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Ronald Coase won the nobel prize in economics for his "transaction costs" solution to the "why do firms even exist" question. A lot of economics is about asking

by netcan 5y ago

Ronald Coase won the nobel prize in economics for his "transaction costs" solution to the "why do firms even exist" question. A lot of economics is about asking a question the right way. He started with "if markets are so great and stuff, why do companies run like soviets & chiefdoms in practice? Why doesn't the product team just contract a UI designer, a testing team and such. Hi solution was "transaction costs." IE, it's too hard to find a designer every time you need a button. Economics and social science generally is prone to a "defend my model" problem. Once you have a model, there's a tendency to see everything in terms of that model. A Coasian sees everything in transaction costs terms. Coasians ran around This author seems to see everything in incentive & game theory terms. Management theory often prefers group psychology explanations like Dunbar's number. IMO, you should probably keep all in mind at once, and remember that none are entirely true. Even if you see the problem as "Prisoners Dilemma," the solution may not be "breaking the prisoner's dilemma." Human cooperation in groups to achieve aims is basically the secret sauce of human civilization, culture & what makes us different from other animals. If it could be predictably engineered, a lot of problems would have been solved already. Most, seemingly common sense solutions fail miserably. Trying to break prisoners' dilemmas by nailing all responsibility to someone (a) may be a lot more disruptive and aggressive than you imagined and (b) will often result in elaborate CYA responsibility avoidance. See enterprise consulting for a snapshot of a mature system described this way. One way or another, this problem has occured to many people over the years. It's not an easy one. Perhaps, it's the hard question of social science.

crdrost 5y ago
> Most seemingly common sense solutions fail miserably. Trying to break prisoners' dilemmas by nailing all responsibility to someone (a) may be a lot more disruptive and aggressive than you imagined and (b) will often result in elaborate CYA responsibility avoidance. Or, that is what the management chain does and this is the only way to scale it. There is also a perspective on this which is along the lines of Turner's social evolution ideas. To recap that, bureaucracy is recast as a gene for a successful organization. For Turner, this is in some sense a very literal survival of the fittest, because he is asking the question, “why do modern militaries and governments regress to The State as their model, rather than the other governmental styles through history?” And his answer is that The State, or bureaucracy, is legit a better gene, it propagates itself and it propagates the organism better. “But, the thing we know about bureaucracies is that they are super inefficient, how can that be the best way to go?!” Well, maybe we need to revisit that. The modern military that is structured like a bureaucracy is vastly vastly larger than the militaries that are not. Is there a forcing function that would drive efficiency way down at these resource scales? And once he's asking that question the answer seems obvious, the same answer as in OP: corruption. In computing terms, a tree with fan-out 5 has 5/4 as many nodes as leaf nodes, with 10 you can drop to 10/9, so you have an 11% - 25% intrinsic overhead. (Substantially more in terms of cost of labor since they also want to be paid more than the front-line employee, which again suggests incentives.) We look at this minimum 20% waste and are shocked by it, but the claim is that the transition to bureaucracy starts to happen precisely when you are moving so many resources that the 2% of bad actors that slip through your vetting can sipon off 5x-10x what they actually need and produce a 10-20% corruption. This combination sets a Dunbar’s number, rather than it being some aspect of human evolutionary psychology. The cost was built into the game rules at these scales, it stops being waste and starts being opportunity cost, in the economic sense... Put another way, maybe it is not the hard question of social science, but a constraint in which social science necessarily operates?
- netcan 5y ago
  I'm not sure that I understand the point correctly, but if I do... One of the point Dawkins' used his original meme concept to demonstrate is that a meme may not be beneficial to the person or culture carrying it. The meme just needs to persist and reproduce. He is the selfish gene guy, after all. Also I agree that cultures evolve, but I think the analogy to natural evolution by natural selection can be overstretched. This dynamic exists and can even be dominant, but there are other evolutionary dynamic going on. For myself, my "Big Theory of Bureaucracy" is simply that it accumulates over time. The larger the scale, the less competition and creative destruction happen so bureaucracy can keep growing undisturbed. You could analogise corporate bureaucracy to just about any traditional culture: the US senate, the catholic church or some small island tribe. The US senate does this ritual around debt ceilings. There are written and unwritten rules that make no sense from the outside. It's all based on a rule from 100 years ago, and stopped serving its initial purpose generations ago. Meanwhile, the whole process has gained incidental important roles in coalition consolidation & legislation bundling. Those now depend on debt ceilings. It can be resolved either by vote or a ceremony whereby a small metal object is place inside a large building. The whole thing requires a lot of paperwork. 50 years from now "debt ceiling" might refer exclusively to a quaint ritual where a president gives some guy with a special hat a special coin. At this point, it's impossible to tell bureaucracy from ritual. It's just stuff that needs doing in very specific ways for reasons that are not externally logical. They have history, dependencies, tradition, etc. Maybe bureaucracy is just an inelegant version of that.
- oceanplexian 5y ago
  I think the evolution of organizations is super interesting stuff. But I would say that a lot of the paradigms that have been true for Millenia have changed rapidly in the last few decades, which is an extremely short period of time in the history of our social evolution. For example: (1) 100 years ago we didn't have reliable instant communication. If you wanted to send a message across oceans it could take days or weeks. As a result having a "chain of command" was critically important to survival. For example a military commander prior to the 20th century could not make decisions regarding an army thousands of miles away, and thus needed to delegate decision making authority. In 2021 a military commander (Or leader) can instantly make a decision from thousands of miles away. Or perhaps a computer could make those decisions instead. (2) Data-driven decision making the name of the game in most large corporations. The dinosaurs are still making decisions based on reports every week/month/quarter. The most cutting edge organizations are operating on a different level. For example, if a particular product or service isn't performing at a certain price, you don't need a bureaucracy to optimize it. Automated software could easily A/B test pricing schemes in different regions, and come up with the most optimized conclusions, all without any humans in the loop. Ride-share software and food delivery apps are already ahead of the curve here, and like it or not, this outsources a lot of people in the business of decision making. Not to go too far down a rabbit hole, but I think that "bureaucracy ... as a gene for a successful organization" may be a gene that soon goes extinct. Computers, data, and software can do bureaucracy much better than humans can. And if the trend continues we may see the entire structure of organizations, leadership, and decision making make a complete shift from what we even expect an organization to be, possibly closer to resembling cybernetic organism rather than a government or traditional corporate leadership structure.
nunb 5y ago
The Coasians sentence seems to have run away after "Coasians ran around" ! Or did you mean "ran aground" ?
- netcan 5y ago
  ..ran around explaining how everything could be understood as transaction costs at work, in much the same way neoclassicals thought their marginal price dynamics explained everything. oops
bjornsing 5y ago
> Human cooperation in groups to achieve aims is basically the secret sauce of human civilization, culture & what makes us different from other animals. I don’t know… Albert Einstein alone makes us pretty different from other animals.
- netcan 5y ago
  Albert Einstein wasn't alone. He was engaged with a scientific community, through papers, publications and such. He used maths developed by others. The scientific method actually calls for multiple people, even if only for objective POVs. Even though he wasn't on a team, that still is a model of communication. We call that model science. The scientific revolution was largely a revolution in the way scientists were organised. They became connected to one another via publication, critical dialogue and such. The scientific method is, among other things a model of cooperation. How to replicate, publish, review and convince one another of things.
  - bjornsing 5y ago
    Sure, I buy that. But if you think chimps would produce the general theory of relativity if we could just teach them to publish their thoughts, then… I don’t buy that.
    - NineStarPoint 5y ago
      It’s less the ability to publish their thoughts, and more the ability to understand the published thoughts of others. I do think that almost any creature with enough presence of mind to do that could get to the theory of general relativity in a couple million years. Being able to pass intricate knowledge to future generations is really what defines humans in comparison to chimps. Although I suppose it’s hard to say exactly what the limited level of intelligence needed to understand a few paragraphs of writing is.

by netcan 5y ago

crdrost 5y ago

> Most seemingly common sense solutions fail miserably. Trying to break prisoners' dilemmas by nailing all responsibility to someone (a) may be a lot more disruptive and aggressive than you imagined and (b) will often result in elaborate CYA responsibility avoidance. Or, that is what the management chain does and this is the only way to scale it. There is also a perspective on this which is along the lines of Turner's social evolution ideas. To recap that, bureaucracy is recast as a gene for a successful organization. For Turner, this is in some sense a very literal survival of the fittest, because he is asking the question, “why do modern militaries and governments regress to The State as their model, rather than the other governmental styles through history?” And his answer is that The State, or bureaucracy, is legit a better gene, it propagates itself and it propagates the organism better. “But, the thing we know about bureaucracies is that they are super inefficient, how can that be the best way to go?!” Well, maybe we need to revisit that. The modern military that is structured like a bureaucracy is vastly vastly larger than the militaries that are not. Is there a forcing function that would drive efficiency way down at these resource scales? And once he's asking that question the answer seems obvious, the same answer as in OP: corruption. In computing terms, a tree with fan-out 5 has 5/4 as many nodes as leaf nodes, with 10 you can drop to 10/9, so you have an 11% - 25% intrinsic overhead. (Substantially more in terms of cost of labor since they also want to be paid more than the front-line employee, which again suggests incentives.) We look at this minimum 20% waste and are shocked by it, but the claim is that the transition to bureaucracy starts to happen precisely when you are moving so many resources that the 2% of bad actors that slip through your vetting can sipon off 5x-10x what they actually need and produce a 10-20% corruption. This combination sets a Dunbar’s number, rather than it being some aspect of human evolutionary psychology. The cost was built into the game rules at these scales, it stops being waste and starts being opportunity cost, in the economic sense... Put another way, maybe it is not the hard question of social science, but a constraint in which social science necessarily operates?

netcan 5y ago
I'm not sure that I understand the point correctly, but if I do... One of the point Dawkins' used his original meme concept to demonstrate is that a meme may not be beneficial to the person or culture carrying it. The meme just needs to persist and reproduce. He is the selfish gene guy, after all. Also I agree that cultures evolve, but I think the analogy to natural evolution by natural selection can be overstretched. This dynamic exists and can even be dominant, but there are other evolutionary dynamic going on. For myself, my "Big Theory of Bureaucracy" is simply that it accumulates over time. The larger the scale, the less competition and creative destruction happen so bureaucracy can keep growing undisturbed. You could analogise corporate bureaucracy to just about any traditional culture: the US senate, the catholic church or some small island tribe. The US senate does this ritual around debt ceilings. There are written and unwritten rules that make no sense from the outside. It's all based on a rule from 100 years ago, and stopped serving its initial purpose generations ago. Meanwhile, the whole process has gained incidental important roles in coalition consolidation & legislation bundling. Those now depend on debt ceilings. It can be resolved either by vote or a ceremony whereby a small metal object is place inside a large building. The whole thing requires a lot of paperwork. 50 years from now "debt ceiling" might refer exclusively to a quaint ritual where a president gives some guy with a special hat a special coin. At this point, it's impossible to tell bureaucracy from ritual. It's just stuff that needs doing in very specific ways for reasons that are not externally logical. They have history, dependencies, tradition, etc. Maybe bureaucracy is just an inelegant version of that.
oceanplexian 5y ago
I think the evolution of organizations is super interesting stuff. But I would say that a lot of the paradigms that have been true for Millenia have changed rapidly in the last few decades, which is an extremely short period of time in the history of our social evolution. For example: (1) 100 years ago we didn't have reliable instant communication. If you wanted to send a message across oceans it could take days or weeks. As a result having a "chain of command" was critically important to survival. For example a military commander prior to the 20th century could not make decisions regarding an army thousands of miles away, and thus needed to delegate decision making authority. In 2021 a military commander (Or leader) can instantly make a decision from thousands of miles away. Or perhaps a computer could make those decisions instead. (2) Data-driven decision making the name of the game in most large corporations. The dinosaurs are still making decisions based on reports every week/month/quarter. The most cutting edge organizations are operating on a different level. For example, if a particular product or service isn't performing at a certain price, you don't need a bureaucracy to optimize it. Automated software could easily A/B test pricing schemes in different regions, and come up with the most optimized conclusions, all without any humans in the loop. Ride-share software and food delivery apps are already ahead of the curve here, and like it or not, this outsources a lot of people in the business of decision making. Not to go too far down a rabbit hole, but I think that "bureaucracy ... as a gene for a successful organization" may be a gene that soon goes extinct. Computers, data, and software can do bureaucracy much better than humans can. And if the trend continues we may see the entire structure of organizations, leadership, and decision making make a complete shift from what we even expect an organization to be, possibly closer to resembling cybernetic organism rather than a government or traditional corporate leadership structure.

nunb 5y ago

The Coasians sentence seems to have run away after "Coasians ran around" ! Or did you mean "ran aground" ?

netcan 5y ago
..ran around explaining how everything could be understood as transaction costs at work, in much the same way neoclassicals thought their marginal price dynamics explained everything. oops

bjornsing 5y ago

> Human cooperation in groups to achieve aims is basically the secret sauce of human civilization, culture & what makes us different from other animals. I don’t know… Albert Einstein alone makes us pretty different from other animals.

netcan 5y ago
Albert Einstein wasn't alone. He was engaged with a scientific community, through papers, publications and such. He used maths developed by others. The scientific method actually calls for multiple people, even if only for objective POVs. Even though he wasn't on a team, that still is a model of communication. We call that model science. The scientific revolution was largely a revolution in the way scientists were organised. They became connected to one another via publication, critical dialogue and such. The scientific method is, among other things a model of cooperation. How to replicate, publish, review and convince one another of things.
- bjornsing 5y ago
  Sure, I buy that. But if you think chimps would produce the general theory of relativity if we could just teach them to publish their thoughts, then… I don’t buy that.
  - NineStarPoint 5y ago
    It’s less the ability to publish their thoughts, and more the ability to understand the published thoughts of others. I do think that almost any creature with enough presence of mind to do that could get to the theory of general relativity in a couple million years. Being able to pass intricate knowledge to future generations is really what defines humans in comparison to chimps. Although I suppose it’s hard to say exactly what the limited level of intelligence needed to understand a few paragraphs of writing is.