> [...] history shows that once we assign power to governments, they're loathe to subsequently give that power back to the people. Policy is a ratchet and things tend to accrete over time. That means whatever power we assign governments today represents the floor of their power in the future - so we should be extremely cautious in assigning them power because I guarantee we will not be able to take it back.
I'm curious what history Jack Clark is referring to here.
If I think of the last thirty years of policy in most of Europe and the US I'm thinking of a strong trend of deregulation and giving more powers to markets, removing international trade barriers and so on.
That seems to be a dynamic opposite to the one the quoted article is suggesting.
> If I think of the last thirty years of policy in most of Europe and the US I'm thinking of a strong trend of deregulation and giving more powers to markets
That's been the PR spin, but it's not actually true. It's a smoke screen to help governments avoid actual accountability.
For example, the crash of 2008 was blamed on too much market and not enough regulation, but in fact it was the opposite: regulatory thumbs on the scale, for example the US government wanting to encourage home ownership and skewing the mortage market and the money supply and requiring lenders to accept more default risk, and governments implicitly giving a "too big to fail" guarantee to large financial institutions and then being extremely arbitrary in when that implicit guarantee was broken. A true free market would never have produced such a thing.
> removing international trade barriers and so on.
Globalization of trade has been going on for much longer than the last 30 years. If anything, the last 30 years have seen more of things like trade wars (for example between the US and China) and other disruptions to smooth international trade.
> for example the US government wanting to encourage home ownership and skewing the mortage [sic] market and the money supply and requiring lenders to accept more default risk
Are there economists who share your view on this? I don’t see how the issue of repackaging CDS and related products by a financial rating agency has anything to go with the government.
If you’re saying that the government forced buyers to abandon due diligence… I think we will have to disagree about the facts of the GFC
> I don’t see how the issue of repackaging CDS and related products by a financial rating agency has anything to go with the government.
The financial rating agencies are creatures of government regulation.
> If you’re saying that the government forced buyers to abandon due diligence
I said no such thing. I said that government regulations forced lenders to accept more default risk--meaning they were forced to lend to people they would not otherwise have lent to because the risk of default was too high. That's what "subprime mortgages" means, and those were a huge contributor to the crash.
> said that government regulations forced lenders to accept more default risk--meaning they were forced to lend to people they would not otherwise have lent to because the risk of default was too high. That's what "subprime mortgages" means, and those were a huge contributor to the crash.
The ratings agencies are free to rate things as they wish - unless maybe you’re saying there’s a government directive to misrate things?
Also, please clarify how the government is compelling lenders to make loans that don’t pass the lender’s underwriting criteria… this is news to me
It's a half truth; the truth is somewhere in the middle of this and another theory. I'm not an economist, but the start of my professional life was marred by the experience of 2008 so I spent a lot of my time reading about it.
In reality, there were a lot more sub-prime loans but only one of those lenders was actually expected to take on sub-prime loans. That's to say, taking on more sub-prime loans was a choice reflected in an ecosystem of incentives where profits were falling because a few lenders started a campaign to lower borrowing standards and the rest of the herd followed to stay afloat. What also happened was that lenders were essentially over weighting sub-prime loans into these packages and then using their relationships with the privately controlled ratings agencies to rate them the way that would be if they were filled with primes. If you read between the lines lenders found the solution to their profit problem and were trying to justify its stability post-hoc through package ratings. The reality is that sub-primes are highly profitable when they work out because they have high interest rates. When they don't they're not that expensive because generally the property is offloaded but this only works up to a magical threshold depending on a lot of risk variables. Once you go beyond that threshold and the dominos begin to fall, they all fall spectacularly. Risk traditionally should be leveled by packaging them with less risky loans.
> please clarify how the government is compelling lenders to make loans that don’t pass the lender’s underwriting criteria
It didn't. Instead it required the lenders, by law, to change their underwriting criteria so that loans which the lenders would previously have chosen not to make, because they were not within their underwriting criteria, were now within their underwriting criteria. It also passed laws forbidding lenders from refusing loans to people who met their underwriting criteria. This was all done on the theory that encouraging home ownership was a good thing and that lenders had been arbitrarily refusing loans to people and needed to be stopped from doing that.
The book Fault Lines: How Hidden Fractures Still Threaten the World Economy makes a claim to that effect, that US government created some unfortunate incentivizes towards risky credit. It was of course not the only problem that led to the 2008 GFC, but it certainly was a part. I recommend the book, it was detailed and has a global focus, as the author was the Chief Economist at the IMF for some years.
Right, and many of those deregulation moves turned out poorly in hindsight. Governments have ratcheted up control in some cases, but stating that it is a universal law is patently false, although it sounds good as a quip.
Regulations are kind of like security practices. When done well they are often taken for granted, but poor ones get a lot of negative attention. I'm glad that I don't have to wonder if the cereal I buy at a store is filled with rat poison. I'm fine if the government never relinquishes the power to oversee that.
Unfortunately the current leaders in the latest AI craze have not inspired much confidence that they will act responsibly in the future. Maybe if different people were running these companies it would make sense for the government to keep out of it, but in this world we're going to need some reasonable regulation.
Deregulation is not returning power to the people, it's bestowing carte blanche privatization of profits to corpos, in the wake of near complete regulatory capture, while they dump the negative externalities on the public.
At least for Europe this is wrong. I mean yes, there are new trade treaties but internally EU regulations and at least for Germany its regulations increase by the day. Just this year the personal tax declaration form got 10 or so additional pages. And the new supply chain law needs medium to large companies to prove that all their purchases are morally correct (sorry not sure how to phrase this properly). And I don't even follow new laws closely.
I don’t disagree with this assessment but it’s also a narrow view[0] that allows the problem to persist in the first place.
Rather, I’d like to see what positive oversight would look like, but that has not been put forth by any of these organizations thus far. It all comes down to “trust us” which is also hard to stomach
[0]: most often but not exclusively held by Americans (of which i am one). We collectively fail to imagine government being a positive force and what that would look like.
This is a relatively new and carefully cultivated state of things.
I mean, the early phases of this era are a half-century old at this point, but it’s not like it’s a law of nature that at least half the population of the US and about half the politicians must regard government as rarely-useful. It didn’t used to be that way. It’s not an American trait in some holistic historical sense.
perhaps our government has become less competent? Having worked in the federal government briefly (and growing up in a place with lots of feds), it makes perfect sense that our government is generally incompetent/low-capacity.
In the wake of the civil rights movement, lots of government civil service exams became presumptively illegal. The pay bands are also pretty trash.
If we wanted a competent government, we should have far fewer people paid a lot more and hired in a more aggressively merit-based process. Our current government is from an era without computerization where you needed lots of grunts to process things like SS claims, etc. That is simply not this era.
> If we wanted a competent government, we should have far fewer people paid a lot more and hired in a more aggressively merit-based process. Our current government is from an era without computerization where you needed lots of grunts to process things like SS claims, etc. That is simply not this era.
This.
IMHO, the military's regular reassignment also solves a lot of bureaucracy-at-scale problems (even if it creates different ones around competency and long-duration projects).
Preventing people from becoming entrenched in a single role/office is important to ensuring a healthy overall system and providing space for new ideas.
What makes you believe the military is immune to "bureaucracy-at-scale" problems? From my vantage point, it may have both large bureaucratic issues and massive churn. (And it's not immediately clear to me that the former isn't partially a result of the latter.)
The rotating post thing is mostly to avoid empire-building and disrupt personal loyalty to leadership, because standing armies are incredibly dangerous things to keep around and that reduces the risk.
It has side-benefits particular to the military mostly related to how adaptable the organization is when lots of its members are being killed and disabled at a high rate.
I don’t think you’d find a lot of takers for a rotating-post offer in the broader public sector, without far higher wages. I think most of the folks willing to do that for low wages are already in the military or the foreign service.
I don't disagree that it solves the "in this job until I die". But as you allude to, it creates its own issues and it's not clear to me if, on balance, its better. Churn can also create an ineffective (or superficially effective) organization because the hardest problems can't really be solved in a short tenure. (If it could the Executive Branch would be considered highly effective because it has churn every 4-8 years).
On the whole, I think it's still a net positive. The drag of unmotivated, apathetic, and/or inflexible employees is incredibly high, and then there's the additional efficiency drag of the systems that must put in place to ensure they meet minimum performance (i.e. filling out make-work forms to track performance).
Better to simply create a system by which they're weeded out.
Which I guess dovetails with the military "up or out" process.
From a giant organization perspective, there's a lot to admire in militaries. They're the worst systems, except for all the other ways organizations as large as them could be organized...
>Better to simply create a system by which they're weeded out.
I agree with this. It's really just another way to say there should be mechanisms to hold people accountable.
>Which I guess dovetails with the military "up or out" process.
I don't think the military does a great job of this. From what I could see, it only forces out the absolute absymal performers (e.g., those who can't pass a PFT or have multiple DUIs etc.) I would argue it takes far too long (often only implemented once they've been in a decade or more and haven't made SNCO). This does a disservice to both the organization (the person is still around for a decade) and also the service member (they have now dedicated over a decade to a career that is a dead end, and usually over halfway to retirement).
>but there's also much stronger gating of promotions by competency tests there, right?
I think it heavily depends on the branch and what is considered “competence”. I remember meeting Airmen who could cite all the stats about weapons systems because that was on their test, but the couldn’t shoot. And Marines where it was the opposite. It’s also generally possible to get promoted by just hanging out, keeping out of trouble, and having reasonable fitness tests
The military has lots of waste and graft, but it is also not terrible at hiring very competent/smart people through their commission system (unlike a lot of the rest of government). I am skeptical that churn is a cause of problems, almost everywhere I have worked in government has by far the opposite problem.
The smartest people I've met either have plum book positions, military officers, or work as prosecutors.
(by plum brook, do you mean NASA? If so, I've met some smart people from there and other NASA posts, but also met some of the worst employees that epitomize some of what the discussion is against - very toxic, against any new ideas, refusing to retire, shirking duties etc. at one point one org had an average age of 59+, that's very indicative of a refusal to move on).
>it is also not terrible at hiring very competent/smart people through their commission system
I suspect you would get a very different perspective if you talked to enlisted servicemembers (or subordinate officers). I would argue the commissioning system is better than the previous aristocratic commissioning system, but still relatively poor at mating skills to positions.
I think churn is a couple of problems for a couple of different potential reasons:
1) constantly moving positions tends to leave the more complicated problems unsolved. For one, it's difficult to truly understand the dynamics of a complicated system in a short period. Secondly, if someone is concerned with promotion, attacking small problems tends to get you a win during your tenure, while it's unlikely you'll make much headway on a really difficult or complicated problem. Even worse is the commander who has all kinds of great ideas they want implemented even before they really understand the problem (ie the 'good idea fairy' dilemma)
2) military churn can bias toward giving people responsibility beyond their capability, simply because they need someone to fill that role. This is especially with younger organizations (and the military definitely biases young). Meaning you tend to people with a lot of power/responsibility before their frontal lobe is even fully developed.
Now I do think the military does a pretty good job at accountability, which can mitigate some of those factors. But if that's the case, we should be trying to optimize for "accountability" and not "churn".
The better military organizations seem to have "churn" in the uniformed services in charge but a steady cadre of professional civilian staff supporting them.
the plum book is a list of politically appointed positions in the federal government, including positions at NASA and elsewhere. i wasn’t referring to the plum brook facility
I dunno. When I read the founding fathers, they seem pretty skeptical of power structures, both public and private. The way they configured the government, it’s clear that they had little trust that we’d have competent or honest politicians at the helm. Hence all the checks and balances and limitations to federal powers.
Well said, also applies to many human dynamics - friendships, relationships, work relationships, etc. Ceding power is a ratchet and you either put your foot down to start with or it grinds away.
Healthy relationships include negotiating when potential boundaries are in question, or if things change that require re-aligning boundaries.
It's reasonable to give more to the other party from time-to-time, and reasonable to discuss with the other party if it becomes a point where it feels unfair.
Instead we (Americans) take an unnecessarily adversarial stance against what our government could do, ensuring it is perpetually unprepared.
In reality, the vast majority of relationships aren’t actually healthy in this way. Most people get that only from their parent and family, if that. So parent’s advice is important.
I love to give more. That’s what life’s about. But it should be done freely and without expectation. What I’m talking about is taking - do this or I’ll be annoyed. It’s overt vs covert contracts. I ask you to do X because it would be helpful/make me happy. Versus I ask you to do X because it’s helpful and also I want to feel in control of you, and maybe you’ll be more willing to do Y later.
I don’t agree with the last comment, maybe I am a cynic.
It is true that sometimes you learn something at time T2 that invalidates something you learned at time T1 (T2 > T1), and thus you do need a de-ratcheting system of some sort.
But what actually drives the ratchet is experience with current policy (or lack thereof). "Oh, we had no plans to deal with X, and we got screwed, so lets add policy for X".
The ratcheting aspect of policy reflects the ratcheting aspect of societal experience accumulation.
Largely because they feared that large language models would be useful for large scale disinformation, election interference, impersonation, automated phishing, etc.
> [...] history shows that once we assign power to governments, they're loathe to subsequently give that power back to the people. Policy is a ratchet and things tend to accrete over time. That means whatever power we assign governments today represents the floor of their power in the future - so we should be extremely cautious in assigning them power because I guarantee we will not be able to take it back.