Arnold Kling

My Thoughts on Technology and Government

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Thanks to Bryan for highlighting and hosting Tyler Cowen's paper. My thoughts:

1. For a long time, I've thought that the technologies of the industrial revolution favored centralization, while the technologies of the information revolution shift the balance somewhat more toward decentralization.

2. I think of industrialization as mass production. Lots of labor per factory. Lots of consumers per product. Lots of soldiers per army. Lots of residents per city. Lots of citizens per governmental unit. I think that the information revolution reverses some of these trends, as we shift somewhat away from mass production and more toward innovation and niche market production.

I think that urbanization increases the demand for government. When people are crowded together, many more externalities are created. Water and sewage management become a huge deal. So does planning a road and transportation system.

Technology for long-distance trade also increases the demand for standardization and enforcement of standards. That is likely to raise the demand for government.

2. I have expressed skepticism that small government in early America came from the Constitution. Instead, I have suggested that the ability of citizens to move to the frontier, and the limited needs for government services in a less-urbanized society, made weak government inevitable.

3. I think that the technological theme of the information age is "economies of scale, diseconomies of scope." In the Internet age, you can distribute a product or service over a wide area, so getting really good at design and really efficient at production can lead you to be really big. However, I doubt that one organization can be really good at design and production of many goods and services. In this environment, government's advantage is scale but its disadvantage is scope. Today, governments are trying to do too many things, and as a result they are doing them poorly. At some point, this is going to cause widespread dissatisfaction with government.

4. What first attracted me to the Internet was its governance structure. The IETFs were not permanent bureaucracies. They were temporary, voluntary groups that formed to solve particular standardization problems as they emerged. I wish that real-world government would learn from this model. I say that the Internet uses specialized task forces that solve a problem and then get out of the way. Meanwhile, government creates bodies that never solve problems and never go away.

5. My vision for government aligned with today's technology is described in the widely-unread Unchecked and Unbalanced.


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The author at The Transportationist.org in a related article titled Linklist: April 30, 2012 writes:
    New Scientist: One Per Cent: Expressive car sends its 'emotions' ahead Tyler Cowan notes: Amy Finkelstein wins the John Bates Clark award. Transportationistas may remember her mention here for her work on E-Z Tax Wikipedia: Rocket mail Arnold Kling: My... [Tracked on April 30, 2012 10:35 AM]
COMMENTS (14 to date)
MikeP writes:

Instead, I have suggested that the ability of citizens to move to the frontier, and the limited needs for government services in a less-urbanized society, made weak government inevitable.

This leads to the general point you often make: exit is more important than voice.

It is certainly the case that the ability to exit correlates to smallness of government -- perhaps to the extent that it is the most important factor.

From feudal societies with their easy exit of walking to the next manor to the worldwide open borders between nations of the 19th century, there was little chance for governments to overtax their populations since their populations would simply vanish.

Then in the 20th century exit was limited by restrictions on immigration across the globe. The largest, communist, governments explicitly restricted emigration as well. And even today the US and others are trying to restrict exit of wealth to lower-tax nations.

Then again, peeling back another layer to discover why immigration restrictions were ascendant, we would find the reasons to be mostly tribal, just with a newly developed larger tribe. And why did the US of 1900 feel more like a single tribe than the US of 1800? Technologies of transportation and communication.

david writes:

I think you misunderstand the nature of the IETF (one IETF, not many) - it has always been dependent on established external institutions for funding and power. It is that which incentivizes the "get out of the way" stage - their funders have no interest in establishing a permanent bureaucracy and so the IETF is limited to coordinating toward a mutually desirable outcome for bureaucracies of the funders rather than negotiating a zero-sum outcome.

Where there are conflicting interests, the IETF loses effectiveness. See, for instance, how the IETF first defined HTML and HTML2 but then promptly lost control when it became a point of contention.

Likewise, when issues affect many people but the only people with practical control in the here and now are a handful of existing bureaucracies, the IETF maintains this monopoly on power. One has free entry into the working group mailing lists but not free entry into becoming a peering rather than paying internet provider.

Saturos writes:
feudal societies with their easy exit of walking to the next manor

@MikeP, I was under the impression that trying to defect to another landlord would get you whipped, if you were a bonded serf.

Keith writes:

Regarding your second point: What about other societies with an available frontier and little urbanization? On the basis of your hypothesized cause of early-American small government, shouldn't we predict that such societies would have small governments too?

This prediction is not borne out. Witness:
1. China, throughout the pre-modern period
2. Europe, in the age of colonialism (when the colonies themselves were the frontier)
3. Tsarist Russia

Didn't all of these have frontiers and little urbanization (relative to total population), yet fairly strong central governments?

Keith writes:

Regarding your second point: What about other societies with an available frontier and little urbanization? On the basis of your hypothesized cause of early-American small government, shouldn't we predict that such societies would have small governments too?

This prediction is not borne out. Witness:
1. China, throughout the pre-modern period
2. Europe, in the age of colonialism (when the colonies themselves were the frontier)
3. Tsarist Russia

Didn't all of these have frontiers and little urbanization (relative to total population), yet fairly strong central governments?

Dan Hill writes:

"the widely-unread Unchecked and Unbalanced"

Demand curves slope down. Suggest you revisit the pricing on your book if your goal is to have more people it. I'm sure it's very good and I really want to read it, but at the current pirce there are way too many more attractive substitutes...

Becky Hargrove writes:

Tyler's essay was helpful in the sense that people desire big government solutions where they are possible. Such solutions make sense whenever economies are growing, but they falter again when overall dynamics change. And government is all about preserving the most recent dynamic!

But we have moved past that dynamic just the same. Not only are banks waiting for the right moment to destroy empty homes, (often flooded from untended water pipes) but many people now do not have sufficent income to support the growing infrastructure needs of cities or towns. Their governments can't maintain them because of pre-existing transer promises and service based debt loads. We have the desire to live closer together in the 21st century, as fewer people will rely on cars, but we may have to create more flexible infrastructure terms just to be able to do so.

Glen Smith writes:

Saturos,

Not so much whipped but you were almost never accepted into any other manor and there really was nothing you could do but become a highway man or die. That is one of the main reason there was slavery in the US since us white guys had a solid exit plan if we thought the manor lord in America was bad. That early America and later the US in the 18th and 19th centuries offered exit is why us white guys had a measure of freedom even if we weren't rich.


Just Guessing writes:

Not sure about this...but I suspect the govt may have grown at faster rate after the "tax withholding" from paychecks started (does anyone know when this practice started?)...same concept as recent JBC medal winner's paper on electronic tolling increases toll amount.

If the above is true - libertarians ought to be careful about pushing VAT...

Bill Harshaw writes:

David Hackett Fischer's new book compares the US and New Zealand histories, societies, and governments: many interesting similarities and differences. Both settler societies, but settled at different times, influenced by different inheritances from the UK, etc.

I believe Milton Friedman helped install income tax withholding during WWII.

Mesa writes:

"Governments" are naturally expanding monopoly providers of services, which services are not always optimally provided by a single source. They are prone to capture by their ability to dispense favors (money). These concepts and their conflict with the spirit of the founding of the country are at the heart of the political debate in the United States.

Technology (computers)has enabled leverage of some markets for adept thinkers that accrue to their benefit, but has not produced real welfare gains in general save for reduced transaction costs in some markets.

Interestingly government has proved not to be one of the technology adept rent seekers, probably because monopoly power obviates the necessity for innovation.

Jacob Arluck writes:

"I think that urbanization increases the demand for government. When people are crowded together, many more externalities are created. Water and sewage management become a huge deal. So does planning a road and transportation system."

This is counter-intuitive, because urbanization also multiplies and expands innovation many times over. A big question is to what extent urban innovation outpaces the demand for government. In a place like New York City or even San Francisco, this is particularly true.

TallDave writes:

Good points, thanks for sharing.

I'll have to try to pick up Unchecked and Unbalanced. I found Crisis of Abundance brilliant, easily the best book written on the issues with U.S. healthcare.

David Friedman writes:

On the question of medieval serfdom ...

I don't think it is at all clear that serfs were in practice tied to the land or that a lord would not accept other lords' runaway serfs. A possible reading of the history is that the customary dues were bounded above by the market rent on the land, precisely because if they went higher than that serfs would leave--with geographically small "governments" (individual lord, not king), a cartel to hold up rents wasn't workable.

Then the black death came. Population dropped, market rent dropped, market wages rose--fewer people, same amount of land. Feudal dues were in part in labor, so the net effect was to push the customary dues above the market rent.

At which point you get a problem of runaway serfs and repeated attempts to use royal power to prevent them from running away.

I believe I discussed the point long ago in my JPE piece on the size and shape of nations, which is webbed on my site if anyone is interested.

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