Explaining Regulation

During this pandemic, elites have greatly enjoyed getting to feel important by weighing in on big pandemic policy questions, such as masks, lockdowns, travel restrictions, vaccine tests, vaccine distribution, etc. Each elite can feel self-righteous in their concern for others, and morally outraged when the world doesn’t follow their recommendations. Don’t people know that this is too important for XYZ to get in the way of the world believing that they are right? Unconsciously, they seek to signal that they are in fact elites, by the facts that they agree with elites, that other elites listen to them, and that the world does what elites say.

Imagine that these key pandemic policy choices had been made instead by private actors. Such as vaccine makers testing, pricing, and distributing as they wished, airlines limiting travel as they wished, and legal liability via tracking discouraging overly risky behavior. Government could have influenced these choices indirectly via subsidies and taxes, but the key specific choices would still have been made privately.

In this scenario, talking head elites would have been a lot more frustrated, as they’d have to direct their advice to these private actors, who are much less visibly eager than public officials to slavishly follow elite advice. So elites could less clearly show that they are elites by the fact that the world promptly and respectably obeys their commands.

When these private actors made choices that later seemed like mistakes in retrospect, then elites who resented their neglect would make passionate calls to change legal standards in order to rain down retribution and punishment upon these private actors, to “hold them to account.” Even though they were not at fault according to prior legal standards. However, when private decisions seemed right in retrospect, there’d be few passionate calls to rain down extra rewards on them. As we’ve seen recently in the “opiod crisis”, or earlier with subprime loans, cigarettes, and nuclear power.

In contrast, when government authorities do exactly what elites tell them, and yet in retrospect those decisions look mistaken, there are few calls to hold to account these authorities, or the elites and media who goaded them on. We then hear all about how uncertainty is a real thing, and even good decisions can look bad in retrospect. Given these sort of “heads I win, tails we flip again” standards, it is no surprise that private actors would often rather that key decisions be made by government officials. Even if those decisions will be made worse, private actors can avoid frequent retribution for in-hindsight mistakes.

In principle, elites could argue at higher levels of abstraction, not about specific mask or travel rules, but about how best to structure the general institutions and systems of information and incentives in which various choices are made. Then elites could respond to a crisis by reevaluating and refining these more abstract systems. But, alas, most elites don’t know enough to argue at this level. Some people with doctorates in economics or computer science are up to this task, but in our world we use a great many weak indicators to decide who counts as “elites”, and the vast majority of those who quality simply don’t know how to think about abstract institution design questions. But masks, etc. they think they understand.

Yes, there are many other topics which require great expertise, such as for example designing nuclear reactors. In many such cases, elites realize that they don’t know enough to offer judgments on details, and so don’t express opinions at detail levels. When something goes wrong, they instead may just say “more must be done”, even though they almost never say “less must be done” after a long period without things going wrong. Or they may respond to a problem by saying “government-authorized authorities must oversee more of these details”, though again they hardly ever suggest overseeing fewer details in other situations.

So the problem with regulation is more fundamentally that elites focus on reacting to concrete failures, instead of looking for missed opportunities, and they don’t understand much more than “do more” and “oversee more” as the possible institutional responses to concrete problems that they see need expertise. Nor do they understand much about how to design better institutions other than to respond in these ways to more particular observed problems.

And that’s my simple theory of most regulation. Elites love to pontificate on the problems of the day, and want whatever consensus they produce to be quickly enacted by authorities. As government officials are far more prompt and subservient in such responses, elites prefer government authorities to have strong regulatory powers. Elites enforce this preference via asymmetric pressures on private actors, punishing failure but not rewarding success, yet doing neither for public actors and their elite supporters.

Elon Musk is in for a world of pain if any of his many quite risky ventures ever stumbles, as elites are mad at him for ignoring their advice that none of his ventures ever had a chance. Zuckerberg is already being credibly threatened with punishment for supposed missteps by Facebook, even though it isn’t at all clear what they did wrong, and with no gratitude shown for all the social value they’ve contributed thus far.

All this gives me mixed feelings when I see smart people offer good advice in elite discussions on concrete topics like masks, vaccines, etc. Yes, given that this is how decisions are going to be made, it is better to make good than bad choices. But I wish such advisors more often and visibly said that this isn’t how such decisions should made. We should instead design good general institutions we can trust to deal with each crisis without needing constant elite micromanagement.