Max Borders

Tea Party: Starfish or Spider?

I offer my answer in this piece. Here's a sliver:

The functional reasons are compelling: You don’t want your organization to dissolve because your leadership gets sandbagged, or because your information system is way too top down. But function and form is just one reason the Tea Party should never formalize... 

A formal (hierarchical) organization - like a political party - is not only too centralized, but it becomes less effective as a check on government power. Currently, the Tea Party is coalescing around anti-incumbent, anti-elite and anti-state-power themes. It moves from without and, due to it’s form, is not as corruptible. Don’t believe me?  Try lobbying the Tea Party. 

There are trade offs, of course. What you lose when you’re decentralized is decision-making power, carried out at some instance, based on some plan. You can’t just turn, go straight, or back up on a dime. Tim Kaine or Michael Steele can’t either, but they can turn the ship with commands and controls to a far greater degree. Their organizations are more like spiders.

But the pluralism and broad theme-orientation of the Tea Party makes it effective in ways that really count: like keeping politicians accountable, raising a stink, and getting people to the polls--which is currently the only game in town when it comes to checking Leviathan.

Read the whole thing if you like.

Max Borders: "Radicals for Rules" Talk - Clip and Full Length

The folks at the John Locke Foundation were kind enough to let me talk about one of my pet ideas: panarchy. Find a clip and full talk here.

Borders on Hayekmania

Here I'm commenting on the recent Hayekmania created by the Beck bump.

Olson, Organizations and the Red Queen Effect

I have another guest post over at A Thousand Nations. Here's a sliver:

If people like Shirky are right, it’s getting cheaper both to monitor and to organize against special interest groups—at least select ones. I’m not saying we’re anywhere near being able to fight them at parity. Perhaps we’ll never be. Nor are we likely to see the immediate effects of our new distributed, organization tools. But we may soon be equipped at least to slow the process of “demosclerosis.” We may already be. And as long as our collective productivity gains outpace the growth of the deadweight state, we’ll be okay—at least in some less-than-savory utilitarian sense. We’re also going to be better equipped to drive creative destruction and out-compete the government in some of its historic monopoly areas, such as education. (We might even unleash the forces of social entrepreneurship if you believe folks like Michael Strong.)

My optimism ends there, however. Read the whole post.

Shirky's New Book: Here Comes Everybody

Remember Coase's The Nature of the Firm? In it, Coase asks a really important question: why do people organize into firms? In other words, why isn't there a totally "free" market in labor? Why do organizations take on scales that result in higher costs? Coase's answer is "transaction costs". It costs more to coordinate actions among people who have disparate skill sets, live in different locations, have various levels of abilities, need to contract with each other and hammer out details of these agreements, etc.... then get them all together to accomplish something profitable. Simply said, it becomes worth it for people to give and take orders. So up to a certain point, organizations with major components of hierarchy are simply less costly to organize. But this cost structure is changing rapidly due to Web 2.Whatever.

Check out Here Comes Everybody. Yes, Shirky's is another "look how new media are revolutionizing everything" book. But among other things - I'm only on Chapter Three - Shirky has been able to articulate the revolutionary change in the structure of transaction costs when it comes to organizing. If you can organize without organizations at increasingly lower costs, the world is a very different place. The nature of the firm is going to change--perhaps not utterly, but considerably. I take away from this a kind of techno-optimism not only about seismic shifts in the nature of human organization, but in the nature of government and our ability to rein it in. For example, if new media are changing things for firms and orgs, will it also change the logic of collective action a la public choice theory?

Ironically, I've been asked to write a review of Here Comes Everybody for a print journal.

Limiting Government Through Incentives

Okay. I’m no economist. Nor am I an accountant. But the economist or accountant who comes up with the way to integrate the following concept might do wonders for reining in an ever-expanding Leviathan in Washington (and 50 little Leviathans, nation wide).

Here’s the basic idea: give government employees incentives at every level and in every department to reduce the amount of money they spend by giving them a percentage of the money they save in their paychecks. This, theoretically, would shrink government and allow government employees to get bonuses for being better stewards of our tax dollars—rather than simply looking for ways to keep growing. Sounds simple, right? 

Of course, real life is always more complicated. One problem with this idea is that you can always get your masters to raise the baseline. For example: if you told bureaucrats in The Department of Deadweight Loss that they would get 1 percent of the savings in the annual budget – distributed quarterly – then these folks would have an incentive to lobby the appropriate budget writers and legislators to raise the baseline for the following fiscal year. This would allow everyone to grow government while supposedly “saving money” from year to year – i.e. missing the point (and gaming the system). Therefore, you’d have to peg the baseline to something besides percentage savings in the annual budget. 

But to what? There may be an obvious answer. And this is where a bean counter or economist might be able to help. In any case, the basic idea is to incentivize those internal beneficiaries of government largesse to consume fewer resources. Hopefully, this post will spark something that smarter people can run with. 

(Note: Another problem is that budgets are determined by legislators. Might they also get an incentive to save/shrink?)

The Metaphors Talk

The Locke foundation has my socio-economic metaphors talk up here. If you prefer to read the whole paper, find that here. 

Rules, Free Zones and Institutions

Typepad is about one more weird glitch away from my ditching it altogether. So, let me try to recreate a post I was working on that disappeared on me:

The long and short of it is this: Paul Romer's TED talk is up. 

Finally, there is someone out there giving a popular talk about the importance of rules, i.e. institutions. James Buchanan and Douglass North have both given us wonderful academic treatments of what is probably the most important lesson humanity will ever learn--institutions matter. But it is exciting to see Romer talk about this fundamental truth using this free-zone approach -- particularly with pragmatism in mind. Some thoughts:

• Special economic zones have worked in Hong Kong, Singapore, Dubai and social entrepreneurs are working on them elsewhere. 
• Polyarchy - distributed authority and divergent rulesets - give us more opportunities to learn what works, to get the institutions right via iteration, and for people to vote with their feet.
• What can we Americans re-learn from this kind of thinking as we seek rapidly to centralize?

Pay close attention to the concept of rules about rules (or metarules). One primary metarule would be to craft rules with a view to individual freedom and the rule of law, which is what the US Founders did. Anyway, check out the Romer talk. (If all this reads like so much gibberish, read the best primer on institutions extant, by Frederic Sautet.)

Libertarianism for Recovering Leftists

My friend Michael Strong has a great interview on this NY Times blog. Check it out. (And in case you missed it, here's my review of his book.) My favorite part of the interview:

Just as a painter needs paints, paintbrushes, and a canvas, an entrepreneur needs key institutions, including property rights, rule of law, and the freedom to create. In order to plan a venture, in order to create new value through a new vision, one must be able to determine what resources one will be allowed to use (well-defined property rights), what the rules will be for using those resources (rule of law), and significant freedom with respect to how to organize and manage those resources (economic freedom). Nineteenth-century classical liberals were clear that these tools were the foundations of the entrepreneurial wealth-creation machine that had made the U.S. and Britain the first societies in the world in which the masses experienced a steadily improving standard of living.

A century of Marxist hostility to the foundations of capitalism has obscured the fact that throughout the developing world, property rights are insecure and ill-defined; the processes through which contracts are adjudicated is often obscure and unpredictable; and there are severe constraints on the extent to which entrepreneurs can create and manage their enterprises. The Fraser Institute’s Index of Economic Freedom, shows that by objective measures (which include institutional measures of property rights, rule of law, as well as the freedom to create), the entire developing world has less economic freedom than Scandinavia.

I like his bet proposal to Jeffrey 'drop money from the heavens like manna' Sachs, too:

G.D.P. per capita correlates with levels of economic freedom, and increasing levels of economic freedom increase average rates of long-term economic growth. There is little evidence that government-to-government foreign aid increases average rates of economic growth.

In order to get Sachs to acknowledge this, I propose that we compare G.D.P. growth of three sets of 20 nations, 20 years from now:

Sachs 1: The 20 nations that have received the most government-to-government foreign aid as a percentage of per capita G.D.P.

Sachs 2: The 20 nations that have experienced the greatest percentage growth in government (in honor of Sachs’s claim that large government does not inhibit growth).

Strong: The 20 nations that have experienced the greatest increases in economic freedom as measured by the Fraser Economic Freedom Index.

Foreign aid may do some good (occasionally) or it may do some harm (usually), but no amount of aid will ever create a dynamic economy in the absence of the Entrepreneur’s Toolkit. Due to Sachs’s prominence in the poverty alleviation debate, until he acknowledges the role of economic freedom in alleviating poverty, he should be regarded as the leading cause of poverty in 2025.

Can We Compete With Free?

I attempt an answer over at TCS.