Knowledge and Decisions; A. Brownfeld

Mr. 8rown"ld. of A.... ndrla. Virgin" ............ nee .UllIor. editor .nd lecturer npec..llrlntBreated In polltlclll eo"nee. 502 Thomas Sowell In modern society, he notes, the number of separate individual deci sions required to do something so apparently simple as bringing a slice of bread and pat of butter to the table-let alone something so com.., plex as exploring space-is stagger ing to the mind. Yet processes in volving a multitude of such deci sions are undertaken every minute of the day by untold millions of peo ple. Dr. Sowell portrays society as a collection of interconnected and overlapping decisionmaking units ranging from U a married couple to a police department to a national gov ernment." They all operate under the inherent constraint of scarcity, and thus face the necessity of engag ing in Utrade-offs."Parents deciding how much time and energy to devote to the care of each of their children KNOWLEDGE AND DECISIONS 503 or a police department determining which laws it will enforce most vig orously both must forgo some desir able options in order to pursue others. The weighing of costs and benefits that characterizes the economic sphere can be seen at work throughout the whole range of human choice: nSocial values in general are incrementally variable: neither safety, diversity, rational articulation, nor morality is categor ically· a ~good thing' to have more of, without limits. All are subject to diminishing returns, and ultimately negative returns."

Knowledge and Decisions by Thomas Sowell. Published by Basic Books, 10 E. 53rd St., New York, N.Y. 10022, 1980. 422 pages, $18.50 cloth. There is a radical difference· be tween the kind. of knowledge pos sessed by producers .of goods and intellectuals or bureaucrats. UTo say that a farm boy knows how to milk a cow," the author writes, ~tis to say that we can send him out to the barn with an empty pail and expect him to return with milk. To say that a criminologist understands crime is not to say that we can send him out with a grant or a law and expect him to return with a lower crime .rate. He is more likely. to return with a report on why he has not· succeeded yet, and including the inevitable need for more money, a larger staff, more sweeping powers, etc. In short, the degree of authentication of knowledge may be lower in the thigher' intellectual levels and much higher in those areas which intellec tuals choose to regard as tlower.'"

Incentives Differ When any area of concern be comes the province of government officials, a different structure of in centives exists than when free mar ket incentives were working. Gov ernment decision makers, for exam ple, may act rationally within the context of their own personal· and bureaucratic incentives and constraints-such as the desire for reelection or promotion, or for in creasing the power of their agency-but this may produce a so cially harmful result. Thus, Dr. Sowell argues, ttMuch criticism of tincompetent bureau crats' implicitly assumes that those in the bureaucracy are pursuing the assigned goal but failing to achieve it due to lack of ability. In fact, they may be responding very rationally and ably to .the set of incentives facing them. For example, govern ment regulatory agencies are often very ineffective in controlling the industry or sector which they have a legal mandate to regulate. But it is a common pattern in such.agencies for those indecisionmaking positions to (1) earn far less money than'com504 THE FREEMAN August parable individuals earn in the reg ulated sector, and (2) after a few years' experience to move on to jobs in the regulated sector. In short, they are regulating their future em ployers. Under such a set of incen tives, it is hardly surprising that decision makers ... approach those whom they are assigned to regulate with an attitude that is sympathe tic, cooperative, and even protec tive."

The examples of such an incentive structure at work, Dr. Sowell shows, are numerous, among them, the In terstate Commerce Commission and the trucking industry, and the Civil Aeronautics Board and the airline industry. He. declares that, ttMuch discussion of the pros and cons of various tissues' overlooks the crucial fact that the most basic decision is who makes the decision, under what constraints, and subject to what feedback mechanisms." Numerous Options When government decides something-it decides it for everyone, often wrongly. ttThe ad vantages of market institutions," Dr. Sowell states, U over government institutions are . . . that people can usually make a better choice out of numerous options than by following a single prescribed process. The di versity of personal tastes insures that no given institution will be come the answer to a human problem in the market. The need for food, housing, or other desiderata can be met in a sweeping range of ways. Some of the methods most preferred by some will be the most abhorred by others. Responsiveness to individual diversity means that market processes necessarily pro duce tchaotic' results from the point of view of any single given scale of values. No matter which particular way you think people should be housed or fed (or their other needs met) the market will not do it just that way, because the market is not a particular set of institutions. Peo ple who are convinced that their values are best-not only for them selves but for others-must neces sarily be offendedby many things that happen in a market economy....

The diversity of tastes satisfied by a market may be its greatest economic achievement, but it is also its greatest political vulnerability." Since an economy functions with scarce resources which have alter native uses, there must be some method of coordinating the ration ing process and getting the most output from the available input. Discussing the manner in which the market proves itself the best source of such coordination, Dr. Sowell writes: ttPrice movements economize on the knowledge needed for given decisions. Where such prices are ar tificially maintained by force, rather than through voluntary transac1980 KNOWLEDGE AND DECISIONS 505 tions, they convey misinformation as to relative scarcities, and there fore lead the economy away from the optimal use of resources. Accurate prices resulting from voluntary ex change permit the economy to achieve optimal performance in terms of satisfying each individual as much as he can be. satisfied, by his own standards, without sacrific ing others by their own respective standards. The results must, how ever, appear tchaotic' to any ob server judging by any given set of standards applied to all. . . . The most basic question is not what is best but who shall decide what is best. . . . Figures of speech about tsociety' as decision maker ignore the diversity of individual prefer ences which are responsible for many of the very phenomena in question-whether economic, social, or political."

Timed for Short Run Political decision making also has a time horizon which is confined to the very short run. ttThe time hori zon of the constituent," the author points out, ttmay be his lifetime, and perhaps that of his children, or even the longer range interest of the whole society as an ongoing enter prise. The inherent incentive struc ture facing a political surrogate em phasizes the time remaining be tween a given decision and the next election. The opportunity for policies with immediate benefits and longer run negative consequences are obvi ous, not only in theory but in prac tice." Government agencies also have no interest in solving the ttproblems" they were created to deal with. If they succeeded, their jobs would end. The result: tt. . . the agency must then apply more activity per residual unit of evil, just in order to maintain its current employment and appropriations level. If the agency is supposed to fight dis crimination against minorities, it must successively expand its con cept of what constitutes tdiscrimina tion' and what constitutes a tminor ity.' Urgent tasks such as securing basic civil rights for blacks ulti mately give way to activities de signed to get equal numbers of cheerleaders for girls' high school athletic teams. A nongovernmental organization, such as the March of Dimes, could-as it did, after con quering polio-turn its attention to other serious diseases, but if it had a government mandate strictly lim ited to polio, it would have little choice but to continue into such ac tivities as writing the history of polio, collecting old polio posters, etc., while children were still dying of birth defects and other maladies ... a nongovernmental organization subject to feedback from donors or customers has incentives and con straints that lead to institutional 506 THE FREEMAN August decisions more attuned to rational social trade-offs."

The question, therefore, is not the nature of the ,men and women in charge of government programs, but the nature of bureaucracy itself: ((Bureaucracies, by definition, are controlled by administrative or political decisions,not by incentives and constraints communicated through market price fluctuations. ... The rank and pay of a bureaucrat is determined by his degree of (responsibility'-in categories documentable to third parties judg ing a process rather than a result. He is paid by how many people he manages and how much money he administers. Overstaffing, (needless' paperwork, and (unnecessary' delays may be such only relative to social purposes-not relative to the incen tives established. Every (needless' employee is a reason for his superior to get a higher salary ..." Government Is Not Society One key myth which Thomas Sowell wants to dispel is that, some how, government is the equivalent of ((society." It is not. Instead, he writes, ((it is often not a consolidated decisionmaking" unit but an over lapping montage of autonomous branches, agencies, and power cliques-each of these responsive to different outside coalitions of inter est groups or ideologists.,. . . A bureaucracy which can envelop its processes in intricate and unintel ligible regulations and bury its per formance under mountains of tangential statistics has achieved the security of insulation from feed back. Knowledge costs-whether inherent or contrived-are institu tional insulations.~' Trends today, both in the U.S. and elsewhere in the Western world, are clearly away from freedom. Democ racy, Dr. Sowell reminds us, is a process, not a value. People can give their freedom away through the democratic, process, .. as many,have done. Hitler, after all, 'came to power,.

in Germany through that very dem ocratic process. Dr. Sowell discusses the role of intellectuals in eroding freedom, a role played by intellectuals in other societies as well, for freedom denies them the power to inflict their ideas upon others. He chronicles the in creasingly legislative role played·by the courts and the non-elected bureaucracy and laments that, (tOver the years, but especially in the twentieth century, the constitu tional division of powers has' been eroded or destroyed . . . the sheer growth in size of the federal gov ernment has given it new powers derived neither from' the .Constitu tion nor from any statutes, but in herent in the disposition of vast sums of money, many important jobs, and great discretionary powers of enforcing a massive and ever 1980 KNOWLEDGE AND DECISIONS 507 growing amount of laws and regula tions. . . . The size of government affects the ability of the citizens to monitor what it does-or even the ability of their elected political sur rogates to monitor the activities of a far-flung administrative empire ....

None of this is historically unique. In the late stages of the Roman Empire its civil servants tfelt able to exhibit a serene defiance of the Em peror.' ... The same was later true of Czarist Russia, for John Stuart Mill declared, tThe Czar himself is pow erless against the bureaucratic body; he can send anyone of them to Siberia, but he cannot govern with out them, or against their will.' The experience of Imperial China was very much the same." The free enterprise system is, Dr. Sowell believes, worthy of support not only because it is the most effi cient but, far more important, be cause it is the only economic system consistent with other freedoms. Those who oppose the free market, whatever their rhetoric, are really opposed to freedom, for which they would like to substitute their own ideological notions. F. A. Harper Although he understands the negative trends, Thomas Sowell is not a pessimist. If he were, he would not have produced this thoughtful and incisive defense of freedom. He concludes: ttHistorically, freedom is a rare and fragile thing. It has emerged out of the stalemates of would-be oppressors. Freedom has cost the blood of millions in obscure places and in historic sites ranging from Gettysburg to the Gulag Ar chipelago. A frontal assault on free dom is still impossible in America and in most of Western civilization.

Perhaps nowhere in the world is anyone frankly against it, though everywhere there are those pre pared to scrap it for other things that shine more brightly for the moment. That something that costs so much in human lives should be surrendered piecemeal in exchange for visions or rhetoric seems gro tesque. Freedom is not simply the right of intellectuals to circulate their merchandise. It is, above all, the right of ordinary people to find elbow room for themselves and a refuge from the rampaging pre sumptions of their tbetters.' " i IDEAS ON UBERTY IF man is to continue his self-improvement, he must be free to exercise the powers of choice with which he has been endowed. When discrimina tion is not allowed according to one's wisdom and conscience, both discrimination and conscience will atrophy in the same manner as an unused muscle.