Monday, March 21, 2011

Wanted: Enlightened Despots

The worst lie ever told in an Economics class is this: If everyone optimizes his individual happiness, the entire system is optimized.   

I still remember some bright bulb in Econ 1 raising his hand and asking, “So if I give a panhandler ten dollars and he buys hooch and gets drunk, that optimizes the system?”  To which the professor replied that, indeed, it did.  In fact, “Who were we to decide what was right for the panhandler?” 
Since then, I’ve come to understand the very opposite: One of the great ironies of big, complex systems is that if every individual in the system—each link--acts in his or her own best interest, then the system becomes wildly inefficient.  It can hurt the very people it's intended to help.

I know this doesn’t sound like good, laissez-faire capitalism, but when we depend on free enterprise to solve every problem in life, it’s a little bit like the New Yorker cartoon where the young mom holds the baby up to the the dad and asks: “Will the Invisible Hand of the Market be diapering him today?” 

The housing bubble is a perfect example.  People with insufficient income got mortgages and moved into homes.  Elected officials got credit for housing growth and happy constituents, and votes for their reelection campaigns.  Mortgage lenders got big bonuses for production, and their companies grew and got rewarded by investors.

And then came the bust.  Each link did so well that we all went to hell in a handbasket.

What the world needs, I’m pretty sure, is more despots.  Enlightened ones, of course.  What Plato called Philosopher-Kings. And Queens.  That’s what we need.  Despotic Philosopher-Kings and -Queens, sitting atop these huge systems, rapping us across the knuckles when our small-time optimization imperils the greater good.
Here’s how it would work.  You have a sinus infection.  Sorry.  Of course, it’s in your best interest to get an antibiotic--in a week you’ll be good as new.  But I have a sinus infection, too.  Maybe I want some antibiotic.  But, says the Surgeon General Despotic Philosopher-Queen, antibiotics are already over-prescribed and we’re starting to create drug-resistant superbugs.  So, she says, only I can have the antibiotic.  Me.  Not you. That’ll cut the system dosage in half and save the world.  Good for me!  Good for all of us!  See how wise the Despotic Philosopher-Queen is?

Sure, you can try to bribe her.  Fund her re-election campaign.  Threaten a coup.   But this is a Despostic Philosopher-Queen we’re talking about.  She knows best.  From each according to his ability to each according to whom is writing the blog.  Someone wins, someone loses.  

All kidding aside, do you see how hard these systems are to tame?  In order to optimize the whole, someone on the ground is going to have his ox gored.

Speaker John Boehner is the quintessential example of a man who could be Philosopher-King.  Boehner leads the party committed to wringing billions of dollars out of our national budget, as big and complex a system as you could want.  
Funny thing for a would-be Philosopher-King, though.  The Continuing Resolution doesn’t cut the $450 million squirreled away for construction of the Joint Strike Fighter.  The one that would be built in Cincinnati, Ohio (where Boehner grew up), and Dayton, Ohio, the largest city in his congressional district.  The one the military doesn’t want.    

There are a billion like this, of course.  These aren’t bad people, and they’re not doing anything illegal.  They just listened to my Econ 1 professor and are optimizing their little slice of heaven, which is, in theory, supposed to optimize the whole system.  

Look at our healthcare system.  How about foreign aid?  Complex supply chains?   Sensitech, a company I know well, built an entire business on the fact that the various links of the supply chain for Food and Pharmaceuticals have competing interests.  If everyone optimizes his link then you and I sometimes get wilted brown lettuce and saline solution instead of vaccine.  

Competition of the species and survival of the fittest--now there’s a complex system that works.  But make no mistake, it’s brutal.  Not everyone gets lungs and brains, if you know what I mean.   Darwin--another candidate for Philosopher-King--understood that in really healthy, complex systems, lots of individuals lose.  Maybe most.
Which gets us, unfortunately, to the SECOND lie we are all told in Econ 1:  People know what makes them happy.   It turns out we really don't know.  Not even close.  In fact, we willingly make all kinds of choices that cause us great unhappiness. 

Think about where that leaves us: We create huge systems that fail miserably because every link optimizes its own self-interest.  Often in ways that don't optimize their own self-interest.

Wanted: Enlightened Despots.