Why We Can’t Have Nice Things: Agency and Knowledge Problems Under Authority

I have a favorite spiel I keep in reserve for bureaucratic functionaries in government agencies and the corporate world — or just brown-nosing coworkers — who say “we have these rules and procedures for a reason.” Yeah, there’s a reason, all right. The reason is that the people who make the rules and procedures don’t trust you.

In every case, your direct contact with the situation and your skills and experience acquired dealing with similar situations over time make you better equipped to decide how to handle a situation than those who make the rules and procedures governing that situation. Nevertheless, those making the rules and procedures are afraid to trust you with discretion to use your own judgment or to apply your experience, skills and direct knowledge of the situation. They assume that were you given such discretion, you’d just use it to screw them — your superiors — over. That’s because they know your interests are diametrically opposed to theirs. They make a living screwing you over every minute of every day. And they’re afraid you know it.

The lack of trust built into authority relationships, essentially, makes human capital unusable.

Apologists for “the rules” like to spin them as necessary, inevitable, rational — and obvious — responses to some impersonal state of affairs. But they are not. They are responses to “reality” as it exists in the skewed and heavily filtered perception of legislators, bureaucrats and bosses. The decision-making process itself is distorted by the institutional mindset of the decision-makers — which, in turn, reflects the unstated assumption that the only feasible solution to any problem is one administered by people like themselves, and fully consistent with their existing level of power. Any feedback they receive on the effects of their decisions is distorted by the phenomenon remarked on years ago by R.A. Wilson: Nobody tells the truth to someone with a gun (or the power to fire them).

Hierarchical institutions are machines for telling naked Emperors how great their clothes look, and those at the top of such hierarchies live in almost entirely imaginary worlds. They tend to communicate better with their peers at the tops of other pyramids than with their subordinates below them in their own pyramids. That means most of their decisions will be based on “best practices,” as reported to them by those at the tops of other pyramids who are as clueless as they are about the internal workings of their own organizations.

Put all this together, and we get a situation in which authority relations almost completely divorce both decision-making power and incentives from those with the actual knowledge and experience to do a job. That’s why just about every activity in our society, except those done by self-organized groups of people acting to meet their own needs cooperatively, seems to be done as inefficiently as humanly possible. Our every dealing with a large hierarchical institution seems like a scene out of Terry Gilliam’s Brazil, where those with the common sense to fix a problem quickly and easily are constrained by a lot of Weberian bureaucratic work rules apparently designed to prevent anyone from ever doing anything.

When things do get done, it’s because the people doing the job have the common sense to ignore the rules and falsify the paperwork afterward. Indeed the fastest way to paralyze an organization, as anyone knows who’s ever engaged in a work-to-rule strike, is for the people doing the work to stop using their own judgment and obey all the rules on paper.

Society is able to function, despite the stupid rules made by stupid people in authority, only because smart people treat authority as damage and route around it.

The central problem of our society is that it’s ruled by a class of people — bureaucrats, landlords, usurers, rentiers — who live off those who actually know how to do stuff. Because they make their living robbing us, they can’t trust us to use our own knowledge to do our jobs. As a result, a major part of the total economic activity of our society is guard labor that serves no productive purpose, but rather prevents those engaged in productive labor from throwing off the rentiers who feed off their sweat and blood.

The solution is abolish coercive authority, and the ruling class that extracts rents through authority, and vest full decision-making power (along with the full fruit of their own labor) in those who know how to do the job. Without authority, there is no conflict of interest. Without authority, those who have knowledge and experience can be trusted to use it, because they do not exist in a zero-sum relationship with the institutions they serve.

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