Morphology

A favorite theme of mine is the idea that every organizational regime contains elements of its own destruction, and that no regime is free of this. Put in a loosely mathematical description, let's say that a schema is represented by A. Imperfections in A are addressed by the addition of institutions or changes in the by-laws, and this new schema is A'. These changes don't quite create perfection, or they introduce new, unintended results, so new changes are made, resulting in A''. This goes on until we have A''', A'''', A^n' or A'''...''', which is functionally equivalent to a completely different schema, B. But B is known also to be not perfect, so adjustments are made resulting in B'. You see where this is going: eventually B morphs into C, or perhaps it morphs all the way back to A.

Given organizational schema A, which is made more efficient by adjusting it to A':

efficiency(A) < efficiency(A') < efficiency(A'')
A'''->B [note that this -> is an arrow, not a "greater than"]
B'''->C
...
Z'''->A?

I believe that this is the fundamental fallacy with the technocratic state and is the analytical blind spot for policy wonks. They seem to believe that any imperfection may be corrected with precise policy adjustments. But at every step, they "discover" new problems. In the environmental movement, technocratic arrogance of this sort is known as "parachuting cats" after a real world incident.

As part of anti-malarial campaign in the northern states of the island of Borneo in the late 1950's, the World Health Organization sprayed DDT and other insecticides to kill the mosquito vector for malaria. During this campaign, DDT was sprayed in large amounts on the inside walls and ceilings of the large "long houses" that housed an entire village in these areas. As a consequence of this effort, the incidence of malaria in the region fell dramatically. However, there were two unintended consequences of this action. There was an increase in the rate of decay of the thatched roofs covering the long houses because a moth caterpillar that ingests the thatch avoided the DDT but their parasite, the larvae of a small wasp, did not. Also, the domestic cats roaming through the houses were poisoned by the DDT as a consequence of rubbing against the walls and then licking the insecticide off their fur. In some villages, the loss of cats allowed rats to enter, which raised concerns of rodent-related diseases such as typhus and the plague. To rectify this problem in one remote village, several dozen cats were collected in coastal towns and parachuted by the Royal Air Force in a special container to replace those killed by the insecticides.

Another favorite example of mine concerns a confluence of well-meaning government schemes: First, it was observed that Florida was filled with disease-carrying swamps, so they (the Army Corps of Engineers) drained the swamps and damned the rivers to create productive farmland. Then people began raising sugar cane, and as they faced stiffer competition from throughout the Carribean, they instituted price controls. But then the cane industry came to be dominated by about 5 families who controlled legislators very tightly. Meanwhile, ADM and the corn farmers achieved control over their legislative concerns and, with the development of High Fructose Corn Syrup (HFCS), they found themselves in competition with the sugar farmers. Fortunately, they found that by also supporting the sugar price controls, HFCS was both more competitively priced and more profitable. So the price controls were universally favored, leading to the continued overuse of swampland to the detriment of the ecosystem (and to Carribean farmers). As this was gradually accepted to be counterproductive, the Clinton Administration proposed changes to restore ecological balance. The solution announced by Al Gore? Clearly, to tax sugar and use the revenues to restore the Everglades. Duh, that's what you thought, too, right? No?! You thought ... what? Maybe abandon the sugar price supports, let the farms go fallow, tear down the damns (saving the annual maintenance costs), and let it all go back to nature? Or perhaps it would have been better to let farmers drain their own land in the first place? Heh, you'll never make it as a bureaucrat.

Each displacement to an equilibrium will cause at least one change in the equilibrium. At least one adjustment needs to be made to restore the equilibrium to efficiency. This is Second Best theory at its simplest. However, few analysts go beyond that and recognize that each of the secondary disturbances, the "corrections", will also create disequilibria that must be adjusted with 3rd and 4th order corrections. In their analysis, somehow, the original disturbance -- the market failure -- must be corrected, but the secondary disturbance -- regulation -- is perfect? Maybe in a one or two dimensional model, but the real world is not one or two dimensional.

So I submit that not only do "ideal" regulations create the need for higher order corrections, but real world regulations create the need for an ever expanding regulatory bureaucracy. It is self-propagating myth and self-justification for bureaucrats. It was this that I reacted to when Megan non-McArdle made the claim that bureaucrats always act to balance competing interests: that may be true in a superficial sense, it may be their rationalization and their intent, but in reality, bureaucrats act to justify their own continuing existence and employment without consciously realizing or intending that. And when one band-aid requires two more, and those each require two more, well, pretty soon bureaucracy is not just surviving, it's thriving and we're parachuting cats. The problem changes from one of individual menaces acting in a freewheeling marketplace where the potential damage is limited to one in which large menaces act in a closely regulated, highly leveraged state-capitalist machine, where the potential damage is vastly larger.

I offer this as background for what will come.