The quote that I have at the top of my sidebar to the right is one I lifted out of an article written by Dr. Madsen Pirie of the Adam Smith Institute about gun control. The quote is:
The desire is there to do something about difficult problems, but because it is difficult to do something which would help solve them, people do something else instead.– Dr. Madsen Pirie, Adam Smith Institute
I came across it sometime in 2003 or 2004 and pulled it out as it seemed fitting to the culture in my work environment, a former Fortune 100 firm. To sum it up, it’s difficult to pursue efficient and cost effective remedies to serious shortcomings of the status quo when incentives to maintain it are built into the culture and have multiple dependencies; a phenomena that is described as diseconomy of scale in the paper Diseconomies of Scale in Large Corporations, Steffan Canaback, February 2004 (page 31, section 3.2).
While the paper is in the context of large corporations, I believe it has implications to public sector bureaucracies as these lack the profit motive, existing outside market influence. Further, the main theme of the paper can be summed up as natural limiting factors on firm size, consisting of what I call limitations of being human while firms and government are purely human constructs.
In my own experience, as an information technology strategist, tasked with strategizing the best course to align IT with business goals, having to go against the grain of “what is” was part of my daily routine. I was rewarded and encouraged for instigating discussions that needed to be had, but ultimately ended that chapter of my career on the outs. In large part, it had to do with a huge disagreement about whether to replace or integrate legacy systems that weren’t amendable to the direction of the firm.
From a long run cost perspective, integration is far more expensive due to the requirement to manage and maintain complexity while not removing barriers to business flexibility, and the ROI on other infrastructure components is diminished. But to the people who are dependent on the existence of legacy systems, the proposition of replacement is unpalatable; hence they tend to opt rather strongly for the alternative. They have different motives that conflict with those of upper management.
The experience was intensified when in the employ of a government agency related to education. The parting of ways happened much faster, 9 months versus 12 years, due to having experienced large amounts of frustration with inefficiency and frustrating others who simply accepted it as a fact. I couldn’t cope with entrenchment and the entrenched couldn’t cope with me. Government, at least that particular agency, was not the place for an ambitious young adult who desired to make a contribution to improvement of “what is.”
When I started my blog, my intended theme was history and its implications to the world we live in today with dash of economics to build on certain points that are of political nature. Additionally, I am not particularly qualified to have a heavy focus on economics. But there was, perhaps, some element of destiny involved as the most pressing problems in my view were, and still are, problems involving monetary policy and adverse financial implications to the public. These problems were too desperate and too compelling to ignore, not discounting the fact that I found myself unemployed on the cusp of the economic crisis in 2008. The lack of necessity of these problems and the narcissistic nature of the economic statist propaganda spin called for a strong focus on facts, adding my own brand of rhetoric based on them.
In the book Market Monetarism: Roadmap to Prosperity, Marcus Nunes and Benjamin Cole point out the possibility of institutional problems within the bureaucracy of the Federal Reserve in Chapter 8, the section entitled When Orthodoxy Become Dogma and Macroeconomic Policy and Democracy. A couple of particular points that mesh well with my subject are these:
The Federal Reserve as an independent institution inhabited by “unremovable” officials with 14-year tenures is undemocratic. The public is forced to cope with whatever it dishes out with no recourse to resolution. As I pointed out in a much earlier post, the President does have the power to remove members of the Board of Governors for cause. This power has never been used; and it likely would not have impacted the nature of the crisis as more than half of the seats on the BoG were vacant as President Obama took office and remained vacant until being slowly filled starting in 2010.
Public organizations always need oversight and accountability. Even with democratic checks – public organizations are never the victims of creative destruction – tend to become devoted to internal goals and standards, not goals and standards the public needs.
The devotion of public institutions to their own set of internal standards and goals appears to be a phenomena that has existed throughout time and is universal. As anecdotal evidence from the historical record, I am providing an example of an observation of the effects of bureaucracy on the public from 1777:
From: Notes on Virginia Query 17
Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now. Thus in France the emetic was once forbidden as a medicine, and the potatoe as an article of food. Government is just as infallible too when it fixes systems in physics. Galileo was sent to the inquisition for affirming that the earth was a sphere: the government had declared it to be as flat as a trencher, and Galileo was obliged to abjure his error. This error however at length prevailed, the earth became a globe, and Descartes declared it was whirled round its axis by a vorteo.
It is error alone which needs the support of government. Truth can stand by itself. Subject opinion to coercion: whom will you make your inquisitors? Fallible men; men governed by bad passions, by private as well as public reasons. And why subject it to coercion? To produce uniformity. But is uniformity of opinion desireable? No more than of face and stature. Introduce the bed of Procrustes then, and as there is danger that the large men may beat the small, make us all of a size, by lopping the former and stretching the latter.
But is the spirit of the people an infallible, a permanent reliance? Is it government? Is this the kind of protection we receive in return for the rights we give up? Besides, the spirit of the times may alter, will alter. Our rulers will become corrupt, our people careless. A single zealot may commence persecutor, and better men be his victims. It can never be too often repeated, that the time for fixing every essential right on a legal basis is while our rulers are honest, and ourselves united. From the conclusion of this war we shall be going down hill. It will not then be necessary to resort every moment to the people for support. They will be forgotten, therefore, and their rights disregarded. They will forget themselves, but in the sole faculty of making money, and will never think of uniting to effect a due respect for their rights. The shackles, therefore, which shall not be knocked off at the conclusion of this war, will remain on us long, will be made heavier and heavier, till our rights shall revive or expire in a convulsion.
This man was a revolutionary leader. It was Thomas Jefferson.
Jefferson was certainly from a different place in time. But from personal experience and examination of the current issues in monetary affairs, his observations appear to be timeless as they concern the nature of human beings, specifically those holding or closely associated with political power who have a much different set of goals, standards and motives than those impacted by their actions. And it is reveling as to why it has taken someone like Scott Sumner several years to have a small, but somewhat meaningful impact on the situation (requiring perseverance and tenacity on his part for which I am grateful).
But the work isn’t complete, being much larger than one man by himself. And the logical question is whether the institutional problems at the Federal Reserve, and perhaps elsewhere, can or will be remedied in the not so distant future, or whether the same problems will only be replicated in aspects of governance that impact other life necessities as people who desire to solve difficult problems end up doing something else instead by taking the legislative and mandate route, the road more easily traveled despite the tradeoff and warning labels attached.
PS: After having returned to my former firm in a different capacity, it is not beyond notice that many of the recommendations I made while there were eventually implemented. It is nice to know that what ultimately became my sacrifice was not in vain.