Processes and Intentions

All too often people define institutions in terms of their intentions (or at least their stated intentions), their hoped for goals.  However, the hoped for goals may have little to do with the actual results.

Consider “profit making enterprise” or “for-profit business.” The hoped for goal is to make a profit.  However, two thirds of start-up businesses fail within the first ten years.  And three quarters within 15.  And while one might consider that small, start-up businesses might be particularly vulnerable, even giant corporations are not immune.  Consider some of these giants that eventually went out of business:

  • Compaq (computer manufacturer)
  • E. F. Hutton (broker and investment advisor: “When E. F. Hutton talks, people listen.”)
  • MCI Worldcom (long distance carrier)
  • Eastern Airlines
  • Pan Am Airlines
  • TWA (another airline)

So, while the intention may be to make a profit, the actual processes involved in operating a business is no guarantee of doing so.

So it is with other institutions.  Consider the following proposition of a process (courtesy of Thomas Sowell in “Knowedge and Decisions”)

Once the legal authorities have defined, combined, and assigned property rights the subsequent recombination or interchange of those rights at the discretion of individuals shall be illegal.

Do you think that would be something most people would support, would even fight for at great risk to themselves?

How about instead, if we take that same proposition and put it in terms of the hoped for goals that is commonly used instead of the process:

The means of production must be controlled for the good of society as a whole and not for the enrichment of a few wealthy one percenters.  We must end the exploitation of the working class and share the wealth of society more fairly.

That’s socialism.  In the first case, stripped of obfuscatory rhetoric, is the process.  The second is the usually stated hoped-for goals.  History has shown that a lot of people have been willing, even to risking imprisonment or death, to support the hoped-for goals as stated by the proponents.  The problem is that there is nothing in the process that necessarily leads to those goals.  And, indeed, there’s nothing in the process, once established, that creates incentives to further those goals.

Historically, once established, socialism has been captured by people seeking not the good of the people, but instead by people seeking personal power and aggrandizement:  Lenin, Stalin, Mao, Pol Pot, Castro, Hitler.  The list goes on and on.

The reason for that becomes clear once you look at the process itself.  That process is going to be extremely attractive to folk desirous of power for its own sake.  Historically, such folk have always taken over that process because there’s nothing in the process itself to stop them.  There’s no correction mechanism.

If a private “profit making” business fails in its goal, the profit and loss statement provides a clear proof that something is wrong (if only that some other business is more efficient at providing commodities to the customers than they are).  If losses mount, they either have to change or they’ll be forced out of business, making room for someone else.  When it’s a government institution feedback mechanisms are much weaker.  Most people are usually unable to associate negative repercussions to a particular policy which was often instituted years before the repercussions became noticeable.  Even more rare is to associate the policies with particular policy makers, particularly when those policymakers have gone on to different or higher office.  As a result, there is little incentive for the policymakers to consider the longer term, second or third order effects of their policies.  So long as they are popular “now” (for any given “now”), the rest can be left for others (hopefully the opposing party) to deal with.

Intentions, hoped-for goals, make fine rhetoric.  But policies aren’t actually made up of intentions.  They are made up of processes.  It’s the processes, and the incentives that those processes create, that need to be considered when judging policies.

After all, we know what road is paved with those good intentions.

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