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Tuesday, November 19, 2013

A Libertarian Heresy?

Contra the structure of social change

Hayek is pretty close to libertarian orthodoxy. So is his structure of production. So it would seem that the application of Hayek’s heuristic to the world of ideas would be a good one. 

Today, the “structure of social change” is being disseminated as orthodoxy among libertarian change makers. But I think it constrains libertarian thinking.

The original structure of production goes something like this:

A right triangle depicts the macroeconomy as having a value dimension and a time dimension. It represents at the highest level of abstraction the economy's production process and the consumer goods that flow from it. One leg of the triangle represents dollar-denominated spending on consumer goods; the other leg represents the time dimension that characterizes the production process. . . . At a given point in time and in the absence of resource idleness, investment is made at the expense of consumption. Investment, which entails the commitment of resources to a time-consuming production process, adds to the time dimension of the economy's structure of production. To allow for investment, consumption must fall initially in both nominal and real terms. Once the capital restructuring is complete, the corresponding level of consumption is higher in real terms than its initial level. The nominal level of consumption spending, however, is lower than its initial level because a greater proportion of total spending is devoted to the maintenance of a more time-consuming production structure.

The relative lengths of the triangle's two legs, then, represent the inverse relationship between nominal consumption spending and nominal non-consumption spending—the latter as reflected by the time dimension of the economy's capital structure.

If you came out of the other side of this quote understanding it, great. 

In the world of physical goods, the structure of production holds up very nicely. The quick-and-dirty description is that it takes time for goods to be produced, so consumption falls while the capital stock is improving and the raw materials are being transformed into something that can be consumed. Once resources go through this restructuring process, you get higher consumption of the end goods. Lather, rinse, repeat. 

Many liberty strategists have tried to apply this heuristic to the world of ideas. They call it “the structure of social change.” And it’s not dumb by any means. 

The notion is that good ideas (and bad) go through a similar process: Eggheads and wonks dream up new ideas, then those ideas go through a process that takes them from abstraction to policy restructuring and then to implementation either as a fire in the minds of the laity, into statute books, or as some other means of social change.

But there are serious problems with applying this social change heuristic in the digital age. Let me analyze them in turn:

1. The structure creates a psychology of patience as opposed to a sense of urgency. In other words, there is a pervasive sense—fair or not—that if we wait for our ideas to go through these restructuring processes, the world will eventually be a better place. One reason for such patience is that many people are disposed to think (or trained to think) that the supreme end of the process is policy change. Public choice theory should disabuse us of this kind of wishful thinking, because we know that special interests and voters (saddled with various biases) distort any elegant version of this process, and at the very least delay said process. In any case, there are good reasons for us to be impatient with this process at it is currently sold to libertarians working across the movement.

2. Good ideas are slow to reach implementation primarily because bad ideas are very often competing goods in the marketplace for ideas. Demand for bad policies is based on increased demand for bad ideas. The way to get out of this thinking and preserve the structure of social change might be to remove any biases to thinking of policy change as the “consumption good.” And that would be a welcome improvement (necessary perhaps, but not sufficient). The truth is, bad ideas flourish in the marketplace of ideas precisely because (a) they are often more attractive to people (perhaps because people want to feel good about themselves), (b) the consequences of holding the idea don’t directly affect the holder of the idea, and (c) embracing better ideas can be a higher-cost proposition.

3. Ideas in the structure of social change are distributed and interlocking with other ideas, as well as with real-world goods and services. This makes the diffusion of libertarian innovations non-linear and contextualized. In other words, the process is not an abstraction, and the interlocking nature of the process means that it is being accelerated and joined with a digital structure of production in interesting ways that might cause us to adopt a new heuristic or to abandon heuristics altogether. For example, one might argue that Satoshi Nakamoto read Hayek’s mini-treatise on competing currencies and was inspired to develop with a small group of cypherpunks what became the core Bitcoin technology. Noting that the development of a competing currency is not about policy per se, we should take another leaf from Hayek and note that the circumstances of time and place make taking ideas to implementation take a circuitous path, one in which people discover through iterative processes of experimentation new ways to implement ideas—and quickly. It’s not a macro abstraction where the raw goods of Mises, Hayek, and Friedman sit around in the ether until think tanks and policymakers push them through. It is rather a process by which creative minds snatch pieces of ideas and allow them to mate, try, and perhaps die in a massive petri dish of non-linear value creation. Of course, economic production happens much in this way. But this garden of forking paths looks less like a linear triangle and more like an ecosystem in the countereconomy.

This is not to argue that innovations don’t take time to go from ideation to implementation. Indeed, in some discrete sense you have to go through the structure, even in the digital age where capital requirements can be staggeringly low. But when you remove the template, what you find is a more unconstrained view of social change, one in which the inputs and outputs of production link up in a sophisticated network, a complex system. In this complex system the implementers can also beget new ideas, and so on. This continuous blurring of raw materials, producers, and consumers makes the dynamic much more interesting.

Seeing social change in this light gives us more of a sense of urgency—a tinkerer’s mentality that allows us to shed much (though not all) of the linear thinking that causes us to wait around on senators to read Bob Murphy’s Human Action Cliff’s Notes and to pass enlightened legislation to be lapped up by the adoring masses. 

Instead, Cody Wilson sits in his garage and creates printable gun specs. Instead, the sharing economy emerges in the interstices left by busybodies. Instead, the Edward Snowdens of the world make the government far more transparent, or the U.S. public responds directly to the prospects of war with Syria with outcry as people on the ground in Syria organize—for better or worse—with Twitter.

We are living in a new world. The structure of social change, as it is currently sold, may help contribute to a hierarchical army of programmed policy science graduates who end up working in the white-paper industrial complex. That strategy is worth something. It’s good for slowing the growth of Leviathan while the alert value creators get along with the business of circumventing an increasingly lumbering State. 

It’s time for us to preach a gospel of Kirznerian value creation right alongside the heuristics of Hayek and the tablets of Mises.

You can read a Portuguese version of this article here.

  • Max Borders is author of The Social Singularity. He is also the founder and Executive Director of Social Evolution—a non-profit organization dedicated to liberating humanity through innovation. Max is also co-founder of the Voice & Exit event and former editor at the Foundation for Economic Education (FEE). Max is a futurist, a theorist, a published author and an entrepreneur.