed to live or to work." Government officials wield
incomparably greater power than do businessmen, and they exercise it with much greater
likelihood of calamitous consequence. One need only consider petty officials at the FDA
who routinely make decisions that prevent suffering individuals from being helped by new
drugs.
The network of beliefs within a community may be related to the idea of "path
dependence," or "lock in," discussed by Paul David (1985; see also the
important work of Liebowitz and Margolis 1990). A path-dependent process is one that
reinforces and steers itself once it has begun. Once members of a primitive society begin
using copper as a medium of exchange, everyone joins in the use of copper. Once one
particular textbook becomes customary for the Introductory Economics sequence, each
professor has the incentive to stick with that textbook. Once the copper or textbook gets
a foothold, it becomes "locked in;" that is, the arrangement is the reason for
its own perpetuation. The moral of the story is that perhaps the original foothold was
made in an adventitious or shortsighted way -- gold actually would serve better than
copper, or some textbook other than the one chosen -- but once down the path a reversal is
difficult to make. The result may be perpetual suboptimality. Hats off to the French
rationalists who forced their countrymen to use the metric system -- and chalk one up for dirigisme.
David explains that path dependence occurs when three features are present: technical
interrelatedness, economies of scale, and quasi-irreversibility. Although David explores
technological systems, the ideas can be applied to belief systems within communities or
organanizations. The first feature, technical interrelatedness, is the need for
compatibility among members of the network. Again, network externalities are clearly
exhibited by the belief system of a community. A common apprehension of ends, values, and
opportunities is crucial to the efficiency of the community. A mind with the wrong beliefs
can disrupt the smooth working of an organization in much the same way that a stretch of
railroad track with the wrong gauge can disrupt the smooth passing of a locomotive train.
David's second aspect of path dependence, economies of scale, says that the more that
system A is adopted within the community, the easier it will be to bring an additional
individual into system A. Learning and using the system gets easier the more the system is
used. This principle would seem to apply to belief systems. The more that one's coworkers
share a common belief system, the solidified and imposing that system will be. Beliefs
that are very common come to be taken as "common sense." Basic notions become
second-nature, and, building on basic notions, community practices produce a mortar of
supplementary beliefs, procedures, and rituals. Questioning the community's common sense
is sure to gain one unpopularity. Often basic cultural premises are so uncontroversial
that they go wholly unstated and unchallenged (see Kuran 1995). Truths are us.
When most of the people working in an organization share a belief system, newcomers are
quickly socialized and they then help solidify that system. In an organization, then, some
system will come to dominate the thinking of the workers, just as in a "Polya urn
scheme" some color will come to dominate the balls in the urn.(1)
To change the metaphor, those who percolate through the cultural filter of an organization
afterward might become part of the filter and enhance its purifying properties.
The third feature of path dependence is quasi-irreversibility of investments, which is
to say, the costs of the original capital (whether animal, mineral, or intellectual) are
at least partially sunk; switching to a new capital good would entail further investment.
The first two features of path-dependent systems may present a sufficiently severe
collective action problem to account for the persistence of suboptimal outcomes, but
quasi-irreversibilty reinforces the difficulty of jumping to a better path once the
community has started down a suboptimal one. In the case of belief systems, Cialdini and
Adam Smith have told us that individuals become attached to their beliefs. New experiences
that compel one to change his mind can be both depressing, since his old intellectual
investments will no longer serve him, and heartbreaking, since his old investments will
have come to hold personal and sentimental value. Such new experiences can be tragic, much
the way a conflagration can be. Hence the saying, "Ignorance is bliss." Like
installing a smoke detector, sometimes we program ourselves to detect and avert new
experiences and new arguments because they would jeopardize the peace of mind that our
current beliefs afford us. And sometimes we refrain from challenging the beliefs of
another, not out of fear of jeopardizing our own peace of mind, but out of a compassionate
impulse to safeguard his.(2)
In an important work, Timur Kuran has modelled public opinion as a process of path
dependence and multiple equilibria. In his main model individuals are endowed with
"private preferences" and then choose their "public preferences," or
outwardly displayed preferences. Which preference one finds most profitable to display
depends, due to the peer effect and social incentives, on what other are displaying.(3) Thus suboptimality can become locked in, or we may witness
sudden revolutionary swings in outward preferences -- in the manner of the French,
Russian, Iranian, and East European revolutions. Kuran is interested especially in the
attitudes of overall society, where exit is very difficult; hence his focus on
preference falsification. I am more interested in beliefs within a subgroup, where
exit is easier, and hence my focus on belief adaptation and self-sorting. But it should be
noted that Kuran also gives much attention to the possibility of the private
preferences being dependent on the path, thereby highlighting the idea that all belief
formation is a contingent social process.
Much earlier William James wrote of belief systems as a social process and acknowledged
the possibility of lock in. He said:
Our ancestors may at certain moments have struck into ways of thinking which they might
conceivably not have found. But once they did so, and after the fact, the inheritance
continues. When you begin a piece of music in a certain key, you must keep the key to the
end. You may alter your house ad libitum, but the ground-plan of the first
architect persists -- you can make great changes, but you can not change a Gothic church
into a Doric temple. You may rinse and rinse the bottle, but you can't get the taste of
the medicine or whiskey that first filled it wholly out. (James 1963 [1907], p. 75)
James goes on to explain that what we call "common sense" is in fact the
product of circumstances and, quite possibly, historical accidents. Occasionally we find
ourselves in conversations in which our "common sense" and the other guy's
"common sense" cannot find much in common.
As for the individual who stumbles into a community and finds herself traveling a path
involving elaborate new beliefs, the story is a case of what the pragmatist philosopher
Richard Rorty calls "contingency." In Contingency, Irony and Solidarity
(1989) Rorty describes the broad terms of social life as set, not only by necessities or
human deliberation, but also by blind contingency. Who we are is not essential, but
accidental, the result of what family we were born into, what theories we were exposed to,
what schools we went to, what jobs we landed, the time and place of our existence. Not
only could our physical doings have been otherwise, but the way we describe
physical doings, including our own, could also have been otherwise. Culture not only
generates incentives to believe in certain ideas rather than others, it provides the ideas
among which we choose our beliefs. Rorty's view, like James's, is uncompromisingly
anti-essentialist -- there can be no metacultural description, only cultural ones -- and
hence he preaches concession to ironism.
There are, then, several distinct principles that help explain uniformity in behavior
or belief: self-sorting and screening (noted by Akerlof, 1991), network externalities and
belief adaptation (discussed in the context of technology, not cognition, by David),
filtered information (noted by Simon), imitation based on uncertainty (congruent with
Cialdini and developed by Bikhchandani et al, 1992), preferences to conform (noted by
Cialdini, Adam Smith and Kuran), and sanctions on deviants (discussed by Kuran and noted
by Mencken).
THE GENEOLOGY OF ORGANIZATION CULTURE
If organization culture exhibits lock in, there remains the question of which path will
come to pass. Path dependence tells us that the enduring equilibrium may have very
adventitous origins, so in that sense there may be no way to generalize about what sort of
equilibrium results. But the consideration of origins and of certain incentives that
operate irrespective of cultural specifics may permit some generalization.
A relativist tradition beginning perhaps with Protagoras and including such thinkers as
Machiavelli, La Rouchefoucauld, Vico, Mandeville, Marx, Spencer, Nietzsche, Sumner,
Mencken, and Burke maintains that interest drives social mores, and social mores drive
morality. Members of a community come to call "good" any behavior that promotes
the interests of the community and "bad" any that damages it. By a process of
legitimation, interest is transformed into propriety and justice. Thereafter community
members obey not only their interest but also their conscience. When a community is
isolated the culture governs all and the society is tranquil in its practices. But if the
community is embedded within a larger society, the way a government agency is, the
cultural development of the agency is constrained by the interests and theories of the
larger society. The interests of the society may in fact be bred into the members of the
agency, so the agency may faithfully serve the greater good. But there will be some
interests particular to the agency and its members.
Everyone wants more comfort and wealth. Almost everyone wants recognition, prestige,
eminence, and power. We want a sense of significance, importance, potency. We feel
important when we can believe a story in which we get to play the hero. We want to take
credit for both the good and the greatness achieved. We want to not hurt colleagues and
associates near to us. As Akerlof (1989, 13) says, people "choose beliefs which make
them feel good about themselves." Call it the self-exaltation principle. It will
sometimes conflict with the conscience, but the plasticity of belief will to some extent
permit the conscience to accomodate self-exaltation even when onlookers perhaps feel it
shouldn't. Government officials, especially high-ranking ones, find comfort and prestige
in their position. They will come to find legitimacy as well. They like to see their
agency's actions as the cause of achievement, and themselves the cause of the agency's
actions. The self-sorting and screening effects tend to prevent someone with strongly
contrary views from entering the community; most of the others join the community and
embrace the culture, which claims importance and legitimacy. The propensity for
self-exaltation is universal enough that we can expect it to be one of the forces shaping
cultural development -- that means the pursuit of expanded power and a willful reluctance
to surrender it.
We might also generalize on the basis of agency founding. The founding of the agency
gives a cultural foothold to certain theories and goals that will to a great extent
determine the belief system into the future. The push for occupational licensing was
fueled by doctors seeking, often quite unabashedly, to limit competition, and justified by
the theory that society needs protection from quacks. The Department of Agriculture grew
out of the theory that farmers were getting a bad shake and the goal became arranging
price supports and subsidies. The public school system was rationalized by the need for
instruction and the goal of public instruction persists. A mountain of literature has
persuaded many people that the public school system is cause for great remorse, but few in
the education establishment have been persuaded.(4) As the
Viennese social critic Karl Kraus asks, "Who is going to cast out an error to which
he has given birth and replace it with an adopted truth?" (1990, p. 114). Those who
favor laissez-faire and doubt the efficacy of government are likely to see badness
persisting in the cultural systems of government agencies, since those agencies were
founded to abridge laissez-faire.
The self-exaltation principle gives reason to believe that the culture of government
agencies will favor expanded government power, and the founding principle gives another
reason, reinforced by self-sorting and screening, to expect the culture to be highly
statist. Although outside theories seep into the agency through its many holes and cracks,
given belief plasticity and the network externalities within the agency, libertarians have
reason for saying that government officials and allied parties often pursue bad policies
but believe in their goodness.
Thomas Jefferson would agree that the irreproachable honesty of the members of the
medical licensing board is no evidence of beneficence:
It would be dangerous delusion were a confidence in the men of our choice to silence
our fears for the safety of our rights; that confidence is everywhere the parent of
despotism. Free government is founded in jealousy and not in confidence; it is jealousy,
and not confidence which prescribes limited constitutions, to bind down those whom we are
obliged to trust with power. (from the Kentucky Resolutions, November 16, 1798)
EXAMPLE: "THE CULTURE OF SPENDING"
James L. Payne has written a book about Congress that emphasizes belief plasticity and
the presence of network externalities in cultural systems. He argues that the beliefs of
congresspeople "will be affected by the information and opinions they are exposed to
day after day." In fact, Congress "is overwhelmed by the advocates of government
programs." Payne, who himself spent much time in the bowels of the persuasion process
on Capitol Hill while researching his book, provides data showing that in the persuasion
process the ratio of pro-spending voices to anit-spending voices is over 100:1 (1991, p.
13). Even though from afar the congressperson might understand why only pro-spending
interests seek the ear of Congress, in the barrage of pro-spending testimony the human
mind simply succumbs to the senses and begins to accept what it hears. How unpleasantly
and unremittingly jaundiced one must become otherwise! Like the poles that form the
cone-shaped frame of a tepee, the lobbyists, agency staffers, media personnel, aides, and
congresspeople all reinforce one another's beliefs. The principle of mutual reinforcement
is nicely captured by an aphorism of Karl Kraus, who wrote bitterly against the First
World War: "How is the world ruled and led to war? Diplomats lie to journalists and
believe these lies when they see them in print" (1990 [ca 1918], p. 81).
The Culture of Spending on Capitol Hill, explains Payne, revolves around two central
premises: (i) "the philanthropic fallacy," or the virtual nonexistence of
alternative uses for the citizen's tax dollar, and (ii) the efficacy of government
programs. Regarding the "philanthropic fallacy," Payne highlights how the will
to self-exalt shapes beliefs:
Everyone wants to have a high opinion of himself... When the congressman comes to
Washington, he is surrounded by beneficiaries and claimants who are pleading for his
`help.' He is strongly invited to accept the role of philanthropist, strongly encouraged
to believe that he has assisted people and left the country better off by funding
government programs... This high self-opinion would be directly threatened if the donor of
funds [that is, the taxpayers] were brought into the picture. As soon as one recognizes
that in order to help some people you have to hurt others, much of the glow goes out of
being a congressman. For this reason, congressmen are reluctant to face the
opportunity-cost issue. (Payne, 1991, p. 53)
Regarding the presumption of government efficacy, Payne says, "Congressmen tend to
trust that government programs actually accomplish their intended purpose. They suppose
that programs to `help farmers,' or `help science,' or `help the poor' actually do what
they are intended to do. One has to work long and hard pointing out defects in each scheme
to overcome this basic credulity" (Ibid, p. 163). Payne highlights the
Truths-Are-Us nature of these beliefs: "For most congressmen, spending programs are
cultural `givens,' an aspect of their environment that they accept without question"(5) (Ibid, p. 173). In discussing the source of program
evaluation information, Payne remarks on the role of self-sorting and screening:
"personnel in government agencies will tend to believe that what their agency does is
useful... An official who believed his program was useless or harmful would probably weed
himself out of the agency even before the system expelled him" (Ibid, p. 36).(6)
Payne explains that the congressperson's beliefs are, to a great extent, adopted only
once the politician enters the culture of spending:
When the innocent enters policy realms armed only with the general idea that `spending
is bad,' he is easily seduced, for this abstract homily is overpowered by visions of
starving millions and eroding continents. The situation is not unlike sending a farm boy
to town and telling him to `keep out of trouble.' Because he is unaware of all the
appealing and subtle forms `trouble' can take in specific instances, this general advice
is practically worthless. (Payne, 1991, p. 158)
Payne supports his theory with a wide variety of evidence, to show that congresspersons
of both parties become substantially more pro-spending the longer they dwell in "the
culture of spending." (There is an unresolved scholarly debate on this question.(7))
Other theories of congressional spending, such as pork barrel politics, log-rolling,
and vote maximization, give the impression that politicians must be rather venal
characters. Payne gives a different impression:
The high-spending congressman does not feel he is a crook. He does not perceive that he
is taking money away from some people to give it to others. He lives in a world of
euphemism where the federal government `generates' a `general revenue' that
well-intentioned `public servants' can spend to `promote the general welfare.' (Payne,
1991, p. 166)
Payne's persuasion hypothesis answers many questions that other theories do not,
including the most immediate one of why politicians, even with all their platitude, seem
more-or-less sincere in their efforts.(8)
CONCLUSION: THEY ARE HONEST AND RENT-SEEKING
. . . and they are not the less quacks when they happen to be quite honest.
-- Mencken (1919, p. 80)
The annual produce of the land and labour of England . . . is certainly much greater
than it was . . . a century ago . . . . [Y]et during this period, five years have seldom
passed away in which some book or pamphlet has not been published . . . pretending to
demonstrate that the wealth of the nation was fast declining, that the country was
depopulated, agriculture neglected, manufacturers decaying, and trade undone. Nor have
these publications been all party pamphlets, the wretched offspring of falsehood and
venality. Many of them have been written by very candid and very intelligent people; who
wrote nothing but what they believed, and for no other reason but because they believed
it.
-- Smith (1776, 327)
The proximate spark igniting me to write the present paper was my friendly argument
over occupational licensing. This paper is an extended response to my colleague's
challenge invoking the honesty of the average doctor. I have said that I found his point
disarming; also I found it a little naive. Wouldn't we expect the members of a state
licensing board to be exceptional and sincere advocates of the cause? Are we
surprised to learn that the A.M.A. opposes midwife birthing, the right to die, and the
relaxation of prescription requirements on drugs? Are we surprised that the education
establishment vociferously opposes school vouchers? Are we surprised that civil engineers
champion rail transit projects, that university professors champion the value of higher
education, or defense officials, the need for a strong military? Of course not, nor do we
seriously doubt their sincerity. Although I firmly believe that occupational licensing
serves existing practitioners and disserves the public at large, I do not suspect
venality. It does not surprise me that a leading student of the subject reports that,
"Despite the many opportunities that exist for bribery and corruption in the granting
of licenses and deciding disciplinary cases, the record is amazingly clean." (9)
I hope that the present paper lends structure and refinement to the intuitions held in
this regard.
Does the culture theory suggested here conflict with theories that portray political
actors as cynical egotists? Not necessarily. We just need to make clear that when we offer
a description based on assumptions of self-seeking behavior, we present the description as
one, simplified description of the matter, and not the one that the political
participants themselves believe. When Milton Friedman (1953, p. 19) said we can describe
the growth of a plant as behavior aimed at maximizing sunlight exposure subject to
constraints, he certainly was not saying that the plant saw it that way. Baldly cynical
theories can give useful insights into the behavior of real people who are in fact not
cynical. Malady does not imply malevolence, just as benevolence does not imply benefit.
As investigators of government failure, we may toggle between what Sanford Ikeda
distinguishes as the deception thesis, which he associates with Public Choice
economists, and the error thesis, which he associates with Austrian economists.
Austrian political economy, says Ikeda, grants, if only for the sake of argument, the
assumption of scruple and public-interest on the part of government officials (Ikeda
1997b). The present paper suggests that the two approaches are not necessarily beginning
with different assumptions, but rather may be describing the same assumptions in two
different ways (cf Ikeda 1997a, 114, 119, 146, 149, 240). The appropriateness of each
description depends in part on one's discourse situation and rhetorical purpose.
Sometimes it is appropriate to incriminate government officials. For the cynical and
irresponsible ones, we might deem their behavior reprehensible. It will depend on how we
delimit responsible beliefs given the individual's personal constraints. But I advise you
to strain to see how bad conclusions might have been reached by thought processes that
were ordinarily honest and good-willed. Libertarians should meet and join institutions of
power, they should cooperate and negotiate with those in power. To do that effectively,
tell yourself that it is up to the wise to undo the damage done by the merely good.(10)
No matter how disagreeable we may find the culture of another community, there is no
profit in addressing them strictly on our terms. As Payne says, the "congressman will
not be persuaded by lobbyists who believe he is a dishonest cad" (166). If the
political-intellectual-academic arena is one of cultural struggle, success is not called
triumph or victory, but persuasion.
REFERENCES
Aka, Arsene, Robert Reed, Eric Schansberg, and Zhen Zhu. 1996. "Is There a
'Culture of Spending' in Congress?" Economics & Politics 8: 191-211.
Akerlof, George A. 1989. "The Economics of Illusion." Economics and Politics
1: 1-15.
_____. 1991. "Procrastination and Obedience." American Economic Review
81: 1-19.
_____ and William T. Dickens. 1982. "The Economic Consequences of Cognitive
Dissonance." American Economic Review 72: 307-319.
Arrow, Kenneth. 1963. "Uncertainty and the Economics of Medical Care." American
Economic Review 53: 941-967.
Bikhchandani, Sushil, David Hirshleifer, and Ivo Welch. 1992. "A Theory of Fads,
Fashion, Custom, and Cultural Change as Informational Cascades." Journal of
Political Economy 100: 992-1027.
Buchanan, James M. 1965. "An Economic Theory of Clubs." Economica
(February): 1-14.
Cialdini, Robert B. 1984. Influence: How and Why People Agree to Things. New
York: William Morrow and Co.
Chubb, John E. and Terry M. Moe. 1990. Politics, Markets & America's Schools.
Washington, D.C.: The Brookings Institution.
David, Paul A. 1985. "Clio and the Economics of QWERTY." American Economic
Review 75: 332-337.
Ehrenhalt, Alan. 1992. The United States of Ambition: Politicians, Power, and the
Pursuit of Office. New York: Times Books.
Friedman, Milton. 1953. "The Methodology of Positive Economics." In Essays
in Positive Economics. Chicago: University of Chicago Press.
Galanter, Marc. 1989. Cults: Faith, Healing, and Coercion. New York: Oxford
University Press.
_____ et al. 1979. "The `Moonies': A Psychological Study of Conversion and
Membership in a Contemporary Religious Sect." American Journal of Psychiatry
136: 165-170.
Hayek, Friedrich A. 1944. The Road to Serfdom. Chicago: University of Chicago
Press.
Hayek, Friedrich A. 1960. The Constitution of Liberty. Chicago: University of
Chicago Press.
Hogan, Daniel B. 1983. "The Effectiveness of Licensing: History, Evidence, and
Recommendations," Law and Human Behavior 7:117-38.
Ikeda, Sanford. 1997a. Dynamics of the Mixed Economy: Toward a Theory of
Interventionism. London: Routledge.
Ikeda, Sanford. 1997b. How Compatible Are Public Choice and Austrian Political Economy?
Tales of Deception and Error. Mss. Presented at the 1997 meetings of the Southern Economic
Association.
James, William. 1963. Pragmatism and Other Essays. New York: Washington Square
Press.
Kraus, Karl. 1990. Half-Truths and One-and-a-Half Truths, trans. And ed. by
Harry Zohn. Chicago: University of Chicago Press.
Kuran, Timur. 1995. Private Truths, Public Lies: The Social Consequences of
Preference Falsification. Cambridge: Harvard University Press.
Liebowitz, S. J. and Stephen E. Margolis. 1990. "The Fable of the Keys." Journal
of Law and Economics 33: 1-25.
Mencken, H. L. 1919. Prejudices: First Series. New York: Alfred A. Knopf.
______. 1956. Minority Report: H. L. Mencken's Notebooks. New York: Alfred A.
Knopf.
______. 1987. H. L. Mencken's Smart Set Criticism, ed. William H. Nolte.
Washington, DC: Gateway Editions.
Payne, James L. 1991. The Culture of Spending: Why Congress Lives Beyond Our Means.
San Francisco: ICS Press.
Rorty, Richard. 1989. Contingency, Irony, and Solidarity. New York: Cambridge
University Press.
Shimberg, Benjamin. 1982. Occupational Licensing: A Public Perspective.
Princeton: Educational Testing Service.
Simon, Herbert. 1976. Administrative Behavior, 3rd ed. New York: Free Press.
Smith, Adam. 1776. The Wealth of Nations. New York: Modern Library, 1937.
Smith, Adam. 1790. The Theory of Moral Sentiments. 6th ed. Edited by
D.D. Raphael and A.L. Macfie. New York: Oxford University Press, 1976.
Szasz, Thomas. 1992. Our Right to Drugs: The Case for a Free Market. New York:
Praeger.
Tiebout, Charles M. 1956. "A Pure Theory of Local Expenditure." Journal of
Political Economy 84 (February): 416-24.
Wildavsky, Aaron. 1988. Searching for Safety. New York: Transaction Books.
Wilson, James Q. 1989. Bureaucracy: What Government Agencies Do and Why They Do It.
New York: Basic Books.
ENDNOTES
1. David (1985, 335) explains the Polya urn scheme: "an urn
containing balls of various colors is sampled with replacement, and every drawing of a
ball of a specified color results in a second ball of the same color being returned to the
urn: the probabilities that balls of specified colors will be added are therefore
increasing (linear) functions of the proportions in which the respective colors are
represented within the urn." It has been shown that "the proportional share of
one of the colors will, with probability one, converge to unity."
2. "The loss of faith, to many minds, involves a stupendous
upset -- indeed, that upset goes so far in some cases that it results in something hard to
distinguish from temporary insanity. It takes a long while for a naturally trustful person
to reconcile himself to the idea that after all God will not help him. He feels like a
child thrown among wolves. For this reason I have always been chary about attempting to
shake religious faith. It seems to me that the gain to truth that it involves is trivial
when set beside the damage to the individual" (Mencken, 1956, p. 141).
3. "[A]n individual, when he joins a crowd, whether of
life-long Democrats, Methodists or professors, sacrifices his private judgment in order to
partake of the power and security that membership gives him" (Mencken, 1987 [1921],
p. 154).
4. Chubb & Moe (1990, 46) say the following of those in the
public school establishment: "Although traditionally they have tried to portray
themselves as nonpolitical experts pursuing the greater good, they are in fact a powerful
constellation of special interests dedicated to hierarchical control and the formalization
of education."
5. Hayek (1960, 112) makes the following related remark: "For
the practical politician concerned with particular issues, these beliefs are indeed
unalterable facts to all intents and purposes. It is almost necessary that he be
unoriginal, that he fashion his program from opinions held by large numbers of people. The
successful politician owes his power to the fact that he moves within the accepted
framework of thought, that he thinks and talks conventionally. It would be almost a
contradiction in terms for a politician to be a leader in the field of ideas."
6. Although watchdog agencies like the Congressional Budget Office
and the General Accounting Office are supposed to challenge the overly convenient beliefs
of lawmakers, such agencies in fact are influenced by the lawmakers themselves and are
rather ineffective (Payne, 66-70).
7. One type of evidence used by Payne is longitudinal data, tracking
over time congresspersons' voting record on spending bills, and he presents evidence of
congresspeople becoming, beginning with their second year, increasingly in favor of
spending. Aka, Reed, Schansberg, and Zhu (1996) also do a longitudinal study and find that
the "culture of spending" results dissolves for a sample size larger than what
Payne used. Payne has noted in correspondence, however, that the Aka et al analysis does
not properly control for several features of the problem, including prior government
experience by congresspeople (in which they have been immersed in a culture of spending
before their freshman term), the "apprentice effect" concerning the common
peculiarity of first-year voting patterns, the phenomenon of a congressman like Ted
Kennedy maxing out on the spending barometer and therefore not evidencing a tendency to
become more in favor of spending over time, and the way national-defensive bills are
handled. In private conversation with the author, Eric Schansberg has expressed a
recognition of the conceptual validity of these points in relation to his own study, and
seems to feel that the question of a correlation is still an open one. It should be noted
that the general validity of Payne's culture hypothesis really does not depend on there
being a correlation between voting-for-spending and tenure-in-Congress (although such a
correlation would be nice evidence for it). If the acculturation occurs prior to arrival
in office (for example, in prior government service or during the campaign), the
correlation will not be found, but the culture theory might nonetheless help us understand
why spending is as popular as it is among congresspeople. I hope researchers try to refine
the empirical investigation of the culture hypothesis.
8. One can imagine methods of studying belief effects in
organizations. For example, one might learn about self-sorting effects by interviewing
those who depart the organization and those who do not, or new arrivals versus veterans.
One might learn from studying massive shifts in personnel, or in the creation of new
subunits, staffed either by insiders or outsiders, or by a change in where the agency
reports its activities.
9. Shimberg, 1982, p. 9. There is much scholarly literature on
occupational licensing, almost all of it critical to one degree or another. A good survey
is Hogan (1983).
10. I find this saying in the good and wise book by Wildavsky
(1988, 91).
Back to Dan Klein's Papers
Back to Dan Klein's Homepage