Trust, not Control
Keith Rankin, 23 February 1999
The following quotations illustrate the "prisoners dilemma" which predicts that rational persons will defect from a cooperative regime they wish others to follow.
"[Robert] Axelrod and [William] Hamilton view the constraints of nature on social beings as a prisoners dilemma. Mutual cooperation provides mutual advantage, mutual non-cooperation (defection by all) results in mutual disadvantage. So far so good - no dilemma yet. The rub comes when one individual can gain added advantage by inducing another to cooperate without having to cooperate in return." (Marvin Henberg, Retribution)
"Collective action generally has the structure of an n-person prisoner's dilemma. The returns from individual defection are higher than the returns from mutual cooperation.... Each defects, and everyone is worse off.... The payment of taxes often has the structure of a prisoner's dilemma, in which the payoff from defection is higher than the payoff from payment. (Margaret Levi, Of Rule and Revenue)
"Where Prisoners Dilemmas and vicious cycles exist, change requires intervention on a social level - from government, unions, professional associations, and other collective organisations." (Juliet Schor, The Overworked American)
Examples of defecting "prisoners" include (i) companies that seek some degree of monopoly power while expecting their suppliers and competitors to be fully subject to market forces; (ii) countries which argue free trade for everyone else but do not practice it themselves; and (iii) people who avoid paying their taxes.
Prisoners dilemmas are resolved, and have been resolved historically, through collective action. The reforms in New Zealand after 1984 have been about removing those institutions and practices that evolved through our history as collective means of dealing with "prisoners dilemma" problems. These quasi-voluntary processes have been replaced by alternative coercive methods of dealing with the problem of ensuring cooperation. Control has replaced trust.
The culture of our public institutions is now based on distrust; agency theory as understood by Treasury et.al. suggests that everyone will always defect on the general good unless they are monitored, coerced, dobbed-in or humiliated. We now only expect people to cooperate if they know they will be caught and punished for non-compliance. We no longer trust people to know what is right and wrong, and to do the right thing.
The new culture is very inefficient and was quite unnecessary. The systems of collective action that prevailed in before 1984 were not perfect, but nor were they broke. The new systems have been built on the premise that we are rational but not moral beings; ie rational in the very narrow calculating sense that only economists understand. And it is built on the premise that if anybody is allowed to defect, then the whole system of enforced cooperation falls apart. (Organisations from the IRD to the IMF follow that harsh premise in the way they operate.)
If we revert to the alternative premise that most people can be trusted to cooperate with the general good most of the time - ie voluntary compliance - then we will always get a few people who breech that trust. Nevertheless, people are more likely to comply voluntarily if they are trusted than if they are treated as if they cannot be trusted. More importantly, in a society with many "prisoners", the general good still prevails even if a few people defect. (2-prisoner examples of the Prisoners Dilemma cannot be directly translated into the many-prisoner situation; in the many-prisoner case cooperating prisoners may get a better payoff by continuing to cooperate, even if they are sure that some of their peers will cheat.)
The question in practice is not whether any "prisoners" defect, but how to ensure that most don't defect. So long as we can tolerate a small amount of non-cooperative behaviour, trust beats control every time. The system will not fall apart if powerful public institutions become more humane, more trusting and show more discretion in dealing with those who have difficulty in meeting the likes of user charges, penal taxes and benefit overpayments.
Cooperation thrives in a climate of trust; of social capital whereby defectors are dealt with through local communities, and not through the bureaucratic excesses of state power.
The media has a role too. By portraying our public representatives (and, by proxy, ourselves) as essentially untrustworthy, and only capable of doing their job honestly when under media scrutiny, we imbibe a culture of cynicism. We have now been so exposed to so much media cynicism that many of us have come to see our democratic parliament - our politicians - as the problem, and that the solution to the problem is to decimate parliament, to have less democracy and therefore more power vested in bureaucracy.
The cooperative behaviour necessary to support an economically advanced society must be based on mutual trust. Control is far too expensive. Trust is the invisible lubricant that enables a market economy to work towards collective ends in the face of its inherent individual incentives to cheat. The alternative to trust, excessive state power, is more than expensive. It undermines economic freedom, leading instead to totalitarian forms of government. Even today in New Zealand, the level of totalitarianism is sufficiently high to deter ordinary New Zealanders from starting businesses with the expectation that they will be financially viable. The consequences of business failure are now so great - and effective marginal tax rates are so high for low and middle income recipients - that most persons cannot consider self-employment as a serious option.
The dwindling social wage, which once complemented our private incomes, has been eroded by the costs of maintaining and extending the post-reform institutions of government control. At the same time, tax policies have shifted the burden of supporting these institutions of control onto small-medium businesses and their employees.
Cynicism begets control. When the media gets righteous, the control freaks get going. Let's give our politicians a break, and our new culture of accountability the heave-ho. Let's assume responsibility ourselves, and allow others to rediscover their consciences.
© 1999 Keith Rankin
Rankin File | 1999 titles