Monday, August 30, 2010

Why Greensboro’s, Guilford County’s and America’s Political System is Broken

In a hierarchy, every employee tends to rise to his level of incompetence.
In time, every post tends to be occupied by an employee
who is incompetent to carry out his duties.

Work is accomplished by those employees

who have not yet reached their level of incompetence.
Dr Laurence J Peter

Market Failure

…market failure exists to the extent that innovation is blocked by incumbents. If innovators can succeed by out-competing incumbents, then the market is working. If incumbents have a self-reinforcing system that keeps out innovators, then we have market failure.

…Suppose that we have a group that wants enormous political power. The group rewards people who justify its power by calling them "experts." It punishes those who question its power by dismissing them as "hacks." If you want money and status, you want to be labeled as an expert. In order to be labeled as an expert, you produce analysis that justifies concentrated political power for the elite group.

This process is self-reinforcing...only "reliable" people are allowed to be CEO's or policymakers. A requirement for being "reliable" is sharing the views of other "reliable" people as to what constitutes reliability.

It is like the tenure system in academia. Who gets tenure? Above all, it is people who support the existing tenure system.

…Of course, incumbents never want to change the process, but markets can force change.

…There is a market failure in health care. Instead of innovation, what gets rewarded are ideas and policies that entrench the existing system.

…There is a market failure in education. Educational institutions are evaluated not on the basis of rigorous standards but instead on the basis of a system of credentialism that is self-referential. X is acceptable because X has been certified by Y, which is acceptable because it has been certified by Z, and so on. In order to climb the ladder in academia, you have to display allegiance to the credentialist ideology. You have to reinforce the incumbents and help snuff out innovation. Our program is accredited, and yours is not. So there.

…The key is whether a reputation system is reasonably open to innovation, or whether it serves primarily to maintain the status of incumbents.

The reputation system…serves the incumbents, who want to centralize political power. The relationship between politicians and experts is the most serious market failure of all. It is our version of what I have called the Moral Rot Factor.

...I think that there is still a high probability that we are on a path to a system in which a political elite ruthlessly rewards its friends and punishes its enemies, leading to a society with much less innovation and much more corruption. I do not foresee gulags and mass murders, but there is plenty of potential for moral rot in cronyism, and that I do fear lies ahead.

Arnold Kling

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