Knowledge And Decisions

As of the time when it was first published in 1980, Knowledge and Decisions was by far my most important and most comprehensive book. None of my subsequent writings has surpassed it, though it has been joined by work of comparable scope in A Conflict of Visions in 1987 and Race and Culture in 1994. The re-publication of Knowledge and Decisions now, sixteen years after its initial debut, reflects the continuing importance of the issues raised in it, and offers an opportunity to update some conclusions while re-affirming others.

The social vision underlying the analysis in Knowledge and Decisions is the opposite of what I have elsewhere called The Vision of the Anointed.¹ There the focus was on a set of people and their perception of their role in a world whose problems they saw as caused by the inadequacies of others. Here the focus is not on particular people or their beliefs, but on social processes and the constraints within which those processes operate. The analysis begins with one of the most severe constraints facing human beings in all societies and throughout history — inadequate knowledge for making all the decisions that each individual and every organization nevertheless has to make, in order to perform the tasks that go with living and achieve the goals that go with being human.

How a variety of social institutions and processes coordinate innumerable scattered fragments of knowledge, enabling a complex society to function, is the central theme of the first half of Knowledge and Decisions. This approach focuses on the advantages and disadvantages of particular institutions and processes in mobilizing the knowledge needed for making particular kinds of decisions. Families, markets, armies, churches, corporations, and sports teams are just some of the wide spectrum of formal and informal social mechanisms for mobilizing and coordinating the knowledge and experience of many to guide or influence individual decisions by others.

Perhaps the most important feature of the first half of Knowledge and Decisions is simply its analysis of decision-making processes and institutions in terms of the characteristics and consequences of those processes themselves — irrespective of their goals. As noted in Chapter 6, this approach rejects the common practice of “characterizing processes by their hoped-for results rather than their actual mechanics.” “Profit-making” businesses, “public interest” law firms, and “drug prevention” programs are just some of the many things commonly defined by their hoped-for results, rather than by the characteristics of the decision-making processes involved and the incentives created by those processes. So-called “profit-making” businesses, for example, often fail to make a profit and most of them become extinct within a decade after being founded. In Knowledge and Decisions the owners of such businesses are defined not as profit-makers but as residual claimants to the firm's income — that is, to what is left over after employees, suppliers, and others have been paid. Put this way, it is clear from the outset that what is left over may be positive, negative, or zero. There is no more reason to expect “drug prevention” programs to prevent drug usage or “public interest” law firms to serve the public interest than to expect that most “profit-making” enterprises will in fact make profits. Whether any of these organizations do or do not live up to their expectations or claims is a question of empirical evidence. Pending the presentation of such evidence, such organizations can be analyzed in terms of what they actually do, not what they hope or claim to achieve. In Germany a 1933 “Law for Removing the Distress of People and Reich” gave the chancellor dictatorial powers², which in turn allowed Adolf Hitler to start wars that brought unprecedented distress — indeed, devastation — to the German people and nation.

The point here is not simply that laws, policies, and programs can have counterproductive results. The point is that, when social processes are described in terms of their hoped-for results, this obscures the more fundamental question as to just what they actually do — and circumvents questions as to whether doing such things is likely to lead to the results expected or proclaimed. More specifically, we need to know what incentives and constraints are created by these social processes. Therefore socialism, for example, is defined in this book not in terms of such goals as equality, security, economic planning, or “social justice,” but as a system in which property rights in agriculture, commerce, and industry may be assigned and re-assigned only by political authorities, rather than through transactions in the marketplace.

To the socialist, of course, government ownership of the means of production is but a means to the various social ends being sought, but such results that are hoped for tell us nothing about the institutional processes set in motion or the incentives inherent in those processes, much less their actual consequences. Indeed, lofty goals have long distracted attention from actual consequences, most notably in many Western intellectuals' determined resistance to acknowledging the devastating consequences of communism in the Soviet Union, which the Communists themselves eventually acknowledged during the era of glasnost under Gorbachev. The lofty goals of communism — always receding before them like the horizon — kept many Soviet sympathizers in the West mesmerized for decades, while more millions were slaughtered under Stalin than in Hitler’s death camps.

Insurgent movements in general — whether religious, political, or academic — look very different when viewed in terms of their respective goals than they do when viewed in terms of their incentives and constraints. Whether the goal of an insurgency has been to establish the Christian religion in the days of the Roman Empire, to create an Interstate Commerce Commission in nineteenth-century America or to promote civil rights for minorities in the twentieth century, what a successful insurgency does in institutional or process terms is to change the incentives and constraints facing others, as well as the incentives and constraints facing themselves and their successors. Against this background, it is not surprising that there should be certain patterns common to insurgent movements, whether those movements have been promoting religion, political ideology, minority interests, or innumerable other causes.

One of these patterns in the history of many insurgent movements has been a disappointment in the direction that the movement has taken after victory, including claims that the revolution has been “betrayed” and that the later leaders and followers have failed to live up to the high standards set by their predecessors in the insurgency. None of this is surprising when such movements are examined in terms of their processes, including the incentives and constraints at work.

First of all, the kinds of people attracted to the original insurgency, under the initial set of incentives and constraints, tend to be very different from the kinds of people who gravitate to it after it has become successful and achieved a major part of its goals. By definition, an insurgent movement forms under a set of incentives and constraints very different from those which it seeks to create. Often the members face a certain amount of hostility, or even persecution, from those around them or from an elite currently benefitting from the status quo. These original insurgents may even face dangers to their careers or to their lives. These are not conditions which tend to attract timid careerists or mere opportunists, unless the opportunists foresee a high probability that the insurgency will succeed within a period of time that is relevant to their personal ambitions.

After the success of the insurgency, however, radically different incentives and constraints are created by that very success. Many Christians in the Roman Empire, for example, went from being a poor and persecuted minority to being among the powerful agents of a state religion, able to enrich themselves and to persecute others. A similar pattern marked the history of the Communists in Russia many centuries later. On a smaller scale, the life cycle of regulatory agencies in the United States has often been seen to follow a pattern leading to control by very different kinds of people and policies from those behind the movement which led to creation of the agency in the first place.³ Cries of the betrayal of the original ideals of the American civil rights movements have also been widely heard in recent years, along with lamentations about the caliber of the later individual and organizational leadership of that movement.

None of this should be surprising. A successful insurgency not only presents different incentives and constraints to its successors, that success itself can winnow out its original supporters in a non-random way. Opportunists within the insurgency are among those most likely to remain after the spoils of success become available, while those most activated by the original ideals that have now been largely achieved may be among those more likely to drift away, either to private life or to other crusades on other issues that remain unresolved in the society. Outside opportunists and careerists are also likely to be attracted in growing numbers over the years. Degeneracy and betrayal are hardly surprising under such circumstances.

The point here is not to single out insurgent movements for criticisms that might be equally (or more) applicable to supporters of the status quo. Indeed, much of the current status quo is the result of prior insurgencies. The more general and more important point is to distinguish between (1) examining issues and institutions in terms of their process characteristics versus (2) examining them in terms of their proclaimed goals or ideals.

Among the ways in which various decision-making processes differ is in the extent to which they are institutionally capable of making incremental trade-offs, rather than attempting categorical “solutions.” Consumers continually make incremental trade-offs when deciding what to buy in supermarkets or in automobile dealerships, but appellate courts may have only a stark choice to make between declaring a statute constitutional or unconstitutional. This is one of the central points explored in the first half of Knowledge and Decisions and remains as relevant today as when the book was written. The importance of incremental trade-offs — whether in economic, social, or personal decisions — is emphasized here, in part because it is so often lost in the shuffle of more emotionally appealing categorical priorities that are its antithesis. The distinction between incremental trade-offs and categorical “solutions” has been highlighted by recent trends in laws, policies, and judicial decisions creating such categorical goals as protecting endangered species, eliminating the last “vestiges” of segregation, creating innumerable “rights,” and promoting “safety” of many sorts — all this not explicitly at all costs, but often in practice treating costs as somehow unworthy considerations to be almost always over-ridden.

Diminishing returns alone can make categorical decision-making counterproductive in its impact, when the point is reached where trivial amounts of one thing are being gained at the cost of devastating losses of another. But, even aside from diminishing returns, categorical decision-making means that the very benefit being sought in one form may be sacrificed in another form. One particular kind of safety, for example, may be achieved by creating vastly greater dangers of another kind, as when pesticides are banned to eliminate their residual dangers in the environment, at the cost of a thousand-fold increase in the incidence of deadly, insect-borne diseases, such as malaria.

The second half of Knowledge and Decisions looks at how different kinds of decision-making processes have been evolving and how particular decisions once made in one kind of place are increasingly being made in other kinds of places — in the schools, rather than in the home, in the courts rather than in the marketplace, and so on. More important, the implications of such changes in the locations of decisions are examined, not only in terms of the accuracy and scope of the knowledge conveyed to different decision makers, but also in terms of what it all means for human freedom.

The analysis in the first half of this book stands as I wrote it more than fifteen years ago. More examples could be added now, but are not needed. However, the trends discussed in the second half have, of course, continued to evolve and so will have to be updated here. The central theme of the second half of Knowledge and Decisions is contained in two sentences in Chapter 7:

In many areas, these trends have clearly continued, but in some — especially in the economic area during the 1980s — there was some movement toward reversing such trends. From a global perspective, the collapse of communism in Eastern Europe and of apartheid in South Africa in the 1990s both represent trends towards greater individual freedom. What history will make of these mixed trends of the past fifteen years is of course a question which only the future can answer. What can be done today is to examine these developments in more detail in social, economic, and political terms.

SOCIAL TRENDS

In one sense, it might seem that there has been a growing trend in the United States, and in Western civilization generally, toward greater individual freedom from both government control and social control. Words that could not have been used in public just a generation or so ago are now broadcast through the mass media. Both still and motion pictures that would have been banned then are today not only widely available but are even being shown to children in the public schools. Flouting convention haws become almost a convention itself and, for critics of existing society, indignation has become a way of life. As with so many other seemingly revolutionary developments in history, however, the question must be raised whether there has been a net diminution of taboos or a substitution of new taboos and repressions for old. From the standpoint of a study of the social coordination of knowledge and the role of decision-making processes, further questions must be raised as to whether these new social trends represent better or worse ways of coping with the inherent inadequacies of human knowledge when making decisions.

One of the central themes of Knowledge and Decisions is that feedback mechanisms are crucial in a world where no given individual or manageably-sized group is likely to have sufficient knowledge to be consistently right the first time in their decisions. These feedback mechanisms must convey not only information but also incentives to act on that information, whether these incentives are provided by prices, love, fear, moral codes, or other factors which cause people to act in the interest of other people. Moreover, not all information is new information. History is a vast storehouse of experience from generations and centuries past. So are traditions which distill the experiences of millions of other human beings over millennia of time. How are all these things affected by the new social trends?

Whether in the media, the arts, or educational institutions from the kindergarten to the university, old taboos have been replaced by new ones. Well-known entertainer Anita Bryant vanished from the media and became a nonperson almost immediately after voicing criticisms of homosexuality. Criticism of any aspect of the values or way of life of any racial or ethnic minority would threaten a similar social extinction to the career of any television commentator, university professor, or newspaper editorial writer so bold as to challenge the new taboos. Merely a failure to use the ever-growing list of “politically correct” terms for all sorts of things can have serious repercussions. Moreover, more than a passive imposition of taboos is involved. Very often, these taboos are accompanied by militant promotions of new social visions throughout educational, religious, and other institutions. The instruments of intimidation include vaguely-worded speech codes under which students may be punished or expelled from many colleges, insulting harangues by “diversity consultants” employed by corporations, colleges, and other institutions, and threats to the careers of military officers, civilian officials, and corporate executives who do not march in step with the new orthodoxies.

The specifics of these visions can be left to be explored elsewhere, as they have been.⁴ What is important in the present context is the question as to how they affect the coordination of knowledge and the functioning of feedback mechanisms that govern decision-making processes.

Many representatives of the new orthodoxies question the very existence of the knowledge which is crucial to decision making. To them, tested knowledge is nothing more than “socially constructed” beliefs — which can be readily replaced by other beliefs which they will construct. The many social verification processes which weed out failing notions and preserve validated knowledge thus disappear from the discourse, as if by sleight of hand, when ideas and practices are seen as merely “constructed” and thus capable of being “deconstructed,” whether in literature, law, or other fields.

The apparent sophistication of this approach can be scrutinized with a physical example, in order to avoid the distractions of ideological presuppositions. Eyesight is, in some sense “constructed,” because it is not merely a matter of light entering the eye and travelling to the optic nerve. From these light patterns the brain must construct a world and project it outward as something that we see. For example, it is not these light patterns themselves but our presuppositions about perspective which enable us to decide that the chair next to us, which looms much larger in our field of vision than the automobile across the street, is nevertheless not as big as the automobile. We know that dogs do not see the same world we do because they are color-blind and that other creatures with different kinds of eyes, and creatures with sonarlike perception systems, such as bats, must construct their picture of the world from different raw materials of the senses. But does any of this mean that what we see is merely a set of conventions, no more valid than an abstract painting or a vision to be conjured up by the words of articulate writers or orators, or by psychedelic drugs?

Would anyone walk into a lion's cage because both the lion and the cage, as we see them, are ultimately things constructed in our brains? More important, why not? Only because the verification processes so deftly made to disappear in theory could become very quickly, very brutally, and very agonizingly apparent. That is also the very reason why dogs do not run into a roaring flame and why bats swerve to avoid colliding with a stone wall. All these differently constructed worlds are subjected to verification processes. All these creatures’ worlds, like our own, are indeed “perceptions” but they are not just perceptions. The position of the observer is indeed an integral part of the data, but it is not the only part of the data.

The whole approach of Knowledge and Decisions is the antithesis of that of deconstructionism, for here the prevailing theme is that there is an independent reality which each individual perceives only imperfectly, but which can be understood more fully with feedback that can validate or invalidate what was initially believed. This is applied not only to physical reality but also to social realities, whose many ramifications may not all be understood by any given individual, but whose feedback nevertheless forces the decision maker to change course in spite of whatever predilections that decision maker may have. To take a trivial and non-controversial example, the initial decision of the Coca- Cola company to change the flavor of their drink to what they thought the public would prefer was rescinded with embarrassing haste when the market response belied the company’s expectations. Stock markets are likewise an ongoing economic referendum on what goods and services people do and don't want, often disappointing — and punishing — those who guessed wrong, even with the best professional advice available.

Given the crucial importance of feedback in using knowledge to make decisions, the transfer of decisions from one kind of institution to another raises serious and even grave questions as to which institution is inherently more open to feedback and which more thoroughly insulated from it. The nature of the feedback process is also important: Is it mere articulation, in which some may have great talents without a corresponding depth of understanding, and in which others may choose to listen to or ignore, or is it inarticulate but powerful mechanisms ranging from money to love?

Plain and commonsensical as this approach may seem, it goes directly counter to the way many of the issues of the day are discussed. Much of the literature on racial or sexual prejudices and their discriminatory economic effects, for example, proceeds in utter disregard of knowledge-validation processes, such as competition in the marketplace. It has often been asserted that women receive only about two thirds of what men receive for doing the same work. While this assertion is open to very serious challenge on empirical grounds,⁵ the more relevant analytical point here is that it treats employers' perceptions as if they were independent of the validation processes of economic competition. For women to be paid only two thirds of what men are paid for doing the same work with the same productivity would mean that an employer’s labor costs would be 50 percent higher than necessary with an all-male labor force. If all that was involved was blind prejudice, that might seem to be a viable situation. But even a cursory consideration of the economic implications of trying to compete and survive in the marketplace with labor costs 50 percent higher than they need be must at the very least raise serious questions. Similarly, the owner of a professional basketball team might read Mein Kampf and become a convinced racist but, if he were then to refuse to hire black basketball players, would there be no economic repercussions — or would he be more likely to disappear as a basketball club owner via the bankruptcy courts?

Note that what is involved here is not enlightened self-interest on the part of individual economic decision makers but the systemic effects of competitive processes which winnow out those whose decisions diverge most from reality. Under special circumstances, such as those of a government-regulated monopoly or cartel, the costs of arbitrary discrimination can be reduced or eliminated, thereby allowing discrimination to continue indefinitely because of insulation from market feedback. The point here is not that discrimination is impossible, nor even an attempt to assess how much discrimination there is. The point is precisely that we must look at the actual characteristics of decision-making processes — their incentives and constraints — if we want to gauge the likely outcomes of particular decisions in particular circumstances. Put differently, sweeping assertions about the consequences of perceptions alone — even racist or sexist perceptions — ignore inherent circumstantial constraints, such as those affecting dogs, bats, and people. Much, if not most, of what is said about many of the great issues of the day pays little or no attention to these kinds of concerns, which predominate in the first half of Knowledge and Decisions.

The growing prevalence of words like “perceptions,” “stereotypes,” and “socially constructed” serves ultimately to mute or eradicate the distinction between ideas and realities. Yet it is precisely the role of feedback through decision-making processes to sharpen that distinction. The disparagement of facts in history, or of original meanings of words and phrases in the Constitution, is part of the more general tendency to treat reality as plastic and the fashions of the times as equal to, or better than, the evolved understandings produced by experience and validated by the assent of successive generations. When works of literature which have gained the respect of generation after generation of readers are called “privileged” writings, not only is a validation process made to disappear into thin air but the very concept of achievement ex post is equated with a privilege ex ante.

Economic achievement, for example, is often seen as mere “privilege” and failure as “disadvantage,” again obliterating the distinction between the ex ante and the ex post, to the detriment of any empirical study of the foundations of achievement and failure, since the very distinction itself vanishes by verbal magic.

ECONOMIC TRENDS

Knowledge and Decisions was published some months before Ronald Reagan was elected president of the United States. His eight years in office were marked by both by changing economic conditions in the United States and by changes in economic decision-making institutions and processes — the “Reagan revolution” — that were imitated by many other countries around the world. Whether that revolution marked an enduring change in economic and social institutions, or just another passing blip on the great screen of history, is the large, unanswered question of our time.

The most striking aspect of the decade of the 1980s in the United States was that it marked the longest peacetime economic expansion in history.⁶ Despite various attempts to rewrite this history,⁷ standards of living rose in the country at large and government tax receipts rose by hundreds of billions of dollars, even as tax rates were reduced. The enduring significance of this economic boom was that it inspired other governments, of both the political left and right, to make similar institutional changes, such as privatizing government-run enterprises and reducing the degree of government regulation in general. As far away as New Zealand, “Reaganomics” inspired “Rogernomics,” named for finance minister Roger Douglas of the Labour Party, who instituted similar policies there. Many third-world countries which emerged into independence during the 1960s and took socialism as axiomatically both the most efficient and the most humane form of economy were nevertheless later forced, either by their own bitter experience or by the demands of outside lending agencies, to privatize and deregulate their economies.

All this represented a break with the trends discussed in Chapter 8 of this book, toward a movement of economic decisions into governmental institutions. One symptom of the change in the United States was that the steady growth in the size of the Federal Register, which records government regulations, was not only stopped but reversed during the Reagan years. However, the growth in the size of this compendium resumed immediately under Reagan’s successor and political heir, George Bush. Neither the trends set in motion under the Reagan administration nor the opposite pre-Reagan and post-Reagan trends can be simply extrapolated. What is clear is that the trends in the evolution of economic decision-making processes, discussed in Chapter 8, remain as unsettled as they are crucial to the economic well-being of peoples around the world.

TRENDS IN THE LAW

Long-standing legal trends, like long-standing trends in economic decision making, began to be seriously challenged for the first time in the 1980s, often by Reagan administration appointees to the federal bench. However, there were also serious intellectual challenges as well from academic supporters of property rights,⁸ from the “law and economics” school of thought, located in various universities, and from critics of trends in criminal justice, most notably Professor James Q. Wilson.⁹ However, legal developments since 1980 have not been a simple counter-trend by any means, for new leftward movements also developed during this period, including “critical legal studies” and “feminist legal criticism” in academia and further extensions of judicial activism in the courtrooms. Moreover, even conservative judges and Supreme Court justices went along with some of the continuations of the leftward movement in the law, both before and after 1980.

From the standpoint of our concern here with decision-making processes, what is crucial is not whether particular Supreme Court decisions, or even the whole trend of them, has been toward policies favored by the left or the right. What is crucial is how these decisions have changed the locus of decision-making and what that implies. In the case of Griggs v. Duke Power Co., for example, the U.S. Supreme Court in effect transferred the decision as to whether to use mental tests in hiring decisions from employers to the federal courts in general and, ultimately, to itself in particular. The basis for this sweeping transfer of decision-making authority from thousands of highly disparate and complex settings across the country to nine individuals in Washington was the simple plausibility of the idea that the validity of a test depended on its having a “manifest relationship to the employment in question” which could be demonstrated conclusively to third parties. Reasonable as this might seem at first, it presupposes far more knowledge than anyone possesses.

Most decisions in most aspects of life cannot be demonstrated conclusively to third parties — particularly not to third parties lacking the experience, the training, or the personal stake of those involved. More fundamentally, the validity of a test, or any other criterion, is an empirical question, not a question of plausibility to observers. Empirically, general tests of intelligence have had far higher correlations with subsequent job performance — however measured — than such alternatives as tests of particular skills used in particular jobs, individual biographical or career information, job interviews, or references.¹⁰ There is no reason for judges to have known this, nor can “expert” testimony necessarily fill in the gaps for them, since nothing is more certain than the testimony of opposing experts, while the ability to weigh conflicting testimony may require as sophisticated an understanding of an alien field as deciding the initial question itself. The Griggs decision, written by conservative Chief Justice Warren Burger, effected a major centralization of decision making, making bureaucracies and courts the determiners of employment fitness, and transforming a once-voluntary agreement into an officially prescribed action, controlled by people who pay no consequences for being mistaken.

Although Griggs was a landmark decision, in another sense it was not a new trend but an extension of an existing legal trend toward the concentration of decision-making power in government in general and in the nonelected organs of government in particular. What was new, beginning in the 1980s, was a developing resistance to such trends, reflected often in cutbacks in the scope of earlier activist decisions or, in some cases, in reversals of these earlier decisions of the post-New Deal era, including the Warren Court years. A landmark in this new trend was the 1995 case of United States v. Lopez, in which blanket extensions of Congressional legislative power under the commerce clause of the Constitution were called to a halt for the first time in more than half a century.

The specific issue in the Lopez case was whether Congress had the authority to forbid the carrying of guns in the vicinity of schools. There was nothing in the Constitution authorizing Congress to pass such legislation and, moreover, the Tenth Amendment forbad the exercise of federal powers not specifically authorized.¹¹ Yet, for decades, adventurous extensions of federal power had been justified and validated by the courts, using Congress’s authority to regulate “interstate commerce” as an escape hatch from the constraints of the Tenth Amendment. Even a farmer who grew wheat on his own land for his own consumption was held to be engaged in interstate commerce, and was thus subject to federal edicts.¹² With such an elastic definition of interstate commerce, the floodgates were open — and remained open for decades. Therefore the simple, common sense conclusion that someone carrying a concealed weapon near a school is not engaged in interstate commerce came as a thunderbolt more than half a century later — and squeaked by the court with only a five-to-four majority.¹³ The narrowness of the vote suggests again that developments since 1980 in the law, like social and economic developments, represent no clearly decisive changes, though they have the potential to become such.

One measure of how far the general public’s sense of the law has changed over the years is that much editorial discussion of the Lopez decision focused on whether it was a good idea to ban guns near schools. Such bans have in fact been enacted by many state governments, which have every constitutional right to do so. The real issue was the scope of federal power under the Constitution, but this issue — on which freedom itself ultimately depends — was often lost in the shuffle, not simply because media journalists did not go into deeper legal issues, but also because courts themselves, especially during and since the Warren Court era, looked upon many cases as policy-making exercises based on moral philosophy rather than being based on a Constitutional legal system. Strong negative reactions from the media and from the law schools to the recent trimming back or reversal of judicial activist decisions of the post-New Deal decades have included denunciations of the very idea of overturning precedents — often made by people who applauded the Warren Court’s overturning of precedents of older vintage. This too makes a clear-cut change in trends difficult to see or predict.

POLITICAL TRENDS

In general, the political trends discussed in Chapter 10 remain a matter of “embattled freedom,” as described in the last section of that chapter and of the book. The political role of intellectuals in particular remains very much what it was in 1980, including “the totalitarian thrust of the intellectual vision,” while “the rampaging presumptions” mentioned there have continued unabated. Perhaps the most striking example of these presumptions was the 1993 attempt to have the government in Washington take over the entire medical sector of the country — an attempt spearheaded by people with neither medical training, hospital management experience, nor expertise in pharmaceutical research or even in the running of a drugstore. That this attempt ultimately failed does not negate the fact that it looked very much as if it would succeed for quite a while. Moreover, the political methods which brought this attempt so close to success may well prevail in other issues, where a sufficiently strong counterattack does not develop as quickly or as effectively.

The strongly pessimistic tone of the last chapter of Knowledge and Decisions in 1980 can now be moderated by subsequent experience — a feedback mechanism very appropriate to this study of feedback mechanisms. While political plans and schemes for overriding the decisions of people with knowledge and experience by government officials with power and articulation continue to be formulated in the political arena or imposed by federal courts loosely “interpreting” the Constitution or the statutes, opposition to such trends has also grown over the past fifteen years, so that the ultimate outcome is at least in greater doubt than it seemed to be in 1980. On the international scene, the “remote hopes” of changing totalitarian governments referred to in the last chapter have already been realized in Eastern Europe. There are few developments on which it is so gratifying to be proved wrong.

Nevertheless, the political forces described in Knowledge and Decisions have by no means been vanquished, even if they have been dealt a setback, and they may yet be resurgent, either at home or abroad. The political situation today is much like the military situation described by British Prime Minister Winston Churchill in 1942, after a British army finally won a battle against a German army: “We have a new experience. We have victory — a remarkable and definite victory.” But he cautioned:

What has happened politically since 1980 is perhaps the end of the beginning of a worldwide drive toward ever more sweeping government control of individuals and institutions — a drive which, in the 1930s, caused many even in the democratic world to speak of totalitarianism as “the wave of the future.” World War II put an end to one kind of totalitarianism but it was nearly half a century later before the surviving totalitarianism of the Communist world suffered its first major defeat with the collapse of the Soviet Union and the freeing of its Eastern European satellite nations. If this turns out to be no more than the end of the beginning, it is still a very welcome end to a very ominous beginning that included an unbroken series of massive territorial expansions for the Communist bloc around the world.

If nothing more, a new century can begin without the dark cloud that hung over most of the twentieth century.

SUMMARY AND CONCLUSIONS

The unifying theme of Knowledge and Decisions is that the specific mechanics of decision-making processes and institutions determine what kinds of knowledge can be brought to bear and with what effectiveness. In a world where people are preoccupied with arguing about what decision should be made on a sweeping range of issues, this book argues that the most fundamental question is not what decision to make but who is to make it — through what processes and under what incentives and constraints, and with what feedback mechanisms to correct the decision if it proves to be wrong.

Those convinced that they have “the answer” on whatever economic, legal, social, or other issues are the preoccupation of the moment are of course impatient with questions about institutional processes and their respective advantages and disadvantages for making different kinds of decisions. That is all the more reason for others to look beyond the goals, ideals, and “crises” that are incessantly being proclaimed, in order to scrutinize the mechanisms being proposed in terms of the incentives they generate, the constraints they impose, and the likely outcomes of such incentives and constraints. Where these mechanisms insulate the decision makers from the forces of feedback, the dangers are especially great, not only in terms of counterproductive consequences but also in terms of a steady erosion of freedom.

The intellectual debt I acknowledged to Professor Friedrich Hayek in the first edition of Knowledge and Decisions must be repeated here. He was one of those people who fit Justice Oliver Wendell Holmes’ definition of a great thinker with great impact on the world. The hallmark of such a thinker is not personal notoriety but the fact that “a hundred years after he is dead and forgotten, men who never heard of him will be moving to the measure of his thought.”¹⁵ Hayek's thought, though little known to the general public even within his own lifetime (the Nobel Prize committee being an exception, however), has inspired numerous other scholars, writers, activists, and organizations around the world. I am proud to say that he inspired Knowledge and Decisions and especially proud that his book review gave it high praise.¹⁶

Others whose help was acknowledged with the original publication of this book include my editor and friend, Midge Decter, whose advice also caused me to reshape my later book, The Vision of the Anointed, even though she was no longer an editor by then. Finally, a special acknowledgment must be made to a lady whose critiques of the manuscript and whose “friendship and encouragement” were mentioned in the original acknowledgment and who is now my wife. For me, that is the most dramatic and most positive change since this book first appeared.

Thomas Sowell

Hoover Institution February 4, 1996

ACKNOWLEDGMENTS

The debts to be acknowledged in the writing of this book are so numerous and varied that any listing must be partial, and accompanied by apologies to those not mentioned.

Intellectually, this book is a product of an odyssey of the mind that goes back more than three decades. Those from whom I gleaned particular insights have ranged across the philosophic spectrum, from Karl Marx to Milton Friedman, and the fields have ranged from biology to law. If one writing contributed more than any other to the framework within which this work developed, it would be an essay entitled “The Use of Knowledge in Society,” published in the American Economic Review of September 1945, and written by F. A. Hayek, later to become a Nobel Laureate in economics. In this plain and apparently simple essay was a deeply penetrating insight into the way societies function and malfunction, and clues as to why they are so often and so profoundly misunderstood.

The immediate environment within which the research for this book began was the Center for Advanced Study in the Behavioral Sciences, in Stanford, California, where I was a fellow in 1976-77. Preparatory planning for this work was begun during 1974-76, when generous grants from the American Enterprise Institute in Washington, D. C., and the Hoover Institution at Stanford University permitted me the time needed for reflections and reconsiderations. Several months in residence as a Senior Fellow at the Hoover Institution in 1977 enabled me to complete the research begun at the Center for Advanced Study and to proceed with the writing.

The person with whom I discussed this book most during its writing was Mary M. Ash, an attorney in Palo Alto, California. Her legal mind was helpful in her critiques not only of the discussions of law but also of material throughout the book. Her friendship and encouragement sustained my efforts and my spirits.

A two-day conference in 1978 at the Center for Law and Economics at the University of Miami was organized around a paper of mine on legal issues, and provided an invaluable experience in confronting leading scholars in law, economics, and political science with the ideas that form the foundation of this book. The generous support of the Liberty Fund in Indianapolis, Indiana, made possible this gathering of distinguished scholars from all parts of the country, and the generous permission of Professor Henry G. Manne, Director of the Center for Law and Economics, has made possible the incorporation of that paper into this book. Other discussions of the book’s evolving themes were held at the University of California at Berkeley, Wesleyan University in Connecticut, the University of Maryland, and San Jose State University in California. I learned something from all of them.

The support, enthusiasm, tact, helpfulness, and wisdom of my editor, Midge Decter, have been of inestimable value during what seemed like interminable years of writing, and in smoothing what can be a rocky road between the manuscript and the finished book. All the good things I had heard about her proved to be true, and I am pleased to hereby amend my longstanding belief that the only good editor is a dead editor. (A couple of other possible exceptions also come to mind.)

These contributors are only the tip of the iceberg. Many librarians, colleagues, secretaries — and especially the marvelous staff at the Center for Advanced Study — have helped me along the way.

In the end, however, after all the influences, aiders and abettors, responsibility for all conclusions and errors is mine.

Thomas Sowell

University of California, Los Angeles May 9, 1979