In his famous article "The Nature of the Firm", Ronald Coase claimed that firms exist because they are cost minimizing. It is cheaper to coordinate a set of economic processes using methods available to business concerns than on the market. Coase thus suggests that marginal costs of organization will tend to be equated to the returns from organization. In general, the larger the firm the greater the costs of organization. Transactions involved in maintaining complex or large organizations are more costly than transactions involved in maintaining smaller ones. Firms grow to an optimal size given the costs and benefits to scale. Economies of scale refer to declining unit costs because of increasing sized firms' increasing ability to spread overhead over a large number of units. But increasing organization costs, also due to increasing size, may outweigh the costs per unit.
Anticipating Coase by more than two centuries and relying on comparative historical analysis, Charles de Secondat, Baron de Montestquieu, makes a parallel claim about the benefits of scale in the design of republics. Montesquieu writes that the optimal size of republics is small, because large scale republics permit large fortunes, which in turn create immoderate demands by interest groups. The competition of special interests leads to an overemphasis on private concerns and an underemphasis on the public good:
"In an extensive republic the public good is sacrificed to a thousand private views; it is subordinate to exceptions, and depends on accidents. In a small one, the interest of the public is more obvious, better understood, and more within the reach of every citizen; abuses have less extent, and of course are less protected."*
Montesquieu gives as an example the Greek republics, which were small city states. Montesquieu also notes that there are advantages to great as opposed to petty states. Thus, he is arguing for a balance, or optimization, of benefits as opposed to costs. In Book IX Montesquieu notes that small republics may be destroyed by foreign invasions and large repulics are destroyed by "internal imperfections". But, argues Montesquieu "confederate republics" have the advantages of a republic together with the external force of a monarchical government. "Hence it proceeds that Holland, Germany and the Swiss cantons are considered in Europe as perpetual republics." The many states balance power. Insurrections in one state can be quelled by others. But confederacies must consist entirely of republics (this was integrated into the Constitution). I would add that confederacies permit intelligent management of information while permitting economies of scale with respect to defense and economic markets.
Of course, there are many other factors relevant to the nature of government. In writing about the geographical differences between Europe and Asia**, Montesquieu notes that geographical differences facilitate the "slavery" of Asia and identifies large scale with despotism:
"In Asia they have always had great empires; in Europe these could never subsist. Asia has larger plains; it is cut out into much more extensive divisions by mountains and seas; and as it lies more to the south, its springs are more easily dried up...Power in Asia ought, then, to be always despotic: for if their slavery was not severe they would make a division inconsistent with the nature of the country."
In the 1960s and 1970s, Mancur Olson and George Stigler argued that ease of organization of interest groups and the economic benefit per participant due to successful lobbying lead to success or failure of specific groups in economic competition. For a long time physicians formed a successful lobby because they shared common training, common values and attended conferences of the American Medical Association. Geographic advantages would certainly be among the kinds of advantages different interests might enjoy. Geography, argued Montesquieu in 1748, contributes to the nature of political organization, and large geographic scope is most consistent with despotism.
A school of historians, to include William Appleman Williams, Gabriel Kolko, Martin Sklar and James Weinstein, has identified Progressivism, which appeared following the advance of big business and the closing of the American frontier, as a pro-big business ideology; that Progressivism was the ideology of big business even though it was packaged as "liberal" and served to preempt socialism (and end laissez-faire capitalism). Montesquieu did not anticipate Progressivism, but he did anticipate that as nations grow in scope they are more likely to be dominated by economic special interests and that the domination is likely to be authoritarian in nature, which is the claim that Kolko-Williams school makes about Progressivism.
Montesequieu also anticipated the ideas of David Riesmann in his famous book The Lonely Crowd. In Book XIX Montesquieu discusses "Laws in relation to the principles which form the general spirit, the morals and customs of a nation".*** He notes that factors like climate, attitudes toward tyranny, religion, laws, morals and other factors influence "the spirit of mankind". He argues that nations ought to pass laws that fit their temperaments. In a puritanical nation with good character "no one ought to restrain their manners by laws, unless he would lay a constraint on their virtues." For instance, laws that reduce luxury or restrain women might cause the nation to "lose that peculiar taste which would be the source of the wealth of the nation, and that politeness which would render the country frequented by strangers." Thus, it is difficult to be rational with respect to law, and it is easiest to fit the temperament of the populace in designing law. Law should be avoided:
"Let them but leave us as we are, said a gentleman of a nation which had a very great resemblance to that we have been describing, and nature will repair whatever is amiss..our indiscretions joined to our good nature would make the laws which should constrain our sociability not at all proper for us."
If laws are necessary, they should build on existing patterns
One of the key attributes (Book XIX, section 8) is "effects of a sociable temper". This is analogous to Riesmann's other-directedness. Montesequieu writes:
"The more communicative a people are the more easily they change their habits, because each is in a greater degree a spectacle to the other, and the singularities of individuals are better observed. The climate which influences one nation to take pleasure in being communicative, makes it also delight in change, and that which makes it delight in change forms its taste.
"...the desire of pleasing others more than ourselves gives rise to fashions. This fashion is a subject of importance; by encouraging a trifling turn of mind, it continually increases the branches of its commerce."
Riesmann notes that the commercial centers are characterized by other-directedness while rural America is still inner- and tradition-directed. Likewise, David McClelland finds in his book Achieving Society that high achievers couple other-directedness with need for achievement. But McClelland was writing after America's greatest achievements were complete. The inner-directeds' achievements were in building a great nation, the other-directedness in consumption and mass communication. Other-directedness, as in Athens and likely Rome, are associated with decline after the inner-directeds have built their vision.
Montesquieu anticipated 20th century arguments such as Walter Lippmann's claim that the public is incapable of rational democratic decision; Mancur Olson's and George Stigler's claim that in a democracy special interest groups tend to organize along economic contours and extract rents from the public; and James March and Herbert Simon's claim that boundaries on rationality inhibit firms from thinking strategically or clearly.
Montesquieu notes the link between commerce and communication.++ It is likely that other-directedness is most advantageous where coordination is more important, i.e., in large firms and in interpersonally driven-tasks involving diplomacy or sales.
He adds:
"The effects of commerce is riches; the consequences of riches, luxury; and that of luxury the perfection of the arts. We find that the arts were carried to great perfection in the time of Semiramis; which is a sufficient indication that a considerable commerce
This is seen in his claim that the necessities of state and those of the taxpayers need to be balanced in assaying taxes, but that few politicians have "the wisdom and prudence" to limit tax levels.+ The wisdom required in a very large state is greater than the wisdom required in a small one. Much as Coase argued that there are limits to economies of scale, so Montesquieu argued, 220 years before Coase, that there are limits to the advantages of the scale of nations.
*Montesquieu, The Spirit of Laws. New York Prometheus Books, 2002. Translation originally published in New York by the Colonial Press, 1900, p. 120.
**Ibid., Book XVII, section 6, p. 269.
***Ibid., p. 292
+Ibid., p. 207
++Ibid., p. 334.
Showing posts with label rationality. Show all posts
Showing posts with label rationality. Show all posts
Monday, January 26, 2009
Monday, June 2, 2008
Walter Lippmann's Public Opinion
Walter Lippmann. Public Opinion: An Important Work on the Theory of Public Opinion in Relation to Traditional Democratic Theory. Reprint by Filiquarian Publishing, 2007. Available used from Amazon.com for $1.98.
"The orthodox theory holds that a public opinion constitutes a moral judgment on a group of facts. The theory I am suggesting is that, in the present state of education, a public opinion is primarily a moralized and codified version of the facts. I am arguing that the pattern of stereotypes at the center of our codes largely determines what groups of facts we shall see and in what light we shall see them. That is why, with the best will in the world, the news policy of a journal tends to support its editorial policy..."
"The hypothesis which seems to me the most fertile is that news and truth are not the same thing and must be clearly distinguished. The function of news is to signalize an event, the function of truth is to bring to light the hidden facts, to set them into relation with each other, and to make a picture of reality on which men can act. Only at those points, where social conditions take recognizable and measurable shape, do the body of truth and the body of news coincide. That is a comparatively small part of the whole field of human interest."
----Walter Lippmann, Public Opinion, pp. 116, 332
This is a classic by Walter Lippmann, who co-founded the New Republic with Herbert Croly and Walter Weyl. Lippmann was a Progressive, but he was much more circumspect than Croly and John Dewey, and his ideas are more contemporary than either's. The book is disorganized and badly written, but Lippmann's insights are seminal.
The book was published in 1921. In 1920, Warren G. Harding had been the first presidential candidate to use radio in his presidential campaign. Forty years later, the Kennedy/Nixon debate was televised, and 87 years later Barack Obama's speeches are spliced on Youtube. Lippmann's book is seminal not only because he was among the first to ponder the effects of mass media on public policy but also because he anticipated the criticisms of the mass media prevalent among today's conservatives. Although the book references newspapers, not radio, the problems that Lippmann outlines have become increasingly important.
But the book has implications well beyond mass media. The question with which Lippmann grapples is the same question that has confronted many of the social sciences: to what degree are decision makers rational?
In 1958 Herbert Simon and James March published Organizations, a book whose main theme is "cognitive limits on rationality" in devising business strategy. The problem of limited rationality is important not only in management theory but also in economics, where information economics and agency theory have generated important and controversial policy prescriptions. In law and economics there has been much discussion of how informational asymmetries influence public choice and lobbying. In the field of organizational behavior, several of Max Bazerman's ideas on perceptual biases are directly linked to passages in this book. All of these developments owe Walter Lippmann a debt.
Lippmann was writing about a broader topic than management: the ability of the general public to deliberate about policy issues. Progressives claim that democracy is not only viable, but the ultimate good. (This, of course, begs the question as to what construct of good the progressives apply; there is no ultimate ground for favoring democracy over wealth or human well being as the ultimate good, and logically democracy would seem to be inferior to human happiness or Aristotle's eudaimonia -well being-. In attacking natural rights theory as arbitrary or mythical, the Progressives supplanted natural rights with an even more arbitrary and much less fruitful construct.)
Lippmann argues that we are unable to understand the real world in which news and policy problems occur (p. 76):
"...the environment with which our public opinions deal is refracted in many ways, by censorship and privacy at the source, by physical and social barriers at the other end, by scanty attention, by the poverty of language, by distraction, by unconscious constellations of feeling, by wear and tear, violence, monotony. These limitations upon our access to that environment combine with the obscurity and complexity of the facts themselves to thwart clearness and justice of perception, to substitute misleading fictions for workable ideas, and to deprive us of adequate checks upon those who consciously strive to mislead."
Lippmann develops a psychologically-based argument. Because people think in stereotypes and cliches they cannot think clearly about underlying facts (p. 87):
"There is an economy in this. For the attempt to see all things freshly and in detail, rather than as types and generalities, is exhausting, and among busy affairs practically out of the question. In a circle of friends, and in relation to close associates or competitors, there is no shortcut through and no substitute for individualized understanding...But modern life is hurried and multifarious, above all physical distance separates men who are often in vital contact with each other...There is neither time nor opportunity for intimate acquaintance...The subtlest and most pervasive of all influences are those which create and maintain the repertory of stereotypes...(p. 102) Thus Marxism is not necessarily what Karl Marx wrote in Das Kapital, but whatever it is that all the warring sects believe."
Lippmann notes (p. 105) that the word "progress" connoted to most Americans "mechanical inventions". The emphasis on "the biggest, the fastest, the highest, or if you are a maker of wristwatches or microscopes the smallest; the love in short of the superlative and the 'peerless'" is (p 106):
"a partial and inadequate way of representing the world. With the stereotype of 'progress' before their eyes, Americans have in the mass seen little that did not accord with that progress. They saw the expansion of cities, but not the accretion of slums..."
Perceptual distortion occurs at various points. One of the most important is what Lippmann refers to as moral codes (p. 105), a term Chester Barnard borrowed in his seminal management book Functions of the Executive in the 1930s. I don't know how much has been done about the Progressive influence on management thought, but it was extensive. Croly talked about scientific management and Taylor was viewed as a member of the progressive movement. In Public Opinion Lippmann provides the foundation for Barnard's use of the concept of moral code in depicting the function of the executive as creating what we would call today organizational culture. Sanford Jacoby in his book Employing Bureaucracy outlines how many of the ideas of human resource management emanated from Jane Addams's social work movement. Arguably, the classic contingency theory of mainstream management, the idea that management style ought to be adjusted to fit the environment is also linked to progressivism in that it implies a key role for university experts to advise managers as to how to anticipate environmental change, a role played in large part by the Federal Reserve Bank (probably to the chagrin of management professors who were hoping for more extensive interest in their consulting services).
With respect to codes, Lippmann argues (pp. 111-114) "the way we see things is a combination of what is there and of what we expected to find". In order to make intelligent decisions about public affairs and politics, knowledge of the subject matter is necessary, but "few can be expert" and "those who are expert are so on only a few topics" so that "whatever we recognize as familiar we tend, if we are not very careful, to visualize with the aid of images already in our mind" and "when a system of stereotypes is well fixed, our attention is called to those facts which support it and diverted from those which contradict."
(p. 116) "Far more serious in the modern world than any difference of moral code is the difference in the assumptions about facts to which the code is applied. Religious, moral and political formulae are nothing like so far apart as the facts assumed by their votaries...At the core of every moral code there is a picture of human nature, a map of the universe, and a version of history."
(p. 120) "And since my moral system rests on my accepted version of the facts, he who denies either my moral judgments or my version of the facts is to me perverse, alien, dangerous...The opponent has always to be explained, and the last explanation that we ever look for is that he sees a different set of facts."
In addition to bias due to moral codes, Lippmann argues that public opinion is distorted by perception of time 9P. 136) and the inability to comprehend statistical inference:
(p. 141) "To pick fairly a good sample of a large class is not easy. The problem belongs to the science of statistics, and it is a most difficult affair for anyone whose mathematics is primitive, and mine remain azoic..."
Thus (p.145):
"There are few big issues in public life where cause and effect are obvious at once. They are not obvious to scholars who have devoted years, let us say, to studying business cycles, or price and wage movements, or the migration and the assimilation of peoples, or the diplomatic purposes of foreign powers. Yet somehow we are all supposed to have opinions on these matters, and it is not surprising that the commonest form of reasoning is intuitive, post hoc ergo propter hoc."
Moreover, as March and Simon (1958) put it, there are cognitive limits on rationality (p. 153-156):
"Of public affairs each of us sees little, and therefore they remain dull and unappetizing until somebody with the makings of an artist, has translated them into a moving picture...Not being omnipresent and omniscient we cannot see much of what we have to think and talk about...In order then that the distant situation shall not be a gray flicker on the edge of attention, it should be capable of translation into pictures in which the opportunity for identification is recognizable..."
Because of the vagaries of public opinion, it is difficult if not impossible to discern what motivates a given public reaction. If public opinion is to be unified or harmonized (p. 200) a symbolic phrase must unify a wide range of meanings so that the phrase itself is vacuous but able to be interpreted in many ways. Thus, an intelligent public policy is possible only through confusion of the public, or at least offering a symbol in which a wide range of people can believe. People come to accept symbols because they are (pp. 207-8):
"planted there by another human being whom we recognize as authoritative...symbols are made congenial and authoritative because they are introduced to us by congenial and important people...And though we may gradually master for ourselves many phases of that larger environment, there always remains a vaster one that is unknown. To that we still related ourselves through authorities...Except on a few subjects where our own knowledge is great, we cannot choose between true and false accounts. So we choose between trustworthy and untrustworthy reporters."
But the choice of an appropriate expert "is still too difficult and often impracticable. On all but a very few matters for short stretches in our lives, the utmost independence that we can exercise is to multiply the authorities to whom we give a friendly hearing...the democratic theory proceeds on the opposite assumption and assumes for the purposes of government an unlimited supply of self-sufficient individuals."
All political theories naively assume that some individual or group has the innate ability to govern. But all people are constrained by the cognitive limits that Lippmann outlines. In particular, Lippmann questions the state of information in the time of the founding fathers (pp. 240-1):
"But the democrats who wanted to raise the dignity of all men were immediately involved by the immense size and confusion of their ruling class...Their science tole them that politics was an instinct and that the instinct worked in a limited environment. Their hopes bade them insist that all men in a very large environment could govern. In this deadly conflict between their ideals and their science, the only way out was to assume without much discussion that the voice of the people was the voice of God...They could not show how a citizen of Boston was to stay in Boston and conceive the views of a Virginian, how a Virginian in Virginia could have real opinions about the government at Washington, how Congressmen in Washington could have opinions about China or Mexico."
He argues that by 1921 "there is no longer any doubt that the continuous reporting of an unseen environment is feasible. It is often done badly, b ut the fact that it is done at all shows that it can be done, and the fact that we begin to know how badly it is often done shows that it can be done better."
Nevertheless (p. 251):
"The democrat has understood what an analysis of public opinion seems to demonstrate: that in dealing with an unseen environment decisions 'are manifestly settled at haphazard, which clearly they ought not to be.'"
According to Lippmann, the American Constitution was based on the view that special interests needed to be kept in equilibrium by a balance of power. "They intended to deadlock local and class interest to prevent these from obstructing government" (p. 259).
Local interests can in Lippmann's view (p. 271) lead to decentralization or a "Roman peace". "Almost always they chose the path that they had least recently travelled." America was founded as a decentralized state, but reaction to the trusts led to centralization. Centralization led to pluralism (p. 273): "This time society was to swing back not to the atomic individualism of Adam Smith's economic man and Thomas Jefferson's farmer, but to a sort of molecular individualism of voluntary groups."
Lippmann goes on to argue (p. 289):
"The democratic fallacy has been its preoccupation with the origin of government rather than with the processes and results. The democrat has always assumed that if political power could be derived in the right way, it would be beneficent. His whole attention has been on the source of power, since he is hypnotized by the belief that the great thing is to express the will of the people, first because expression is the highest interest of man, and second because the will is instinctively good. But no amount of regulation at the source of a river will completely control its behavior, and while democrats have been absorbed in trying to find a good mechanism for originating social power, that is to say a good mechanism of voting and representation, they neglected almost every other interest of men. For no matter how power originates, the crucial interest is in how power is exercised. What determines the quality of civilization is the use made of power. And that use cannot be controlled at the source."
In order to obtain information, the public relies on newspapers. But newspapers are riddled with error. (p. 297) "The truth about distant or complex matters is not self-evident, and the machinery for assembling information is technical and expensive". Newspapers are businesses, and they have to make decisions based on business considerations as well as on public service ones (p. 298). Readers have limited attention spans. News must be tailored to the selfish and personal considerations of the audience. The very definition of news as well as the threat of defamation suits limit editors' abilities to discern important underlying causes (p. 325):
"A great deal, I think myself the crucial part, of what looks..as deliberate misrepresentation on the part of newspapers is the direct outcome of a practical difficulty in uncovering the news, and the emotional difficulty of making distant facts interesting unless, as Emerson says, we can perceive them to be only a new vewrsion of our familiar experience."
(p. 331) "...news and truth are not the same thing, and must be clearly distinguished."
The press is "too frail to carry the whole burden of popular sovereignty, to supply spontaneously the truth which democrats hoped was inborn...they fail, they are bound to fail, in any future one can conceive they will continue to fail...Unconsciously (democracy) sets up the single reader as theoretically omnicompetent, and puts upon the press the burden of accomplishing whatever representative government, industrial organization and diplomacy have failed to accomplish."
Lippmann argues that institutions that are well run will generate accurate information, so that the quality of the press reflects the quality of institutions (p. 335-6):
"At its best the press is a servant and guardian of institutions; at its worst it is a means by which a few exploit social disorganization to their own ends...The press is no substitute for institutions...The trouble lies deeper than the press..."
The book falls down when (p. 342-3) Lippmann argues that experts can solve the information problem. This solution sounds naive indeed, although Lippmann can be forgiven for he was writing in 1921. Lippmann qualifies this claim by discussing the limitations of social science as he conceived it then. Nevertheless his conclusion that there is a "need for interposing some form of expertness beween the private citizen and the vast environment in which he is entangled" sounds stale from this vantage point. He couldn't have known about Ben Bernanke back then, of course.
"The orthodox theory holds that a public opinion constitutes a moral judgment on a group of facts. The theory I am suggesting is that, in the present state of education, a public opinion is primarily a moralized and codified version of the facts. I am arguing that the pattern of stereotypes at the center of our codes largely determines what groups of facts we shall see and in what light we shall see them. That is why, with the best will in the world, the news policy of a journal tends to support its editorial policy..."
"The hypothesis which seems to me the most fertile is that news and truth are not the same thing and must be clearly distinguished. The function of news is to signalize an event, the function of truth is to bring to light the hidden facts, to set them into relation with each other, and to make a picture of reality on which men can act. Only at those points, where social conditions take recognizable and measurable shape, do the body of truth and the body of news coincide. That is a comparatively small part of the whole field of human interest."
----Walter Lippmann, Public Opinion, pp. 116, 332
This is a classic by Walter Lippmann, who co-founded the New Republic with Herbert Croly and Walter Weyl. Lippmann was a Progressive, but he was much more circumspect than Croly and John Dewey, and his ideas are more contemporary than either's. The book is disorganized and badly written, but Lippmann's insights are seminal.
The book was published in 1921. In 1920, Warren G. Harding had been the first presidential candidate to use radio in his presidential campaign. Forty years later, the Kennedy/Nixon debate was televised, and 87 years later Barack Obama's speeches are spliced on Youtube. Lippmann's book is seminal not only because he was among the first to ponder the effects of mass media on public policy but also because he anticipated the criticisms of the mass media prevalent among today's conservatives. Although the book references newspapers, not radio, the problems that Lippmann outlines have become increasingly important.
But the book has implications well beyond mass media. The question with which Lippmann grapples is the same question that has confronted many of the social sciences: to what degree are decision makers rational?
In 1958 Herbert Simon and James March published Organizations, a book whose main theme is "cognitive limits on rationality" in devising business strategy. The problem of limited rationality is important not only in management theory but also in economics, where information economics and agency theory have generated important and controversial policy prescriptions. In law and economics there has been much discussion of how informational asymmetries influence public choice and lobbying. In the field of organizational behavior, several of Max Bazerman's ideas on perceptual biases are directly linked to passages in this book. All of these developments owe Walter Lippmann a debt.
Lippmann was writing about a broader topic than management: the ability of the general public to deliberate about policy issues. Progressives claim that democracy is not only viable, but the ultimate good. (This, of course, begs the question as to what construct of good the progressives apply; there is no ultimate ground for favoring democracy over wealth or human well being as the ultimate good, and logically democracy would seem to be inferior to human happiness or Aristotle's eudaimonia -well being-. In attacking natural rights theory as arbitrary or mythical, the Progressives supplanted natural rights with an even more arbitrary and much less fruitful construct.)
Lippmann argues that we are unable to understand the real world in which news and policy problems occur (p. 76):
"...the environment with which our public opinions deal is refracted in many ways, by censorship and privacy at the source, by physical and social barriers at the other end, by scanty attention, by the poverty of language, by distraction, by unconscious constellations of feeling, by wear and tear, violence, monotony. These limitations upon our access to that environment combine with the obscurity and complexity of the facts themselves to thwart clearness and justice of perception, to substitute misleading fictions for workable ideas, and to deprive us of adequate checks upon those who consciously strive to mislead."
Lippmann develops a psychologically-based argument. Because people think in stereotypes and cliches they cannot think clearly about underlying facts (p. 87):
"There is an economy in this. For the attempt to see all things freshly and in detail, rather than as types and generalities, is exhausting, and among busy affairs practically out of the question. In a circle of friends, and in relation to close associates or competitors, there is no shortcut through and no substitute for individualized understanding...But modern life is hurried and multifarious, above all physical distance separates men who are often in vital contact with each other...There is neither time nor opportunity for intimate acquaintance...The subtlest and most pervasive of all influences are those which create and maintain the repertory of stereotypes...(p. 102) Thus Marxism is not necessarily what Karl Marx wrote in Das Kapital, but whatever it is that all the warring sects believe."
Lippmann notes (p. 105) that the word "progress" connoted to most Americans "mechanical inventions". The emphasis on "the biggest, the fastest, the highest, or if you are a maker of wristwatches or microscopes the smallest; the love in short of the superlative and the 'peerless'" is (p 106):
"a partial and inadequate way of representing the world. With the stereotype of 'progress' before their eyes, Americans have in the mass seen little that did not accord with that progress. They saw the expansion of cities, but not the accretion of slums..."
Perceptual distortion occurs at various points. One of the most important is what Lippmann refers to as moral codes (p. 105), a term Chester Barnard borrowed in his seminal management book Functions of the Executive in the 1930s. I don't know how much has been done about the Progressive influence on management thought, but it was extensive. Croly talked about scientific management and Taylor was viewed as a member of the progressive movement. In Public Opinion Lippmann provides the foundation for Barnard's use of the concept of moral code in depicting the function of the executive as creating what we would call today organizational culture. Sanford Jacoby in his book Employing Bureaucracy outlines how many of the ideas of human resource management emanated from Jane Addams's social work movement. Arguably, the classic contingency theory of mainstream management, the idea that management style ought to be adjusted to fit the environment is also linked to progressivism in that it implies a key role for university experts to advise managers as to how to anticipate environmental change, a role played in large part by the Federal Reserve Bank (probably to the chagrin of management professors who were hoping for more extensive interest in their consulting services).
With respect to codes, Lippmann argues (pp. 111-114) "the way we see things is a combination of what is there and of what we expected to find". In order to make intelligent decisions about public affairs and politics, knowledge of the subject matter is necessary, but "few can be expert" and "those who are expert are so on only a few topics" so that "whatever we recognize as familiar we tend, if we are not very careful, to visualize with the aid of images already in our mind" and "when a system of stereotypes is well fixed, our attention is called to those facts which support it and diverted from those which contradict."
(p. 116) "Far more serious in the modern world than any difference of moral code is the difference in the assumptions about facts to which the code is applied. Religious, moral and political formulae are nothing like so far apart as the facts assumed by their votaries...At the core of every moral code there is a picture of human nature, a map of the universe, and a version of history."
(p. 120) "And since my moral system rests on my accepted version of the facts, he who denies either my moral judgments or my version of the facts is to me perverse, alien, dangerous...The opponent has always to be explained, and the last explanation that we ever look for is that he sees a different set of facts."
In addition to bias due to moral codes, Lippmann argues that public opinion is distorted by perception of time 9P. 136) and the inability to comprehend statistical inference:
(p. 141) "To pick fairly a good sample of a large class is not easy. The problem belongs to the science of statistics, and it is a most difficult affair for anyone whose mathematics is primitive, and mine remain azoic..."
Thus (p.145):
"There are few big issues in public life where cause and effect are obvious at once. They are not obvious to scholars who have devoted years, let us say, to studying business cycles, or price and wage movements, or the migration and the assimilation of peoples, or the diplomatic purposes of foreign powers. Yet somehow we are all supposed to have opinions on these matters, and it is not surprising that the commonest form of reasoning is intuitive, post hoc ergo propter hoc."
Moreover, as March and Simon (1958) put it, there are cognitive limits on rationality (p. 153-156):
"Of public affairs each of us sees little, and therefore they remain dull and unappetizing until somebody with the makings of an artist, has translated them into a moving picture...Not being omnipresent and omniscient we cannot see much of what we have to think and talk about...In order then that the distant situation shall not be a gray flicker on the edge of attention, it should be capable of translation into pictures in which the opportunity for identification is recognizable..."
Because of the vagaries of public opinion, it is difficult if not impossible to discern what motivates a given public reaction. If public opinion is to be unified or harmonized (p. 200) a symbolic phrase must unify a wide range of meanings so that the phrase itself is vacuous but able to be interpreted in many ways. Thus, an intelligent public policy is possible only through confusion of the public, or at least offering a symbol in which a wide range of people can believe. People come to accept symbols because they are (pp. 207-8):
"planted there by another human being whom we recognize as authoritative...symbols are made congenial and authoritative because they are introduced to us by congenial and important people...And though we may gradually master for ourselves many phases of that larger environment, there always remains a vaster one that is unknown. To that we still related ourselves through authorities...Except on a few subjects where our own knowledge is great, we cannot choose between true and false accounts. So we choose between trustworthy and untrustworthy reporters."
But the choice of an appropriate expert "is still too difficult and often impracticable. On all but a very few matters for short stretches in our lives, the utmost independence that we can exercise is to multiply the authorities to whom we give a friendly hearing...the democratic theory proceeds on the opposite assumption and assumes for the purposes of government an unlimited supply of self-sufficient individuals."
All political theories naively assume that some individual or group has the innate ability to govern. But all people are constrained by the cognitive limits that Lippmann outlines. In particular, Lippmann questions the state of information in the time of the founding fathers (pp. 240-1):
"But the democrats who wanted to raise the dignity of all men were immediately involved by the immense size and confusion of their ruling class...Their science tole them that politics was an instinct and that the instinct worked in a limited environment. Their hopes bade them insist that all men in a very large environment could govern. In this deadly conflict between their ideals and their science, the only way out was to assume without much discussion that the voice of the people was the voice of God...They could not show how a citizen of Boston was to stay in Boston and conceive the views of a Virginian, how a Virginian in Virginia could have real opinions about the government at Washington, how Congressmen in Washington could have opinions about China or Mexico."
He argues that by 1921 "there is no longer any doubt that the continuous reporting of an unseen environment is feasible. It is often done badly, b ut the fact that it is done at all shows that it can be done, and the fact that we begin to know how badly it is often done shows that it can be done better."
Nevertheless (p. 251):
"The democrat has understood what an analysis of public opinion seems to demonstrate: that in dealing with an unseen environment decisions 'are manifestly settled at haphazard, which clearly they ought not to be.'"
According to Lippmann, the American Constitution was based on the view that special interests needed to be kept in equilibrium by a balance of power. "They intended to deadlock local and class interest to prevent these from obstructing government" (p. 259).
Local interests can in Lippmann's view (p. 271) lead to decentralization or a "Roman peace". "Almost always they chose the path that they had least recently travelled." America was founded as a decentralized state, but reaction to the trusts led to centralization. Centralization led to pluralism (p. 273): "This time society was to swing back not to the atomic individualism of Adam Smith's economic man and Thomas Jefferson's farmer, but to a sort of molecular individualism of voluntary groups."
Lippmann goes on to argue (p. 289):
"The democratic fallacy has been its preoccupation with the origin of government rather than with the processes and results. The democrat has always assumed that if political power could be derived in the right way, it would be beneficent. His whole attention has been on the source of power, since he is hypnotized by the belief that the great thing is to express the will of the people, first because expression is the highest interest of man, and second because the will is instinctively good. But no amount of regulation at the source of a river will completely control its behavior, and while democrats have been absorbed in trying to find a good mechanism for originating social power, that is to say a good mechanism of voting and representation, they neglected almost every other interest of men. For no matter how power originates, the crucial interest is in how power is exercised. What determines the quality of civilization is the use made of power. And that use cannot be controlled at the source."
In order to obtain information, the public relies on newspapers. But newspapers are riddled with error. (p. 297) "The truth about distant or complex matters is not self-evident, and the machinery for assembling information is technical and expensive". Newspapers are businesses, and they have to make decisions based on business considerations as well as on public service ones (p. 298). Readers have limited attention spans. News must be tailored to the selfish and personal considerations of the audience. The very definition of news as well as the threat of defamation suits limit editors' abilities to discern important underlying causes (p. 325):
"A great deal, I think myself the crucial part, of what looks..as deliberate misrepresentation on the part of newspapers is the direct outcome of a practical difficulty in uncovering the news, and the emotional difficulty of making distant facts interesting unless, as Emerson says, we can perceive them to be only a new vewrsion of our familiar experience."
(p. 331) "...news and truth are not the same thing, and must be clearly distinguished."
The press is "too frail to carry the whole burden of popular sovereignty, to supply spontaneously the truth which democrats hoped was inborn...they fail, they are bound to fail, in any future one can conceive they will continue to fail...Unconsciously (democracy) sets up the single reader as theoretically omnicompetent, and puts upon the press the burden of accomplishing whatever representative government, industrial organization and diplomacy have failed to accomplish."
Lippmann argues that institutions that are well run will generate accurate information, so that the quality of the press reflects the quality of institutions (p. 335-6):
"At its best the press is a servant and guardian of institutions; at its worst it is a means by which a few exploit social disorganization to their own ends...The press is no substitute for institutions...The trouble lies deeper than the press..."
The book falls down when (p. 342-3) Lippmann argues that experts can solve the information problem. This solution sounds naive indeed, although Lippmann can be forgiven for he was writing in 1921. Lippmann qualifies this claim by discussing the limitations of social science as he conceived it then. Nevertheless his conclusion that there is a "need for interposing some form of expertness beween the private citizen and the vast environment in which he is entangled" sounds stale from this vantage point. He couldn't have known about Ben Bernanke back then, of course.
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