Quote of the Day: Constructing Freedom-Oriented institutions

From libertarian Wendy McElroy at the Laissez Faire Books, (bold original)

What is an institution?

An institution is any stable and widely-accepted mechanism for achieving social and political goals. Traditional institutions of society include the family, court systems, the free market, and churches. Institutions generally evolve over time to reflect the history and dynamics of a culture. For example, the institution of common law evolved on a grassroots level to meet the demand for justice by average people. Equally, the institutions of money and the market arose to satisfy human need and desire for goods.

As those needs and desires change, so do the institutions. Sometimes the change occurs due to conscious human design. Trial by a jury of one’s peers, for example, was a procedure consciously designed to maximize the justice of verdicts. This court procedure weathered the test of time well enough to now be viewed as a cornerstone of Western jurisprudence. When institutions are responsive and grassroots in nature, they become such a natural part of human progress that they change in a spontaneous manner, as in the continuing evolution of language. Like the free market, they strongly encourage peaceful interaction because that is what benefits the vast majority of people.

The political system is the institution upon which libertarians focus. They commonly observe that politics ‘institutionalizes corruption’; political structures and procedures encourage bad results like the personal malfeasance of elected figures. A large reason for the corruption is that the political system is not responsive, not grassroots. As a static institution, it serves the embedded interests of an elite class rather than the dynamic ones of the average person. (The elite class consists of politicians and those with political pull.) What libertarians call ‘corruption’ is what the elites call ‘profit’. They have consciously sculpted the institution to increase their profits through such procedures as non-transparency.

In a sense, the embedded corruption of politics is good news for libertarians because it spotlights a basic truth about institutions. They can promote liberty or statism depending upon their structure, procedures and the embedded incentives. The Founding Fathers knew this. For example, they attempted to limit the government by constructing a tripartite system of checks and balances designed to prevent the centralization of power. The Bill of Rights created incentives toward liberty by laying down societal ground rules to be upheld by the Supreme Court. (Whether the best intentions of the Founding Fathers were doomed to defeat by the inherent nature of politics is debatable.)

The specific structures and procedures of any institution will determine the results it produces. As long as the procedures are followed, the motives of those participating in the institution are irrelevant. Elsewhere, I offered the example of a man who works in a candy factory with the intention of producing canned tuna. As long as he follows the workplace rules and procedures, however, he will produce candy. A police officer may want to promote libertarian justice but as long as he enforces the laws of a totalitarian state, he will produce injustice.

Equally, as long as everyone respects the rules of the free market, it will function as a mechanism of peace and prosperity even if some of its participants are ill intentioned human beings. You may buy goods from a man whom you would never allow into your home; he can detest your religion or skin color even as money peacefully changes hands. As long as the rules of the free market are observed, freedom itself is served.
The burning question now becomes: how do we construct institutions that encourage liberty?

Conclusion

There are two answers on how to construct freedom-oriented institutions. The first: do not to construct them at all. Allow them to evolve through the spontaneous interaction of individuals pursuing their own self-interest. This is how free markets function, families are created, free speech rings out… Many institutions require merely to be unobstructed.

But other institutions require some design beyond the “anything that is peaceful” rule. For example, a court system requires procedures of justice such as “innocent until proven guilty.” And, so, the second answer to designing institutions is: do so in as minimal a manner as possible and only to promote individual rights.

Quote of the Day: Hatred is the Essence of Politics

In politics and government, however, the institutional makeup fosters hatred at every turn. Parties recruit followers by exploiting hatreds. Bureaucracies bulk up their power and budgets by artfully weaving hatreds into their mission statements and day-to-day procedures. Regulators take advantage of artificially heightened hatreds. Group identity is emphasized at every turn, and such tribal distinctions are tailor-made for the maintenance and increase of hatred among individual persons who might otherwise disregard the kinds of groupings that the politicians and their supporters emphasize ceaselessly.

That’s from economist Robert Higgs.

Political hatred, which stems from group identity (us against them), is actually groupthink fallacy. People become easily manipulated when they surrender individual thinking to the collective.

I previously quoted a study at my earlier post, Groupthink fallacy has the following traits

1. Illusion of invulnerability –Creates excessive optimism that encourages taking extreme risks.

2. Collective rationalization – Members discount warnings and do not reconsider their assumptions.

3. Belief in inherent morality – Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions.

4. Stereotyped views of out-groups – Negative views of “enemy” make effective responses to conflict seem unnecessary.

5. Direct pressure on dissenters – Members are under pressure not to express arguments against any of the group’s views.

6. Self-censorship – Doubts and deviations from the perceived group consensus are not expressed.

7. Illusion of unanimity – The majority view and judgments are assumed to be unanimous.

8. Self-appointed ‘mindguards’ – Members protect the group and the leader from information that is problematic or contradictory to the group’s cohesiveness, view, and/or decisions.

These can be summed up to "seeking comfort of the crowds".

And politicians, mainstream institutions and media pander to the gullible public through groupthink fallacy (e.g. nationalism) by sowing hatred (us against them mindset) to advance their interests.

Quote of the Day: In Liberty, Institutions Matter

However that may be, the main point about which there can be little doubt is that Smith's chief concern was not so much with what man might occasionally achieve when he was at his best but that he should have as little opportunity as possible to do harm when he was at his worst. It would scarcely be too much to claim that the main merit of the individualism which he and his contemporaries advocated is that it is a system under which bad men can do least harm. It is a social system which does not depend for its functioning on our finding good men for running it, or on all men becoming better than they now are, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid. Their aim was a system under which it should be possible to grant freedom to all, instead of restricting it, as their French contemporaries wished, to "the good and the wise."

The chief concern of the great individualist writers was indeed to find a set of institutions by which man could be induced, by his own choice and from the motives which determined his ordinary conduct, to contribute as much as possible to the need of all others; and their discovery was that the system of private property did provide such inducements to a much greater extent than had yet been understood. They did not contend, however, that this system was incapable of further improvement and, still less, as another of the current distortions of their arguments will have it, that there existed a "natural harmony of interests" irrespective of the positive institutions. They were more than merely aware of the conflicts of individual interests and stressed the necessity of "well-constructed institutions" where the "rules and principles of contending interests and compromised advantages" would reconcile conflicting interests without giving any one group power to make their views and interests always prevail over those of all others.

[bold highlights mine]

The great Friedrich von Hayek, in Individualism and Economic Order, debunked the need for individual reformation—as peddled by mainstream media “I am start [of change]” as a way to progress but is no less than a disingenuous camouflaged way of promoting collectivism predicated on organized and mandated violence—but for people to live in freedom under the parameters of established institutions which protects and advances a system of property rights. [hat tip Professor Pete Boettke]

And a possible enabling factor for this would be the rhetorical, ideological and cultural acceptance by the public or the "Bourgeois Virtues" for such institutions to emerge as Deirdre McCloskey has theorized.

Quote of the Day: Cycles of Political Institutions

From Bill Bonner

As an institution matures, little by little it shifts from serving its original purpose to serving the ends of those who control it. It becomes rigid — digging in its heels and resisting any change that would diminish the power and wealth of the controlling groups. The longer the institution remains unchanged, the more parasitic and arthritic it becomes. It drains resources away from honest production and redirects them towards favored groups of leeches.

Then…history returns. Then cometh the revolution.