If the companies had foreseen the effects of their business practices, they would have wanted a law against them, and adhered to the law so that they could avoid the crash.
No. False. Let’s model it in game theory terms. There are a number of players (companies) and each one chooses to act responsibly or not. If all or most players act responsibly, they all reap the benefits of no crash. If some act irresponsibly, they reap a greater benefit. But if a high enough proportion of companies act irresponsibly, there is a crash and everybody loses. (This kind of problem is a very common type of game theory problem, which has been analysed a lot. (It’s actually a close relative of the Prisoner’s Dilemma.)) The Nash equilibrium of this game is everyone defecting and acting irresponsibly, which leads to a bad result that no one wants, and everyone is unhappy.
So how do we solve it, we can make laws which give a negative incentive to acting irresponsibly, and thus move the equilibrium of the game. (And of course the players do want that, as it simply gives them a better outcome from the game.) And that’s fine, it sometimes works, but some other times the law’s negative incentives don’t work out, and the equilibrium is everyone acting irresponsibly again. This is because the law cannot perfectly control what people do, as one can always break the law, and often get away with it.
An Unbreakable Vow is unbreakable though, and so rather then have government regulations, which are clumsy and sometimes don’t work, if the companies have that much contractual power, that is they can make contracts that are actually and completely unbreakable… One of the simplest solutions in game theory to problems of this type is that you just allow the agents to precommit to their strategies.
I thought you had in mind a system where a body passes laws, and the whole population takes vows to obey all those laws. This would solve issues of noncompliance, but not issues of stupid laws. I suspect that the system you’re recommending would be less well coordinated than what we already have, because the abundance of historical evidence suggests that people tend to be very bad at choosing when and how to self regulate, and it’s not as if we don’t have mechanisms in real life that people could use to prevent most defection.
As you can see now, this is not the system I had in mind at all. Remember, what is the point of governments? To enforce the kind of thing that the Unbreakable Vows enforce much better. That is why in this scenario I very much doubt there would be any sort of government as we know it at all.
Remember, actually people are quite good at self regulating. In a roundabout way, of course, by establishing governments and empowering them to regulate. That whole roundabout method of having social contracts enforced by a government seems rather roundabout and convoluted if it could be bypassed and the contracts enforced directly by magic.
So how do we solve it, we can make laws which give a negative incentive to acting irresponsibly, and thus move the equilibrium of the game. (And of course the players do want that, as it simply gives them a better outcome from the game.) And that’s fine, it sometimes works, but some other times the law’s negative incentives don’t work out, and the equilibrium is everyone acting irresponsibly again. This is because the law cannot perfectly control what people do, as one can always break the law, and often get away with it.
But if breaking the law and getting away with it is unlikely, then the rational actors won’t try. What the companies would have wanted, had they been rational good predictors, was a well enforced law which heavily punished defection. This way they would all have had higher expected utility than the scenario in which there was no law.
But they did not push for this. In fact, all the lobbying action was in the other direction. The business practices that resulted in the crash were previously illegal. If you want to make a convincing case that they would have done better in a system with an unbreakable enforcement mechanism, you’ve got to demonstrate that in spite of appearances, an adequate enforcement mechanism, rather than adequate predictive power and rationality, was what was missing.
As you can see now, this is not the system I had in mind at all. Remember, what is the point of governments? To enforce the kind of thing that the Unbreakable Vows enforce much better. That is why in this scenario I very much doubt there would be any sort of government as we know it at all.
Remember, actually people are quite good at self regulating. In a roundabout way, of course, by establishing governments and empowering them to regulate. That whole roundabout method of having social contracts enforced by a government seems rather roundabout and convoluted if it could be bypassed and the contracts enforced directly by magic.
Government doesn’t just provide people with an enforcement mechanism for coordination problems, it also provides a workaround for lack of information, and ideally for irrationality, in coordination problems.
Suppose that chemical A which is used in a manufacturing process is highly toxic, and that chemical gets into the environment in the course of the process, and causes a lot of harm to people and wildlife. 0.2% of the population (those who understand the chemistry and have read the relevant studies) know this, and of those, all who are not employed by the manufacturing company agree that the chemical should not be used in that manufacturing process. The other 99.8% has no opinion. If the population has perfect enforcement for agreements, but no oversight body, and all agreements are worked out on an individual basis, then the manufacturing company will continue using the chemical, affecting everyone, not just the people who know enough to care. If there is an oversight body charged with creating rules for the population whose job it is to pass rules that are in the public’s interests, whether or not the public knows enough to care about them, the people who know about the effects of the chemical can go to the oversight body and say “as you can see, the evidence favors this chemical being harmful, and we all agree you should make a rule against using it,” and the oversight body can look at the evidence and pass the rule. By having a body whose full time job it is to look at issues that potentially warrant the creation of rules, judge evidence, and determine which rules would be good to pass, the population as a whole can review more issues which potentially impact the whole society, at less opportunity cost to the whole population. If everyone took the time to research every issue that might be worth making a rule about, they wouldn’t have time to do anything else.
The “irrational choices” and “lack of information” sections of Yvain’s Non-Libertarian FAQ are good reading on this topic.
But if breaking the law and getting away with it is unlikely, then the rational actors won’t try. What the companies would have wanted, had they been rational good predictors, was a well enforced law which heavily punished defection. This way they would all have had higher expected utility than the scenario in which there was no law.
Of course a well enforced law that heavily punished defection would be just as good as an Unbreakable Vow, but in a certain sense that’s my point. The best case scenario in the case of a law (that is, of the law being well enforced and with harsh penalties) is the default scenario if you are using Unbreakable Vows.
Government doesn’t just provide people with an enforcement mechanism for coordination problems, it also provides a workaround for lack of information, and ideally for irrationality, in coordination problems.
...
The “irrational choices” and “lack of information” sections of Yvain’s Non-Libertarian FAQ are good reading on this topic.
This is what I was saying earlier, the main difference between our points of views is one of the most basic political questions, of what viewpoint on the libertarian-statist axis you accept. In other words, how much of government should be workarounds for that sort of thing.
You know what, I honestly don’t know the real answer to that question. It is one of the biggest questions of that type, and so it is fitting not to know the exact answer to it. That said, I do slightly tend toward taking a more libertarian point of view. I do understand that what you said is in fact one of the main points against libertarianism and toward more government intervention. All in all, the answer is far from obvious, and here is not the best place to get into a big discussion about it.
So, all in all, I think that this discussion is a result of a much lower level and more subtle disagreement. Maybe I am being too idealistic and putting too much faith in human beings, and maybe you are being too cynical and putting too much faith in governments. In practice, the only way to see if this system works is to try it out, which is (sadly?) impossible seeing as the unbreakable Vow does not exist in the real world.
No. False. Let’s model it in game theory terms. There are a number of players (companies) and each one chooses to act responsibly or not. If all or most players act responsibly, they all reap the benefits of no crash. If some act irresponsibly, they reap a greater benefit. But if a high enough proportion of companies act irresponsibly, there is a crash and everybody loses. (This kind of problem is a very common type of game theory problem, which has been analysed a lot. (It’s actually a close relative of the Prisoner’s Dilemma.)) The Nash equilibrium of this game is everyone defecting and acting irresponsibly, which leads to a bad result that no one wants, and everyone is unhappy.
So how do we solve it, we can make laws which give a negative incentive to acting irresponsibly, and thus move the equilibrium of the game. (And of course the players do want that, as it simply gives them a better outcome from the game.) And that’s fine, it sometimes works, but some other times the law’s negative incentives don’t work out, and the equilibrium is everyone acting irresponsibly again. This is because the law cannot perfectly control what people do, as one can always break the law, and often get away with it.
An Unbreakable Vow is unbreakable though, and so rather then have government regulations, which are clumsy and sometimes don’t work, if the companies have that much contractual power, that is they can make contracts that are actually and completely unbreakable… One of the simplest solutions in game theory to problems of this type is that you just allow the agents to precommit to their strategies.
As you can see now, this is not the system I had in mind at all. Remember, what is the point of governments? To enforce the kind of thing that the Unbreakable Vows enforce much better. That is why in this scenario I very much doubt there would be any sort of government as we know it at all.
Remember, actually people are quite good at self regulating. In a roundabout way, of course, by establishing governments and empowering them to regulate. That whole roundabout method of having social contracts enforced by a government seems rather roundabout and convoluted if it could be bypassed and the contracts enforced directly by magic.
But if breaking the law and getting away with it is unlikely, then the rational actors won’t try. What the companies would have wanted, had they been rational good predictors, was a well enforced law which heavily punished defection. This way they would all have had higher expected utility than the scenario in which there was no law.
But they did not push for this. In fact, all the lobbying action was in the other direction. The business practices that resulted in the crash were previously illegal. If you want to make a convincing case that they would have done better in a system with an unbreakable enforcement mechanism, you’ve got to demonstrate that in spite of appearances, an adequate enforcement mechanism, rather than adequate predictive power and rationality, was what was missing.
Government doesn’t just provide people with an enforcement mechanism for coordination problems, it also provides a workaround for lack of information, and ideally for irrationality, in coordination problems.
Suppose that chemical A which is used in a manufacturing process is highly toxic, and that chemical gets into the environment in the course of the process, and causes a lot of harm to people and wildlife. 0.2% of the population (those who understand the chemistry and have read the relevant studies) know this, and of those, all who are not employed by the manufacturing company agree that the chemical should not be used in that manufacturing process. The other 99.8% has no opinion. If the population has perfect enforcement for agreements, but no oversight body, and all agreements are worked out on an individual basis, then the manufacturing company will continue using the chemical, affecting everyone, not just the people who know enough to care. If there is an oversight body charged with creating rules for the population whose job it is to pass rules that are in the public’s interests, whether or not the public knows enough to care about them, the people who know about the effects of the chemical can go to the oversight body and say “as you can see, the evidence favors this chemical being harmful, and we all agree you should make a rule against using it,” and the oversight body can look at the evidence and pass the rule. By having a body whose full time job it is to look at issues that potentially warrant the creation of rules, judge evidence, and determine which rules would be good to pass, the population as a whole can review more issues which potentially impact the whole society, at less opportunity cost to the whole population. If everyone took the time to research every issue that might be worth making a rule about, they wouldn’t have time to do anything else.
The “irrational choices” and “lack of information” sections of Yvain’s Non-Libertarian FAQ are good reading on this topic.
Of course a well enforced law that heavily punished defection would be just as good as an Unbreakable Vow, but in a certain sense that’s my point. The best case scenario in the case of a law (that is, of the law being well enforced and with harsh penalties) is the default scenario if you are using Unbreakable Vows.
This is what I was saying earlier, the main difference between our points of views is one of the most basic political questions, of what viewpoint on the libertarian-statist axis you accept. In other words, how much of government should be workarounds for that sort of thing.
You know what, I honestly don’t know the real answer to that question. It is one of the biggest questions of that type, and so it is fitting not to know the exact answer to it. That said, I do slightly tend toward taking a more libertarian point of view. I do understand that what you said is in fact one of the main points against libertarianism and toward more government intervention. All in all, the answer is far from obvious, and here is not the best place to get into a big discussion about it.
So, all in all, I think that this discussion is a result of a much lower level and more subtle disagreement. Maybe I am being too idealistic and putting too much faith in human beings, and maybe you are being too cynical and putting too much faith in governments. In practice, the only way to see if this system works is to try it out, which is (sadly?) impossible seeing as the unbreakable Vow does not exist in the real world.