Institutions, Machines, and Complex Orders (Part 9); Conclusion: legal-political institutions and systems

Institutions, whether formal or informal, consist of limitations on behaviour that allow structuring an order of human interaction (North, D.C., 1991). Such institutions endow decisions with their agents of transitivity and, consequently, with rationality and predictability. That is to say, an institution allows to conform expectations on a range of events dependent on individual decisions that will happen and, above all, on another range of events that will not happen or, if they do happen, they will generate an obligation to repair (either to a private individual through a pecuniary indemnity or to society through a criminal sanction).

For these reasons it is interesting to compare institutions with algorithms: a set of automatic procedures -and therefore devoid of arbitrariness on the part of any of the agents- that, according to the data provided by the environment, yield a range of possible results. In a modern political legal system (equality before the law, division of powers, political responsibility of high officials, principle of closure, etc.), such results show at the individual level a certain range of prohibited actions (the aforementioned principle of closure, everything that is not prohibited is allowed). At the individual level, an institution as an algorithm will allow us to predict what an individual will not do, but not what he will concretely do outside of that range of prohibited actions. At the governmental level, the opposite occurs: institutions allow us to anticipate what judicial decisions will be, which in turn will have to review laws and decrees that violate the rights and guarantees of individuals.

However, while institutions can function as algorithms, providing predictability to individual decisions and policies, they cannot function in a vacuum, but they need to be integrated into a legal and political system. This is so that it is impossible to enunciate them if it is not within the parameters configured by such systems. If institutions are algorithms, legal and political systems are abstract machines that select and integrate such institutions. It is the institutions integrated into a legal and political system that constitute a framework of incentives for human action.

Such institutions evolve following a natural selection pattern, when the legal-political system allows to act a negative feedback system mainly articulated by judicial decisions and precedents that readjust their meaning and content for the resolution of concrete controversies based on principles emanating from the legal system itself. Of course, each system represents the materialization of a set of values. Those of modernity, for example, are based, among others, on the dignity of the human person, which translates into the right to individual autonomy.

An ethic of political responsibility that defends such values ​​can be carried forward by rescuing an abstract system of dispute resolution between individuals that refrains from designing society from a central command. In many cases, such an ethic of responsibility must face ideological political programs that are presented under the guise of an ethics of principles.

Such antagonism is asymmetric, since the central design of society presents its followers with a concrete model and the promise that everything works. Although, this only leads, in practice, to an increasing number of decisions based on expediency. Thus, the opposite of the predictability and absence of arbitrariness of a system of spontaneous coordination of individual plans.

[Editor’s note: You can find Part 8 here, and the full essay can be read in its entirety here.]

Institutions, Machines, and Complex Orders (Part 2): Moral and Politics

It is a characteristic feature of Modernity to separate between private morality and public ethics. The first concerns the ethics of principles by virtue of which each individual governs his own sphere of autonomy. Each individual, while not interfering in the interests of third parties, is a legislator, judge, and part of their own moral issues. The law regulates conflicts of interest between individuals, giving legal protection to a certain range of interests and systematically denying it to others (Friedrich Hayek, Law, Legislation and Liberty, Volume I, “Norms and Order”, 1973). For example, in almost all modern legal systems the interest to move and, fundamentally, to leave a territory is protected through the freedom of locomotion. In the meantime, a producer may feel prejudiced by the mere existence of competition and nevertheless he may be denied the right to protection of his monopoly (since a “right” is a legally protected interest). In both cases, questions of principle and questions of social utility are combined.

In most modern systems, the interest to circulate freely is solved more by addressing questions of principles than of social utility – the right to freedom of locomotion is enshrined without addressing arguments about the utility of denying legal protection with respect to another interest. While the problems of protectionism and competition are considered mainly in terms of their social utility, the arguments about whether a certain individual or group of individuals have, as a matter of principle, the right to monopolize an economic activity by the mere fact of belonging to a certain ethnic group, estate, or guild today sounds ridiculous, but not in the past.

The widespread distinction practiced by Max Weber between ethics of conviction and ethics of responsibility continues in force. Individuals, in their private lives, have the right to make decisions following the ethics of conviction, although their principles may be debatable, obsolete, incongruous, and arbitrary. In any case, the consequences will have to weigh on the agents of the decision themselves. On the other hand, the consequences of the decisions of politicians extend to the whole society. The ethics of responsibility becomes relevant here, which, although it may come into conflict with the ethical principles most widely spread among members of society – that is, the current morality – it must address issues related to social utility. This is to say that a substitution of the current morality for welfare economics would be operated.

However, the Weberian notion of ethics responsibility brings with it all the problems of instrumental reason: the means-that is, the resources to be sacrificed-must be proportional to the ends-in this case, the social utility-but remains open to definition what are the values ​​that will define social utility. This is how the question of principles is reintroduced, the discussions about what is right and what is wrong, i.e. morality, in the political sphere. Correlatively, the critiques around the notion of subjective or instrumental reason once formulated by Max Weber are also applicable to the aforementioned welfare economy, so that they retain special validity.

[Editor’s note: Here is Part 1 of the essay. You can find the full essay here.]

Nightcap

  1. Make Nigeria Great Again Adewale Maja-Pearce, London Review of Books
  2. When Britain chose Europe Simon Schama, Financial Times
  3. Censoring the counterculture Brian Doherty, Reason
  4. George Faludy Robin Ashenden, Quillette

Nightcap

  1. The Ottoman origins of capitalism (pdf) Kerem Nisancioglu, Review of International Studies
  2. The book on Marx that Arendt never finished Geoffrey Wildanger, Boston Review
  3. An insider’s perspective of the Algerian War Lincoln Krause, War on the Rocks
  4. The racing cheetahs of the 1930s Jennifer Noonan, Damn Interesting

Poverty Under Democratic Socialism — Part III: Is the U.S. Denmark?

The Americans who call themselves “socialists,” do not, by and large, think in terms of government ownership of the means of production. Their frequent muted and truncated references to Sweden and Denmark indicate instead that they long for a high guarantees, high services state, with correspondingly high taxation (at least, for the more realistic among them).

When I try to understand the quasi-programmatics of the American left today, I find several axes: End Time-ism, a penchant for demanding that one’s collective guilt be dramatically exhibited; old-style pacifism (to an extent), a furious envy and resentment of the successful; indifference to hard facts, a requirement to be taken care of in all phases of life; a belief in the virtuousness and efficacy of government that is immune to all proof, demonstration, and experience. All this is often backed by a vigorous hatred of “corporations,” though I guess that not one in ten “progressives” could explain what a corporation is (except those with a law degree and they often misuse the term in their public utterances).

I am concerned that the last three features – nonchalance about facts, the wish to be cared for, and belief in government – are being woven together by the American left (vaguely defined) into what looks like a feasible project. I think that’s what they mean when they mention “democratic socialism.” The proponents seem to know no history. They are quick to dismiss the Soviet Union, currently foundering Venezuela, and even scrawny Cuba, as utterly irrelevant (though they retain a soft spot for the latter). And truly, those are not good examples of the fusion of socialism and democracy (because the latter ingredient was and is lacking). When challenged, again, American proponents of socialism refer vaguely to Sweden and to Denmark, about which they also seem to know little. (Incidentally, I personally think both countries are good societies.)

The wrong models of democratic socialism

Neither Sweden nor Denmark, however, is a good model for an eventual American democratic socialism. For one thing, the vituperative hatred of corporations on the American left blocks the path of economic growth plus re-distribution that has been theirs. In those two countries, capitalism is, in fact, thriving. (Think Ikea and Legos). Accordingly, both Sweden and Denmark have moderate corporate tax rates of 22% (same as the new Trump rate), higher than the German rate of only 16%, but much lower than the French rate of 34%.

The two countries pay for their generous welfare state in two intimately related ways. First, their populace agrees to high personal income taxes. The highest marginal rates are 60+% in Denmark and 57+% in Sweden. (It’s 46% currently in the US.) The Danes and the Swedes agree to such high rates for two reasons. For one thing, these rates are applied in a comparatively flat manner. Everyone pays high taxes; the rich are not publicly victimized. This is perceived as fair (though possibly destructive to economic growth). For another thing, their governments deliver superb social services in return for the high taxes paid.

This is the second way in which Danes and Swedes pay for their so-called “socialism” (actually welfare for all): They trust their government and the associated civil services. They generally don’t think of either as corrupt, or incompetent, as many, or at least a large minority of Americans do. As an American, I think of this trust as a price to pay. (I am not thinking of gross or bloody dictatorship here but more of routine time-wasting, exasperating visits to the Department of Motor Vehicles.) The Danes and the Swedes, with a different modern experience, do not share this revulsion or this skepticism.

Denmark and Sweden are both small countries, with populations of fewer than six million and about ten million, respectively. This means that the average citizen is not much separated from government. This short power distance works both ways. It’s one reason why government is trusted. It makes it relatively easy for citizens’ concerns to reach the upper levels of government without being distorted or abstracted. (5) The closeness also must make it difficult for government broadly defined to ignore citizens’ preoccupations. Both counties are, or were until recently, quite homogeneous. I used to be personally skeptical of the relevance of this matter, but Social-Democrat Danes have told me that sharing with those who look and sound less and less like your cousins becomes increasingly objectionable over time.

In summary, it seems to me that if the American left – with its hatred of corporations – tries to construct a Denmark in the US, it’s likely to end up instead with a version of its dream more appropriate for a large, heterogeneous county, where government moreover carries a significant defense burden and drains ever more of the resources of society. The French government’s 55% take of GDP is worth remembering here because it’s a measure of the slow strangling of civil society, including in its tiny embodiments such as frequenting cafés. In other words, American democratic socialists will likely end up with a version of economically stuck, rigid, disappointing France. It will be a poor version of France because a “socialist” USA would not have a ready-made, honest, elite corps of administrators largely sharing their view of the good society, such as ENA, that made the unworkable work for a good many years. And, of course, the quality of American restaurant fare would remain the same. The superior French gourmet experience came about and is nurtured precisely by sectors of the economy that stayed out of the reach of statism.

Poverty under democratic socialism is not like the old condition of shivering naked under rain, snow, and hail; it’s more like wearing clothes that are three sizes too small. It smothers you slowly until it’s too late to do anything.


(5) When there are multiple levels of separation between the rulers and the ruled, the latter’s infinitely variegated needs and desires have to be gathered into a limited number of categories before being sent up to the rulers for an eventual response. That is, a process of generalization, of abstraction intervenes which does not exist when, for example, the apprentice tells his master, “I am hungry.”

[Editor’s note: Part I can be found here, Part II here, and the entire, longform essay can be read in its entirety here.]

Nightcap

  1. Modernity and the loss of human dignity Lee Trepanier, Law & Liberty
  2. Gorbachev Joshua Dill, Modern Age
  3. The old problem of old age Carol Tavris, Times Literary Supplement
  4. Silas Dinsmoor, Indian Agent yours truly at RealClearHistory

Nightcap

  1. Is the Turk a White Man? Murat Ergin, Aeon
  2. The centenary of the Amritsar Massacre William Dalrymple, Spectator
  3. The struggle continues Rafe Champion, Quadrant
  4. Why moral progress is not inevitable Ilya Somin, Volokh Conspiracy