Tuesday, December 20, 2011

What is "cronyism" and what isn't?

Ryan Murphy provides a link to these big business/U.S. government Venn diagrams.

I'm never quite sure what to make of these worries. I just try to think of what the world would be like if government officials didn't play important roles in the private sector in the fields that they deal with as policymakers. Is it possible to have a policymaker knowledgeable about the impact of his policy in the real world without inevitably having many of them rise to the upper ranks of business? Would we really rather have a situation where we deny people with this kind of experience any role in government? Cronyism to me is about a lot more than "six degrees of separation" test. I'm much more concern about whether there is actual malfeasance. That's obviously a risk - you don't need to be a public choice theorist to know that. But the risk on the other side is incompetence. When we have costs and benefits to weigh on either side, that usually means we have a trade off to make and it usually means a corner solution is not the right solution.

12 comments:

  1. Bias makes malfeasance unnecessary for the practical equivalent of corruption to occur.

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  2. In some cases transfer of personnel in both directions is inevitable. Take the FCC for example, they need to know about communications technology.

    And, of course, it's malfeasance that matters, I don't think anyone really disagrees with that. However, the question is, does the amount of regulation make more opportunities for corruption possible.

    Part of the problem is that the FCC (to take an example I have personal experience of) simply take the view that any regulation that could help should be put into place. They don't take into account things like the opportunities it brings for unintended consequences.

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  3. It's something that most people on the street don't expect and is something predicted by regulatory capture. You can say, after having seen the diagrams, that of course people should work in both sectors! It only makes sense! But a lot of that is hindsight bias, unless you previously believed with probability 1 that there would be such significant crossovers between industry and government, and probability 0 that regulatory agencies would be run by largely disinterested bureaucrats. Even if you claim such prescience, it doesn't apply to people on the street - I've talked to them.

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  4. No, Daniel is right. Regulators would be terrible at their jobs if they didn't have firsthand private sector experience. Regulatory capture occurs BECAUSE of such practice, not the other way around.

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  5. I don't understand your point Stravinsky. Are you arguing *for* the movement of people between regulators and the industries they regulate or are you arguing *against* it?

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  6. Most people seem to have an inaccurate view of how corruption and regulatory capture works, and I'm merely trying to correct it.

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  7. Well I for one can't understand what you're saying.

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  8. Corruption and capture are at least as much a product of bias as they are a product of vice.

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  9. So, are you saying that if a person once worked for a company then they will be prejudiced in that companies favour. I agree to some extent, but they may also be prejudiced against that company too.

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  10. It's more about the availability heuristic. So you want to regulate banking, for example. Who you gonna call? Bankers, duh. So who's your source of information? Bankers, duh. And bankers will have self-serving bias, which isn't the same thing as being a selfish prick. So they'll tell you information that gets you to do what they want at the expense of the public good, without either the regulator or the regulated realizing it.

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  11. In that case I mostly agree with you Stravinsky.

    I think it does matter a lot who is employing who though. Self-serving bias will lead bankers who are working for banks to support regulations that help their banks or help banking versus other industries. Bankers who are employed by regulators will wish to persuade the regulators that it's necessary to continue employing them at high rates.

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  12. I think that the call is mainly to have politicians and Administrations with the spine and breadth of understanding to realize when they're being served on a platter by their regulators (and, as in Ron Suskind's "Confidence Men," their cabinet members), and the willingness to combat it as necessary.

    Those Venn diagrams are interesting, but they suggest very little to me. Proximity, as Stravinsky notes, is not enough for malfeasance; but it's not a necessary or sufficient condition, either.

    I wonder if there isn't a bias in the charts - unintentional most likely, although the only partisan chart (Democrats and Keystone) targets Democrats (and I am confused about whether they mean the ex-Governor of Michigan - Jennifer Granholm; as the chart was uploaded in the time Governor Rick Snyder (R) was Governor, policy going forward will be impacted by his office).

    Also take a look at the Federal Government / GE chart. It mentions links going back to the Carter Administration, and two Reagan appointees, but the most famous Reagan connection with GE - Ronald Reagan's hosting the General Electric Theater from 1954 to 1962 - isn't mentioned. That connection may have been of similar or greater consequence to that of his appointees, if it shaped (and I don't see how one can credibly argue it didn't) his view of what a President's job is vis-a-vis corporate America.

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