Opposite day: The limits of Burkean gradualism

Ilarum is once again at the breach fighting all the wrong battles. He imprudently charges where I would prefer to reserve judgement. This time however, he may have a sliver of a point. I do not so much disagree with him, as think he may be overstating his conclusions.

Hi, I’m back again as this Opposite day has extended to the whole week. In talking about the supposed radicalism of OWS, Mr Isquith quotes some guy called Teichberg:

“Those are very important elements of this new human system we want to build.”

James Hanley replies:

There’s the problem–they want to build a system.  They lack all understanding of tradition, of the evolution of society, of the value of marginal change.  Like the French revolutionaries, or the Khmer Rouge, they want to build, and in doing so they can only end up destroying

Mr Van Dyke concurs:

This “new human system we want to build”  is a chimera, for it requires a “new man” with a new human nature to populate it. Unfortunately, we’re still making men like we used to and always will.

Few men who find themselves in a mob are capable of behaving like anything more than men in a mob, and there are as few today as there ever were.  It’s not that our minds or ideas aren’t strong enough, it’s that our feet will always be made of clay

This seems to be a rare enough event that it deserves a second post from me.

So lets get a few things straight. It is often the case that radical change is imprudent.  This is the case for a number of reasons.

1. We lack adequate knowledge about the world. When we try to model how the world would change in response to changes that we make, we try to generally keep things simpler by treating some variables as constants. However, strictly speaking, this would not be true. However, they are good enough approximations over small changes. Larger changes would therefore have unintended consequences.
2. A lot of the good and bad in the world is a product of not just institutions, but of the interaction of institutions with culture. Good results require good institutions and good cultures. Institutions which are deployed wholesale in hostile cultures can have even worse results. The culture therefore requires time to acclimatise to institutions. Gradualism, therefore allows the culture to keep pace with institutional change.
3. Institutions which have stood the test of time can be presumed to be functional because they would have collapsed if they were not.

Let’s say we take the above on board. The thing is, the above two are not the only determinants of the success of institutional change radical or otherwise. Institutions and in particular, incentives do matter. In some cases, an institution could have developed over time with an accompanying culture which is so bad that things just need to change. Let’s take Greece for example. Greece is not entirely the product of sudden social experiments (although the monetary union was kind of radical), but its bloated public sector and endemic tax evasion might as well be hallowed institutions. And now, Greece is in dead deep doo-doo.

The reason Greece is like that is because it had poor incentives. As Mr Van Dyke said, certain features of people in general are kinda constant. Such are people’s natures. So, if we’ve got some massively dysfunctional system, whose dysfunctionality has been ratcheting up over a long time, such a system, even though it has yet to collapse may still require change. Waiting for collapse may just have too high a human cost.

It seems that many on the right are therefore too quick to suppose that no radical change is necessary. But, folks you guys are looking at 10% unemployment (actually 8.6%, but that’s still high), an outsized boomer generation about to retire and your social security and healthcare system are running out of funds. You need change and you need change now before you end up like Greece.

As David Schmidtz has written, the problem is that there is no responsibility. Your healthcare system is like a buffet where you consume as much as you want but pay a fixed premium. Any individual person’s over or under consumption has a negligible impact on premiums, so it seems individually rational to over consume. However, over consumption by everyone will drive up premiums (That’s why it is insurance, not a charity). This is a classic tragedy of the commons. Your social security system is not much better. It operates on a defined benefit scheme which means that people get what they get regardless of what they contribute. Yes, it has lasted for the past 80 odd years, but again, we can see that it is destined to fail.

If I had my druthers, I would gut the health insurance industry (except for catastrophic) and step up a conversion to mandatory health savings accounts. Health insurance would work like insurance and not as some kind of weird middle man who handles your healthcare payment while pocketing some of your money. I would also scrap your current social security system and replace it with a mandatory retirement savings account. The advantage of this is that it has a defined contribution so what you get out depends on what you pay in. Time is urgent and you cannot afford to wait.

Also, the thing about irresponsibility is that things are already in a bad equilibrium and culture. Hospitals expect to be paid by insurance and charge accordingly. Gradualism will not work. Even if we got rid of the tax break for employer-provided health insurance, people will merely purchase their own insurance. People using a Health savings account would be able to consume less for the same “premium” The nature of the tragedy of the commons is that no one as an incentive to change over to the responsible mode of payment (at least under the gradualist model).
So what’s the bottom line? We should not dismiss too quickly, people’s claims about the necessity or desirability of radical change. When things are going to hell in a hand basket, it is often because the incentives are horrible. And there is nothing about horrible incentives that says that they are necessarily a product of radical social engineering. Rather, institutional incentives and culture can degrade over time.