the pendulum might be the best we can do

oscillation of the nation

(Me elsewhere! - have a look at this piece I wrote for the Starling Trust Compendium on “Beyond Accountability”, which I actually think is my clearest explanation so far of some of the points that get dealt with in rather a rush in the last chapter of The Unaccountability Machine. )

Sorry, a day late this week as the summer disorganisation is upon me; there will be a special guest post tomorrow though! I’ve been thinking for a few days about this piece on “flexible bureaucrats” from Ivan Vendrov, which is a bit of a cousin of my own recent “flat cap corporatism” post. What I think we’re both trying to work out is the fuzzy and indistinct borderline between useful flexibility and broad based communication, versus sclerosis and corruption.

But is it even a borderline? We have, loosely speaking, two things we’re trying to achieve, which are basically inconsistent with each other. As I said a few weeks ago:

“When we build state capacity, we are trying to achieve two broadly incompatible goals – we want a predictable and transparent system that’s flexible and responsive. So we build up levels of rich and informal communication and facilitation, until they turn into a sclerotic nest of rent seekers. Then we build up layers of clear and detailed regulation, until they turn into a sclerotic mess of rent seekers of a different kind.”

In these sorts of circumstances, it’s normal to think about things in terms of a tradeoff. But it might not be right.

The fact that you can’t have all you want, when it comes to two incompatible but desirable things, absolutely does not mean that there exists a stable and comprehensible exchange rate between them. It doesn’t guarantee that there’s a one-to-one or even many-to-one relationship between the two quantities. Even if we beg some pretty huge questions and pretend that “predictability and transparency” can be quantified and “flexibility and responsiveness” can also be quantified in a comparable way, we don’t have a defined budget of “legal and organisational mana points” to allocate between them. This is, sadly, not a videogame.

So although the phrase “trade-off” is unavoidable, I think it is often a red flag for over-simplification. We can do things that make the system more or less flexible, and we can do things that make it more or less predictable. Sometimes but not always, improving one dimension will worsen the other; a lot of the time, we might actually find ourselves dealing with the consequence of policies which make the system worse along both dimensions but which need to be adopted for other reasons.

Adding to the sum of our problems, the world is always changing. So there’s not even a stable target to aim at. If we’re trying to keep our institutions consistent with long term viability – to play the function of the “higher levels of the metasystem”, in Stafford Beer’s terminology – then it looks like the best we can hope for is to get a sense of what looks like it might make things better in the here and now. Rather than optimising a tradeoff, we just react to local conditions and ask questions like “are the problems we’re currently facing more like the ones we’d expect to see in an excessively rulebound and inflexible system, or in a corrupted and untransparent system?”.

This is the sort of thing I’m always seeing in the day job with respect to financial regulation. Senior people are always warning against a “regulatory pendulum”, whereby the system goes from excessive deregulation, to crisis, to overregulation, to stagnation and over again. But maybe they’re wrong to complain? Maybe it’s a chimera to ever have thought we could alight at the exact equilibrium point where the cost of regulation was as low as it could be brought without taking excessive risk of crisis.

Maybe this kind of oscillation between overcorrections is itself the equilibrium. Viability at the system level doesn’t have to be a single steady state. Maybe it’s just more cognitive effort than it’s worth (or more effort than it’s possible to bring to bear, given that bureaucratic and legal change is necessarily a slow process) to improve the “tracking accuracy” of the system beyond what we have now. Deregulation versus regulation – monopoly versus competition – even investment versus consumption or distribution versus growth – maybe these should be treated as tactics rather than principles. Rather than picking one side of the debate and supporting it as if it was a football team, we ought to just say why we think one tool rather than another is appropriate for the job at hand.