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Comment by hprotagonist | Hacker News Reader

https://www.jerrypournelle.com/reports/jerryp/iron.html

  Pournelle's Iron Law of Bureaucracy states that in any bureaucratic organization there will be two kinds of people:

    First, there will be those who are devoted to the goals of the organization. Examples are dedicated classroom teachers in an educational bureaucracy, many of the engineers and launch technicians and scientists at NASA, even some agricultural scientists and advisors in the former Soviet Union collective farming administration.

    Secondly, there will be those dedicated to the organization itself. Examples are many of the administrators in the education system, many professors of education, many teachers union officials, much of the NASA headquarters staff, etc.

  The Iron Law states that in every case the second group will gain and keep control of the organization. It will write the rules, and control promotions within the organization.

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Almost all the examples discussed are government or social institutions, but it really applies more widely. Large corporations should be included, and even whole economies. A more general word instead might be "systems".

If you look at the historic prime growth and productivity eras of national economies of the US and China, some of the most productive eras were early on when large scale systems (corporations, institutions, etc) simply didn't exist. In the primary build phase, growth was huge even though the investments and actual tasks required were huge. But as the 50s/60s US Economy, and the 90s/00s China economy filled in with existing systems there is a phase transition. Productivity slows. Even when you have more resources, and more solved problems, more skills available, productivity slows. And IMHO, it directly relates to this inversion of administration vs actual work.

The most productive eras corresponded to when the economies were most free market.

This is apparently true of the past 200 years, but I wonder if it’s not causal?

There were millennia of unbelievably open markets which were marked by almost no growth at all.

There has to be unrealized economical potential for growth. And there has to be shifts either in that potential, or in the machinery that uses it for change.

Think of it like a potential gradient, or a gravity well, or a food source in biology.

Open markets where markets have been open for awhile (and no new game changing things like new technology, new ideology, etc. have happened) will maintain homeostasis at that level.

If new technology gets introduced, unless there is strong closed market forces to keep it from spreading, then you’ll have change (in this case growth) faster with open markets. It will equalize the potential faster.

Which, depending on who you are, may be desirable or not.

> There has to be unrealized economical potential for growth.

Free markets have always found that potential.

Free markets help, but are not by themselves sufficient. Equalizing that potential is also not always in the interest of many parties.

You don’t have to go back very far in history to find plenty of examples.

Recent history has had massive and rapid technological development, and it’s been relatively easy to find win/win trades, so it’s easy to think it is.

But the Caribbean slave trade, or US Deep South cotton trade, or Indian spice trade? Eh…. A little less clear.

> Free markets help, but are not by themselves sufficient.

Example?

> Caribbean slave trade

And yet the free market in the US buried them, and the Caribbean remains poor.

I don’t think you have the history here.

Technological development - decent ships, actually good and reliable navigation, and knowledge of exploitable opportunities (sugar markets, and later cotton).

Energy gradient - cheap labor (in the form of slaves) in Africa, cheap arable land (Caribbean, US, South America), hungry markets with excess wealth in Europe.

First, the Caribbean got exploited (with open markets!) rather brutally, until the slave rebellions starting in 1790, and further escalating.

Haiti in particular, won their rebellion - and then were completely economically isolated (by closing the market!) by the European powers. They still have not recovered economically, same for most of the Caribbean.

Around this time is when the US markets (less ideal to exploitation, but larger and more controllable) in both sugar cane and cotton started to take off using the same sources.

Which fueled significant tension between the northern states (no crops easily amenable to slavery, rather being capital manufacturing, livestock, and secondary goods like weaving/textiles) and the southern states (many labor intensive crops, amenable to slavery).

Attempts at controlling the open markets in these crops by dissimilar interests (by either banning slavery or by blockade) is what led to the civil war.

The south couldn’t ban slavery without bankrupting their economy. The north couldn’t allow free trade/slavery continue without making themselves less competitive, as Europe has more developed textile mills and heavy manufacturing. So them getting the goods directly was undercutting northern US competitiveness.

Notably, the British, being the first into the Industrial Revolution and the furthest along, were also the first major European power to not just ban slavery in their country - but all their colonies, and everywhere else they could reach.

To cut off the ‘energy gradient’ of cheap labor, and make their products (more capital intensive manufacturing) more competitive.

The Caribbean is poor because they rebelled against exploitation, but couldn’t capture the economic engine that was exploiting them - they got bypassed by a competitor.

And by the time their competitor (US Deep South) also got broken, the underlying energy gradient that led to them being exploited at all was cut off.

So all they had left was ruins, debt, and disease.

Sucks to be them.

So, depending on how you measure ‘good’, they’d have probably been a whole lot better off with a closed market that would never have let the initial energy gradient be formed to begin with, eh? Or at least not allowed the extremely rapid and rapacious exploitation.

Think of open markets as a full open floodgate, and closed ones as having a valve at various degrees of closed off.

Flooding is very ‘profitable’ if you can somehow harness it (very difficult to do), but can be very unpleasant and destructive for those caught in its path. It’s nearly impossible to die of thirst in a flood.

Restrictive flow doesn’t product as much ‘profit’ but has the potential to produce more desirable outcomes if used effectively. As long as the dam doesn’t burst of course. If the valve is misused or turned off, it’s easy for some (or even all) to die of thirst.

Pick your poison.

And yet the free Northern economy buried the slave Southern economy. How does that fit into your theory? And how the entire country boomed after slavery was abolished?

Free economies always outperform slave labor, by a large margin.

> Technological development

Oddly enough, happens first in free market countries. Turns out, you can't build a technological economy using slaves.

The Caribbean countries would be prosperous if they'd try free markets instead of socialism and communism.

Huh?

The northern economy was MORE CLOSED than the South. For one, they banned slavery first. They had more import/export controls.

The south was as free and open* as you could imagine - anyone with the Capital could buy a slave, or sell goods, etc.

Trade was minimally restricted.

(* Notably, if you were a "free man". Slaves, Women, Children, and sometimes Indentured Servants all had significant restrictions on rights across the board in both locations that were very similar - both de jure and de facto).

The North were the ones blockading the South, not the other way around.

[https://history.state.gov/milestones/1861-1865/blockade]

The current Caribbean countries are also currently free markets? At least from what I can see.

Plenty of 'international banking' in many of them too.

Haiti finally paid off the restitution the French have been making them pay since the slave revolt back in 1947 [https://en.wikipedia.org/wiki/Haiti_Independence_Debt], and seem to be slowly gaining ground again.

The Dominican Republic (on the same island, other side of the fence, different government due to a revolt in the ~1850's) has been doing quite well for a long time, I think partially because they don't have to pay that debt back, being a "different country" and all. And they generally don't have the various travel blacklists that Haiti has had.

I suspect the argument you're trying to make is that mechanization/automation (and it's helpful companion, Capitalism) beats slavery.

Which I definitely agree with. One beneficial advantage being that it frees up people to do more thinking (and less, well, slaving away) and benefits significantly from economies of scale - both for the Capitalists, and everyone else. Which is why inventing is so useful (when it won't get stomped on by monopolies, anyway).

So it's mostly a beneficial cycle, as long as monopolist tendencies get reined in and someone is watching things to ensure it doesn't get too abusive. Unlike Slavery.

Slavery is also despicable in general, so I personally am glad to see it gone.

Free/Open/Closed/Restricted markets are not necessarily good or bad, independent of the circumstances - same as guns, IMO. They do have predictable outcomes, if used in predictable ways though.

The more closed, the more problematic IMO, but I have yet to see a truly open market (aka a black market, perhaps?) without some really nasty abuses of it's own. So YMMV.

You keep trying to equate slavery with freedom and prosperity. It doesn't work. Forced labor is not free labor, and slaves are significantly less productive than free labor, for obvious reasons.

The Southerners used slaves for cotton and tobacco farming. It was the only industry that could eke out a profit with them, and even that was failing by the 1850s.

The Northern economy BURIED the Southern one. That's why the South wanted to secede. It wanted to protect itself from the North. The North also won the war because they enormously outproduced the South in arms, uniforms, railroads, food, everything needed to fight.

The reason for the Gettysburg battle was Lee was headed for Harrisburg to loot the shoe factory there, because the Confederate army was barefoot.

Except I’m literally not?

Maybe you should actually read my comment?

They were fundamentally different, that’s the point. Just not in the way you seem to keep trying to say it is.

Industrialization and automation wins over slavery.

Which is a good thing! And literally what I said in my comment.

Free markets win over slavery even in a pre-industrial society.

Consider that no country that had slave agriculture has ever been able to feed itself. Even with tractors.

The Roman Empire? [https://www.bartleby.com/essay/The-Roles-Of-Ancient-Roman-Sl.... ]

Spartans and the Helots? [https://en.m.wikipedia.org/wiki/Helots]

Plus a dozen other examples from antiquity and recent history - including the Confederate states before the blockades and sanctions due to their use of slavery.

What are you even talking about?

From your cite:

"An estimate of the slave population in the middle of the second century, when the Republic was at its peak, was over fifteen percent"

The Romans couldn't have produced enough food with only 15% of the population. Not even close.

As for the Spartans and the Helots, isn't it interesting you have to go back 2000 years to a society of which very little is known? Spartans left behind very little writing, what we know of it comes from their enemies.

The Confederacy used slaves for cotton and tobacco, not produce.

Lol. From the beginning of my cite

"Slaves increased the economy, fed the entire republic through agriculture, and they also upheld important roles and was the glue that held Ancient Rome together. Slaves played a huge roll in Ancient Rome and was the reason for the great economy and without the slaves Rome would not have been as powerful as it was. "

Total US employment in the food industry (not just farms) is 10% of US employment, and only 5.5% of GDP.

Slavery is terrible. But pretending humans haven't used it (successfully) to run civilizations at scale is just being willfully obtuse.

Goodbye.

> Open markets where markets have been open for awhile (and no new game changing things like new technology, new ideology, etc. have happened) will maintain homeostasis at that level.

I think "homeostasis" is overselling it, even if I agree in the short to medium term.

Any growth potential leads to pressure to take advantage of it, which leads to runaway growth until some sort of scarcity sets in, where one entity's ability to exploit the potential is decreased by other entities'. This leads to competition, which results in pressure for each entity to take advantage of more of it than other entities, which leads to entities evolving ways to restrict others' consumption even at the expense of their own. Free markets expand consumption of potential to the point of scarcity, at which time they produce evolutionary pressure towards non-free markets (via monopolies, regulatory capture, or whatever else is available).

It's like a nutrient-rich drainpipe getting so clogged up with algae that the water stops flowing. Or fishing, where it's all good until you start making a serious dent in next year's breeding stock.

Free markets in times of plenty can produce massive benefits. They raise people out of poverty, dramatically improve healthcare and education and opportunities, etc. AFAICT, they're the most powerful mechanism for doing so. And then eventually, they consume themselves.

I take back the complaint about using "homeostasis". After all, it applies to systems that will eventually die.

When a creatures homeostasis gets too out of whack, yes - it dies. Notably, I have yet to see any system that won’t die eventually. The giant Communism experiment died in the 90’s, for one.

Luckily, most have mechanisms to adjust - if they’re willing and able to do so.

Cancer, notably, is one such situation that hijacks that mechanism. I’d argue that culturally, we have such a cancer forming right now. And it’s not capitalism, or communism, or politics, or guns or anti guns, or whatever.

It’s our inability to focus on and care about what we, as individuals, actually need and want, and push for it.

An inability actively being grown and reinforced by a number of entities - and allowed because we refuse to acknowledge our weaknesses too.

The problem isn't scarcity actually. If you have scarcity, "it just works".

It is in fact the opposite. Capitalism fails due to inevitable relative abundance. At some point you reach market saturation. Present abundant resources should be allocated to the future. This doesn't happen. When abundance happens, you no longer need full employment to produce all present consumption needs. However, the principle of hiring the most productive employees and letting them work full time results in the redundancy and unemployment of less productive people, because hiring a single employee has less fixed costs than hiring two employees assuming they both perform the same amount of work. The paradox is that the more productive person is producing the consumer goods of the person that was let go. That unemployed person can't afford to buy his own consumer goods since he doesn't get paid to produce them, because it saves the employer fixed costs. You could think of this as a greedy knapsack algorithm. This algorithm works while there is scarcity, since you can just hire all workers. It doesn't work when there is abundance, since workers have to earn enough income to buy their own products. Note how this relates purely to the structure of the economy. Now the classical objection to this is that the workers who produce but don't consume will save instead, which lowers the interest rate. This is supposed to happen even if the interest rate is already at zero or even negative. The capital market signals that present resources are supposed to be allocated to serve the future. This allows employers to hire the unemployed workers and let them work to satisfy future demand, such as interplanetary travel and colonization of the moon or building pyramids that last more than four thousand years.

> Capitalism fails due to inevitable relative abundance

If it's inevitable, there ought to be compelling examples?

It's true for the last thousand years at least. A thriving middle class appeared in northwestern Europe a thousand years ago, a middle class of merchants and other businessmen.

Which middle class would that be, in 1024? The merchant princes came later, centuries later in fact.

The only that would remotely qualify would be guild organized professions, and even those rose to prominence in the high and latr middle ages.

If I recall correctly, it was most apparent in the Netherlands with the textile industry. It wasn't princes, it was commoners setting up shops etc.

The funny thing about all those guilds, as those were necessary to create something of a non-peasant class in the cities, is that zhey were absolutely not free market. They fixed prices, limited output, set salaries, limuted the number of workshops. In a sense, they were as much labor union as they were oligopols.

What we consider free market came with the industrial revolution and colonialism and the national companies created to exploit those colonies. The first signs of that can be traced to the early renessaince era, with Italian merchant princes, the Fugger and the Hanse. Those were still subserviant to nobility and aristocratic rule so, while the industrial revolution capitalists and colonial companies were much less so.

Fun fact: The workers building cathedrals were fully unionized, with all the benefits that's with that: limited work hours and days, health care, social security.

The places where the guilds had more power were less prosperous.

The places were the guilds had power were the prosperous places up until the early modern age and the rise of manufacturing in the run up to the industrial revolution: medieval towns and cities, added benefits if those towns had noble rulers that allowed, for various reasons, a high degree of independence.

Examples include the Hanseatic League (run by the various merchant guilds as a de-facto state) ans every single city in what now is Germany or Austria. Up to the point the rural nobles constabtly feuded with those cities.

You saidb t yourself, the textile manufacturer guolds of the low countries contributed a lot to the prosperity of those places, same for England. And for a long time, the trade between those cities was run by the Hanseatic League (which were arguable a lot closer to modern day capitalism than a local crafts guild).

My source is "The Victory of Reason" by Rodney Stark starting on page 131.

https://www.amazon.com/Victory-Reason-Christianity-Freedom-C...

Linking all of Europes success during history, up to WW1 arguably as far as sucess goes, to Christianity is at best a fringe view.

What does the book have to say about which kind of christianity is the source of all of that? Cathlocism, protestantism (which one?), the orthodox church (again, which one?)?

And how does Enlighment fit into all of that?

Edit: Focusing on the West is also extremely reductive. Up until colonialism really got started, the Mongols dominated the far east, China was a major economic and scientific power. None of which were even remotely Christian. It is true so, that the Western form of guilds is directly linked to European christianity. As the mongols and China show us so, there are more ways to prosperity than the "Christian" one.

Why not take a look at the book? It's an easy read, and there's far too much of interest to quote here.

The religious angle is not relevant to this discussion. It's about the emergence of free markets in the Netherlands, and the results.

As for China, China invented a number of things, but failed to apply them like the West did. For one take on why, see the book "The Triumph of the West" by Roberts

https://www.amazon.com/triumph-West-J-M-Roberts/dp/076070850...

In modern times, China adopted free markets with spectacular results.

I don't know those specific books. I do know the pop-history trend of late that paints European dominance, starting in the 1500s and ending somewhere around WW1, in a certain way. Meaning Western capitalism, bonus points for including a religious angle, as the absolute superior. And that ignores a number of things:

It fails to look at the medival period as different, distinct periods. It also fails to brake those down by region. That can be called cherry picking.

It fails to look at all of that im context, especially by ommitting the history of the other side of Western dominance. That history is directly linked, after all Western dominance required a counter part to be dominated. So whatever happened at the other end is crucial to understand the shared history. This can be called ignorant.

And last but not least, this view on history is used to drive political narratives. As is the opposite political bias that shows in other books and papers. I do not like neither, historians shoupd at least try (one cannot be fully neutral ever) to be impartial and provide an objective study of history. Late pop-history doesn't do that.

> I don't know those specific books.

But you dismiss them anyway. I'm not impressed.

The last two hundred years saw the amount of energy available increase 50X.

The US is into free markets because historically it's interests were anti-mercantilist.

The amount of energy available hasn't changed in a billion years, only the activities of humans has.

Please don't make silly comments like this.

You don't think the social context in which the energy was made available has anything to do with the fact that the growth occurred?

Also when currency was backed by commodity that made limits by sources. With fiat money, there are no limits and companies / governments crippling free market. (or natural resources like environment etc.)

Define “free”. Most modern Asian capitalist economies have never been very “free” in the American sense of “free market”. They’ve always been heavily guided by government policy.

I think the most productive eras are really when everyone is picking low-hanging fruit. And the low-hanging fruit only seems so low because there’s been a burst of newly available mechanical technology. Then everything is picked clean, productivity drops, and the economy shifts to prioritizing useless consumption.

"The free market is an economic system based on supply and demand with little or no government control. One of the central principles of a free market is the concept of voluntary exchange, which is defined as any transaction in which two parties freely trade goods or services."

-- google "free market"

Voluntary is carrying a lot of weight there. Do we voluntarily trade money for bread or freely choose starving as an alternative? What is to prevent those who control the bread from coercively taking every penny you have?

A free market without government control is an adolescent fever dream. Nothing like it has ever existed or ever will. The question is not whether there will be government control, it is how much?

The purpose of government in a free market is to prevent use of force & fraud in transactions, and to enforce contracts and property rights.

> Nothing like it has ever existed or ever will.

The free North in the US.

Doesn't this depend on how you define productive? If GDP is your metric, I think it probably correlates well - despite the fact that the 50s and 60s weren't particularly free market (wage restrictions, high taxes, etc.) when compared to say 1930 after the free market collapsed.

But my larger point is that I think "free market" eras also correspond with worse quality of life for the majority of citizens. I'm thinking things like pre-safety-regulations industrialization in the US; the environmental catastrophe that was the 60s (so bad that it led Nixon to create the EPA); the affordable housing catastrophe that has been the past 15 years.

We can obviously produce more if we don't have to worry about externalities like "worker safety", "being able to afford rent", or "habitable environments". Free markets create conditions where externalities aren't as important.

"Free Market" here refers to "free from economic rent"

That is not a common definition of free market.

Whenever I hear people talk about free market it is usually not in the sense of economic freedom or free software. So you are correct. It generally refers to free as in free beer aka the government is supposed to subsidize the private sector and average citizens are supposed to pay for it. I'm not talking about socialists here, I'm talking about neoclassical economists and neoliberals in business and politics.

Almost nobody wants to pay for the pollution they cause via CO2 taxes. Meanwhile income taxes are considered efficient despite their dead weight loss. Everything is upside down on this planet when it comes to economics.

I’ve literally never heard of someone defining a free market as a market with government subsidies.

It’s usually defined as a market free from (excessive) government control.

I think you might be trying to shoehorn domestic policy concerns into a broader definition of free markets.

That was Adam smith's definition when he coined the term...

> 1930 after the free market collapsed

What collapsed were the banks, due to mismanagement by the Fed (the government). In particular, it was trying to maintain a fixed (government specified) exchange rate between gold and money while inflating the money 2:1.

Like all such pegging schemes, the result was a run on the banks, leading to their collapse. This (finally) stopped when FDR made it illegal to exchange gold for money.

Man why must Hacker News be so chock full of the most devoted followers of right-libertarianism

> We can obviously produce more if we don't have to worry about externalities like "worker safety", "being able to afford rent", or "habitable environments". Free markets create conditions where externalities aren't as important.

You're conflating two different things here.

Pricing externalities is part of a functioning market, but most of those things aren't externalities. Pollution is, but free markets where emitting pollution is priced can still be competitive, they just take into account the cost of internalizing the externalized cost into the market price of the end products. Environmental regulations can be inefficient if they're poorly conceived or impose excessive administrative burdens, and that's a problem, but you can have simple rules like "no leaded gasoline" and "no dumping mercury in the river" without destroying the free market.

Whereas the reason housing is expensive isn't any market externalities, it's regulations that restrict where and how much of it can be built, and the supply of trade labor with which to build it.

The Soviet Union was very productive in some areas without a free market.

Like what?

Typically raw materials required by military.

They built up a massive industry of mining and processing raw materials like aluminum, titanium and steel.

Slave labour can be highly productive.

Private companies, I think, have some limits. Governments can always raise taxes or print more money to sustain their otherwise insolvent organization.

In other words they can be wasteful and top heavy without having to periodically pare things down through layoffs.

And definitely organizations that teach their initial goals will reinvent themselves to milk more money.

Monopolies and regulatory capture sustains insolvent organizations.. see Boeing.

This really isn't a private enterprise vs govt split. It's the system in place of how decisions get made, how resources are allocated. Our current system of the world has elements split in both private enterprise and gov't that as a system, exhibit Pournelles law.

This theory of division between private enterprise and gov't doesn't in practice limit the negative effects - in fact in think we live in a modern world where we should recognize that there are many many examples of this split failing to administer a solution to meet the needs of society & humans.

Boeing can still go bankrupt or become so financially strapped it needs to sell itself off, merge, split, etc. Governments rarely try to become more efficient. By and large they keep adding to their bureaucracies.

The ex Gov of Texas was made fun of for saying he’d eliminate parts of the executive and when asked couldn’t even remember which ones, never the less, there is a kernel of a good idea to retrench bureaucracies on a periodic basis -something when younger I’d dismiss out of hand because I though more govt always equals better.

Private enterprise in our current system stands in the way of government being more efficient. It's a prime example of administrators (in the form of capitol holders) standing in the way of better functioning.

Intuit / Turbo Tax standing in the way of better tax admin.

Pharma companies standing in the way of negotiated drug prices for medicare.

Power utilities standing in the way of rules allowing distributed power production.

The list goes on and on...

Do you think the VA hospitals run better than private?

I know that private medicare advantage plans are coming to be worse than gov't medicare plans and the private healthcare fights many improvements in medicare administration. Including wierd lobbied divisions between what the private plans are allowed to cover in areas that the public plans are not.

And on a system wide scale, US private healthcare is broken in both cost and performance when compared to comparably advanced nations.

I'll rephrase what I said in a different comment, and that the public/private division and arguing about which is "better" on an exclusionary basis is a big distraction on the failing of systems which include elements of both. "Free market or not" is mostly an immaterial distinction imho.

> "Free market or not" is mostly an immaterial distinction imho.

I don't think this is the right conclusion.

What you need is a competitive market. An uncompetitive market doesn't work. But a government is going to be a monopoly, which is the thing that doesn't work, whereas a market has the possibility of being competitive even if it is possible to screw that up.

US healthcare is a case in point. The healthcare system is highly regulated and the regulators are captured by the incumbents, so the regulations are designed to inhibit price competition between providers and keep costs high because those costs are the incumbents' profits.

In order to achieve the benefits of competition you would need rules that actually facilitate it. For example, if providers were required to publish pricing and then insurance would deposit into your HSA 90% of the median cost of a procedure among every provider within 100 miles of your address (equivalent to a 10% copay), and then you can choose where to go. Now there is no such thing as "in network" anymore and the patient has the direct incentive to be price sensitive, which in turn requires providers to publish competitive prices. But we don't do that, because it might work.

To be a bit glib there is no competitive market to give me an emergency surgery if my appendix has burst.

But in a sense I think we have some agreement that it’s much more interesting to discuss a set of characteristics than can make markets work to deliver value. I just think “free” isn’t a useful distinction because it’s approached usually a shorthand for free of regulation. I think that all markets are artificial and require rules to form a functional marketplace of exchange.

> To be a bit glib there is no competitive market to give me an emergency surgery if my appendix has burst.

This is what everybody resorts to when trying to claim that this can't work, but it's really more an excuse to not even try.

The large majority of medical spending isn't emergency care. You can't shop around for an appendectomy doesn't mean you can't shop around for a joint replacement.

> I just think “free” isn’t a useful distinction because it’s approached usually a shorthand for free of regulation. I think that all markets are artificial and require rules to form a functional marketplace of exchange.

There are a couple of different dimensions along which you can measure this. One is the type of regulation that exists.

Markets need externalities to be priced, otherwise companies will dump industrial waste in the river. That's one type of regulation.

Another is paternalism. You can't buy a huge soda because it will make you fat. That's not an externality. You're the one choosing to buy and drink the soda and you're the one who gets fat. You're the one who buys the poorly insulated house and you're the one who pays the heating bill. This isn't Alice doing something that hurts Bob, it's Alice doing something that hurts Alice. It's a different type of thing, and we could do without it entirely and still prohibit companies from polluting the rivers.

Likewise, some regulations are, shall we say, petty. Some might say illiberal. You can't put an addition on your house or finish your basement because then more people might live in it. You can hypothetically frame this as an externality, because then there might be more traffic or something, but the underlying premise would have to be that this is something other people have a legitimate right to prevent and that interest should override another person's interest in having somewhere to live. We could do entirely without this type of regulation too.

The other dimension is that regulations of actual externalities can be unnecessarily burdensome. You can pass a law against dumping mercury in the river and then fine anyone caught dumping mercury in the river. Or you can pass a law against manufacturing products without testing each and every one of them for the presence of mercury, even if you don't use any mercury in your manufacturing process, and then fine anyone who doesn't pay for testing, coincidentally by a testing company owned by a legislator's brother which employs a lot of people whose unions made some generous campaign contributions. Or just establish administrative agencies with too many bureaucrats who run out of anything legitimate to do and start to micromanage everything.

Regulating externalities efficiently is a hard problem and claiming that you can't have a free market unless you can remove externalities without any inefficiency is basically claiming that you can't have a free market. We could certainly do better than we do right now, and there is value in the attempt, but it's never going to be perfect.

Whereas the rules that are purely paternalism and politics? If the claim is that a market with those kinds of rules isn't a free market, that's a fairly legitimate claim.

I'll add a separate comment, because I don't feel I specifically addressed your observation that Boeing can go bankrupt, split, etc.

Boeing is today, the conglomeration of previous companies that did become distressed enough to be consumed or split and acquired. That actually exacerbated the systemic problems of the current Boeing. So this idea that private enterprise can't accumulate systemic issues seems like an optimistic concept that is invalidated by Boeing's current circumstances.

The current issues with Boeing are largely blamed on a merger with McDonnell Douglas that was forced upon Boeing by the US government. Now the US government gives many favorable conditions to Boing with regards to lucrative defence contracts as well as the US govt goes after Boeing would be competitors on their behalf (see Embraer). At this point it may make more sense to consider Boeing a for profit arm of the US government than any kind of normal business.

- Governments can always raise taxes or print more money.

Fiat money basically cripple the free market. We need decentralised currency for healthy free market that has limits in commodity.

Companies can be very efficient at keeping themselves in the market rather than providing real value. Rent seekers, mono/oligopolies, etc. examples are abundant.

Addl note on the phase change: administration might also be thought of as capital ownership in a economic or capitalist context where an inefficiency is protection or "administration" of large pools of existing wealth and profits becoming more important than the continued building of the creation of value and identification and solving of social problems through economic activity.

In particular, this would be capital ownership by independent investors who are only interested in abstractly making money and not being personally involved in business operations, and then hire managers afflicted with the principal-agent problem to handle the details.

Individual investors are actually pretty disenfranchised compared to concentration of financial parties like institutional investors and private equity. This those more collected interests which are happy to install a Professional Managerial Class that are only interested in the abstract financials and ignore principal agent mismanagement of long term interests. But concentrated fictionalization agents and PMC they appoint preserve their control above their ability to manage healthy growth. And our system is unable to check them.

> Large corporations should be included, and even whole economies. A more general word instead might be "systems".

For example Davita actively lobbies their patients not to get transplants [1]

[1] https://www.youtube.com/watch?v=yw_nqzVfxFQ

> If you look at the historic prime growth and productivity eras of national economies of the US and China, some of the most productive eras were early on when large scale systems (corporations, institutions, etc) simply didn't exist.

I really don't think that's correct. In fact GDP per capita was historically flat in most of the world, even through the early parts of the industrial revolution. It took off like a rocket only after WW2 in the pax americana era. I think that's an interesting argument to have, but I'm not going to believe that statement for an instant without numbers.

I agree with you that this law applies to any large organization.

But I disagree with the idea that the 50s/60s represent the end of an "early on" era of the US economy. Many large US corporations were already decades old the time WW2 started - John Deere was founded in 1843, GE in 1892, Castrol in 1899, Texaco in 1902, Ford in 1903, Chevrolet and IBM (under a different name) in 1911, Boeing in 1916. The biggest boom in the US economy happened during and just after the war, when much of the giants of today (except big tech, of course) were 30+ years old companies (and there were many .

I don't think bureaucracy was the problem with any slowdown, or if it was, it wasn't as inevitable as the law suggests.

In 2015, Chuck Palahniuk (author of Fight Club) talked about the same concept in an interview he gave about the graphic novel he was making as a sequel to Fight Club[1]

> my dream, or idea was that Project Mayhem and the whole organization would work to create empowered individuals who would go off to create their own visions. And that the organization itself would disappear. People weren’t meant to stay in it; the organization wasn’t meant to sustain its own power. Which was my experience with doing [Werner H. Erhard’s self-improvement training] EST. A lot of people who had a vision, who were empowered by EST — including myself — then went off to become the person they dreamed of being. That’s how I started writing. But a lot of people who didn’t really have a vision became part of EST. They really couldn’t bridge out of it. They just kind of perpetuated the power of the organization, because they didn’t have their own personal vision. And so what we’re seeing in Fight Club 2 is that Project Mayhem has crossed the line where it’s no longer about empowering people. It’s about maintaining its own power in the world.

[1] https://www.theverge.com/2015/5/27/8660881/fight-club-sequel...

To be clear, the Fight Club 2 limited comic series was indeed published in 2015 and concluded in 2016 after 10 issues, which have been collected into a graphic novel:

https://en.wikipedia.org/wiki/Fight_Club_2

I think the “Mars” books (red mars, blue mars, green mars) proposed an interesting economic idea.

In a world where automation and AI allowed physical stuff to be organized and built almost as easy as software, you didn’t really _need_ huge organizations (employee wise) to accomplish goals, so Mars came up with an economic setup that did not allow you to join an organization, unless you got hard equity in it, and the amount of equity you could have had a minimum of 1%.

So everyone worked for their own organizations and were incentivized for their success, and organizations couldn’t grow too big (100 people at most).

So you had lots of small organizations with well developed interfaces between them, because there were so many of them. And you could still acquire huge wealth, just couldn’t be a monopoly.

I mean its just sci-fi thought experiment, but it got me thinking maybe there are better economic systems out there, both equitable and free market based …

> came up with an economic setup that did not allow you to join an organization, unless you got hard equity in it, and the amount of equity you could have had a minimum of 1%.

Wow… we’re so deep into capitalism that worker cooperatives is a sci-fi concept now.

I think what the author was trying to explore is a society where _all_ the workers are forced to be in cooperatives, I guess kinda like Sweden with its mandated unions, but even more sharply defined. And what the downstream effects of it would be.

Another great related insight from Systemantics (see other thread below)

> For Every Human System, There Is A Type Of Person Adapted To Thrive On It. There are some attributes that are probably necessary for survival in any system, but each system has some uniqueness in the sense that it attracts different traits. It’s hard to tell what traits any given system attracts. The traits do not necessarily align with successful operation of the system itself e.g. the qualities for being elected president don’t necessarily align with the ability to run the country effectively. Systems not only attract people who will succeed within the system but also people with parasitic traits that thrive at the expense of the system. “Efforts to remove parasitic Systems-people by means of screening committees, review boards, and competency examinations merely generate new job categories for such people to occupy.”

My favorite way of thinking about this is that every undertaking needs people to carry it out and logistical demands. The people who do the work ('technicians') are focused on accomplishing the specific goal, they are often poorly suited to secure resources for the entire group. On the flip side, those who focus on logistics ('administrators') are isolated from the underlying goal. They invest their time into work that, by necessity, relies on an abstracted notion about the details of the work.

This creates conditions where the administrators are always at risk of self-dealing and of mis-understanding self-dealing as supporting the underlying work. The technicians can self-deal as well, but because they are not in charge of coordinating resources across the org, the impact is smaller. It's easy to accuse any particular technician who disagrees that it's the technician who lacks a sufficiently wide view (and in fact this is always a danger). Selfish people who want to secure resources for themselves thrive in this area - but the situation does not require selfishness to become degenerate.

I was a NASA federal employee in 2017 at Johnson Space Center and I saw this exactly. There were people like me who joined to be a part of a particular project and who maybe would follow that project when it got separated and sold off to some contractor, and there were the die-hard NASA fanboys (and girls) who just wanted to "be a part of NASA" and who maybe spent years singularly focused on getting hired and displayed little concern about which role they inhabited. Project-level managers up through department heads appeared to be people who started in the first group and slowly transitioned to the second group.

> there will be those dedicated to the organization itself

The Iron Law holds. The article’s title does not. The way bureaucracies survive is by mutating their goals.

The examples are numerous: the March of Dimes [1], every successful referendum movement, every country with clean drinking water. The author’s mistake is in interpreting opposition as preservation.

[1] https://en.m.wikipedia.org/wiki/March_of_Dimes

I've heard this stated in a simpler form: that every institution eventually evolves to serve and protect its own interests first and foremost. My dad always used the term "petty fiefdoms".

I like to think it was the awful "Type II" people who insisted that "wasn't a thing", but it was probably the innocence and naiveté of the Type I's.

Does the second group also end up skewing remuneration in their favour? For example, a tech company where managers are paid over the odds, while the passionate engineers who do a lot of the technical heavy lifting are paid less.

If not directly, they skew it by expanding their headcounts by the year

Naturally. I’m being hyperbolic but barely. It’s middle management’s entire job to squeeze as much productivity out of their reports for as little money as possible. Anything they do in their free time (1:1s, career discussions, etc) is just there to give the reportees the illusion of control in the system. And it’s not my belief - I fight it where I can but it’s literally how companies structure incentives. Nobody gets a bonus for how many of their underlings got promoted last year. Your importance is a measure of headcount (why have a principal engineer when you can have 3 associates?) and products shipped (more hands on keyboards mean more stuff flung to prod, quality need not apply).

Source: am middle management.

I am a big proponent of what you imply: the best leaders are massive next exporters of top talent. Once you explicitly compensate for that, the optimizers will destroy your organization by promoting mediocre people.

Sounds like you work at a pretty toxic org if this is the case. Even at Amazon a big component of management promotions is how many people did you get promoted this year and what are the highest levels of people reporting to you.

The fastest way to go from Senior Manager to Director is to get as many people as possible promoted to Principal Engineer, or hire more PEs. Or better yet get your Principal Engineer promoted so that they have to become your peer.

And you can guess what shenanigans result from such a strong incentive. People should be promoted when they are ready, not when their manager’s empire-building aspirations will benefit.

People were promoted after they were ready, because they had to convince a promo committee that they were ready. The manager was your advocate but did not have a say in if you were promoted beyond being your advocate.

So the incentives were aligned. The manager was incentivized to put you up for promotion as soon as they thought you might be ready, not the other way around. The toxic part was actually that your manager didn't have final say.

Even when they thought you were ready they had to convince others in an overburdensome process.

I’d be inclined to believe you if the company in question wasn’t legendary for being an awful, toxic dumpster fire of a place to work for SDEs.

I don't think what you wrote and I wrote are at all in conflict. I said managers are incentivized to promo people and that it's super hard for them to do so, which means people don't get their promos when they should. But it still contradicts what OP wrote about managers being incentivized to not promo.

I suggest you look for another job, and don’t know how you can work in such toxicity

I’ve worked for several companies of various sizes and industries in my career and I can’t say any of them have been remarkably different than what I described. Being a manager now explained the confusing behavior and outcomes I experienced earlier in my career, in fact.

Start your own tech company. Let us know how it goes.

Corollary: we have to kill these organizations off every now and then so that the herd doesn't get too ossified.

Now define “we” “have to” and “kill.”

What mechanism, that is not a system vulnerable to the same ossification but with far more unilateral power, will actually execute such a directive?

Imagine a union which forms in secret, strikes once, hard enough that the misbehaving institution cannot continue, then disbands.

Now imagine a culture which habitually does this. You don't need continuity of leadership if the only reason your organization exists is to rid the world of a problem. Once the problem goes away, so does the organization that solves it. (And if you fail, well, disband anyway and try it again next time as a differently composed group).

It would be like agriculture, but instead of selecting plants for drought resistance we're selecting institutions for human-friendliness.

Perhaps there's a holiday, and a crypto thingy that handles voting. If there's not sufficient consensus, nothing happens, but if it turns out that a sufficient majority voted to disband the same institution, then on the next such holiday you meet in person with some algorithmically chosen subset of people who voted similarly to you (to verify that they're real people and not sybil accounts).

If validation succeeds, then we generate proofs that indicate that yes, there are enough of us--this isn't radicalism--this is the will of the people. Then you spend the next such holiday orchestrating the demise of your target. Then you disband, problem presumably solved. If not, you'll have to try it again with a new union on the next cycle.

It would create incentives for the bureaucrats to not let their organization be chosen. It's more or less what labor day should have been. Let's do it quarterly.

As for "have to", you don't "have to" breathe, but you "have to" breathe in order to stay alive. It's a conditional, not an imperative.

So I mean that if we want our institutions to be continually useful to us, then we have to practice some kind of hygiene of this sort. Evolution does not act on organisms or organizations which don't occasionally die.

Perhaps this too would ossify and eventually have to take itself out of the meme pool, but I think it could do us some good along the way.

This seems like a great argument that bureaucracy is a just another kind of biological organization. It follows from Maturana's theory of autopoeisis, any version of homeostasis, or more recent ideas from Friston on self-evidencing.

Another way to say that is:

• The first group sees something in the world as wrong / broken / requiring change, or just "could be better"; they see themselves as a force for that change; and they see any organization they're a part of, as infrastructure to enable/multiply their force. To these people, the organization is only relevant/valuable as long as it is providing leverage for individuals like them "on the front lines" to accomplish change. To these people, "everything staying the way it is" is an awful concept — if they were willing to accept things as they were, they wouldn't have bothered to become $profession! They will consider their life wasted if things don't end up changing for the better!

• The second group sees nothing wrong with the world, because (in part) they see those frontline people working toward positive change, to be an inherent part of the equilibrium-state of the world. They do think the problem is a problem worth solving! (That's probably why they gravitated to this industry.) But they think that "things are going great" in addressing the problem, insofar as there are these other people who are willing to "fight the good fight." They don't think it matters much whether any particular individual is involved in that fight, as long as in aggregate "people who are motivated to solve the problem" are minted faster than they burn out. People in this group don't feel motivated to be directly involved in solving the problem; and they also aren't much concerned with "losing" people who are directly involved — since they believe that there will always be new "new blood" coming in with a fresh reserve of morale.

The first group ("vocationals") will focus on the work to the exclusion of maintaining the organization. In a crisis, they will let the organization fall apart so that the work can continue happening.

The second group ("professionals") knows this, and thinks this is silly — to them, the work will always get done soon enough (because, if vocational A can't do it, vocationals B/C/D will feel compelled to pick up their slack, at their own expense.) But the organization itself might become paralyzed or fall apart — which these people believe would prevent the work from happening for a much longer time. So they dedicate themselves to keeping the organization functioning — which often involves cutting costs (i.e. making the first group's lives harder), imposing regulations (i.e. punishing the first group for the times they go above-and-beyond to get the work done at the organization's expense), etc.

These groups are rarely aligned, because their world-views are rarely aligned.

It can happen, though. If it becomes clear that the number of people in the first group is declining over time, such that the organization cannot simply rely on "new blood" — then the second group's behavior toward the first group changes dramatically.

That's a charitable take on the "professionals" (and arguably also on the "vocationals"). Both your model and the more pessimistic one can happen, but I think the pessimistic model is what happens more often as an organisation fails.

I'd say that often the "professionals" are "vocationals" who failed upwards. They're the teacher who can't teach, but got transferred to the department. It's the engineer who "failed upward". It's the people who liked the idea of being a teacher or nurse or doctor or rocket scientist, but couldn't hack it in the front lines. Sometimes it's cheaper or easier to transfer a hack into management (or some non-core admin role) rather than firing them. Sometimes it's the least essential person who ends up nominally in charge (the "Dilbert Principle"). Sometimes people go hard for promotions because they are sick of their job (because it's hard for them, because they're incompetent or lazy). An org might want a super-hero for a leadership role, but there's no super heros so they only get bullshitters ticking all the boxes.

There's a few "professionals" who genuinely think that being in charge is more important than working at the front. Maybe they see a good boss resign, and want to fill their shoes. Or they have a bad boss resign, and think they'll try to make a difference. Or they've seen stupid but well-meaning "vocationalists" tear things apart because they have a dumb idea that they're pushing, and think "a good boss wouldn't let these well-meaning idiots do harm rather than good".

But true professionals (either professionals at heart, or vocationalists who see the need to be professionals) are often not going to be as numerous as burnt-out, lazy, failed vocationalists falling upwards. And once there's too many burnt-out, lazy, failed vocationalists in management, the organisation is going to suffer.

> The Iron Law states that in every case the second group will gain and keep control of the organization.

It depends a lot on whether you own the organization in entirety or not.

I could have a business that operates for 5 years, own 100% of it, then shut it down because of loss of market interest and not wanting to pivot it to a direction that I personally disagree with just for the sake of keeping the business alive.

I could consider it a 5-year success and just be happy with that.

If investors are involved it's a totally different story.

> If investors are involved it's a totally different story.

Well, when you take their money, they'll want a return on their investment.

Yeah totally. Just saying that TFA's thesis doesn't necessarily apply if the founder is mission-driven and 100% owns the organization. They might actually value the mission over the organization and be content when the mission is fulfilled.

As a founder mindset person if I could bootstrap a business that gets me $50 million by curing cancer I'd be MORE THAN HAPPY to just retire on that $50 million, and open source all the IP so that anyone can make the drugs. I don't have a desire to be a billionaire over curing cancer.

However, if you give up ownership during the process, things change. You have fiduciary duty to investors that would be violated if you just gave up all future revenue and open sourced everything. It would have to be a bootstrapped business in order to do the above.

You might change your mind if/when you reach $50m. Whatever one has becomes one's "new normal" and the goal posts just move.

BTW, I open sourced my IP :-)

What you are describing is not a bureaucracy. The Iron Law is the Iron Law of Bureaucracy, not the Iron Law of personal projects.

I don't know if this is really true, but it does feel true. And I worry there are no easy paths for the first kind of person. One option is to persist devoted to the cause, and try to put up with the pain of being in that organization, potentially changing the organization's path after much effort. Another option is to quit and go it alone / start a new organization, but that's quite hard too.

The second group is just impossible to beat: people interested in playing office politics, unburdened by objectives like “achieving anything great as an institution,” and motivated by a need to find a niche to survive. Always seemed like an argument for Basic Income to me; at least rob them of some of their motivation, and remove some of the incentive for others to ally up with them.

Also the 2nd group will game the system to funnel a bigger percentage of the income to themselves while raising prices on students.

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