“Bastiat’s Iceberg” — an article by Sean Corrigan

“Bastiat’s Iceberg,” is a fascinating article on economic crisis, recommended by The Cobden Center (“for honest money and social progress”).

Toby Baxendale, at The Cobden Center, on 21 December 2009, writes: “Sean Corrigan of Diapason Commodities Management packs more sound applied economics into this report than ever.” It’s an interesting way to think about the economics of Hayek’s “extended order” and the dangers of commanding it to reorganize itself.

Download the report —this will trigger the download of a 1.6 MB pdf file.

Baxendale’s summary & commentary.

Corrigan, on planners (chateau generals) and entrepreneurs (frontline officers), from the article:

In their Olympian disdain for the little man whose very breath they nonetheless now yearn to regulate, they are congenitally oblivious to the truth that the World can thrive without them: that, absent their heavy-handed interference, its form is highly articulated, intrinsically adaptable and — yes — partly redundant, but therefore gratifyingly robust.
These Planners who so plague our modern lives are all, at root, chateau generals, arraying their coloured counters in textbook fashion in the sandbox; serenely isolated from the mud and gore at the front; disastrously behindhand in their decisions; hopelessly divorced from the harsh realities of the fray — all failings which, of course, do not discourage them in the least in their pretence at deciding the destinies of the many.
The shrewd commander of the storm-troop, by contrast, is ever alert to the fact that the ‘want of a nail’ is emblematic of military failure and so remains conscious of the importance of logistics — of the necessity for the smooth functioning of that extensive rear-area ‘Tail’ … to the delivery of combat power by the armed ‘Teeth’ in the battlezone. He also lives by the dictum contained in von Moltke”s lapidary phrase that ‘no plan survives first contact with the enemy’ and so knows that there is always a need for hands-on officership, for what we might usefully call an ‘entrepreneurship of war’.
If even the starchy Junkers of the Prussian army could learn to delegate as much responsibility as possible right down to men with their noses in the dirt — a doctrine known as ‘Auftragstaktik‘ — why is it that, in civilian life, a drearily intrusive economic prescriptivism has been able to live so far beyond its many failures in the crucible of history?


December 25, 2009

8 thoughts on ““Bastiat’s Iceberg” — an article by Sean Corrigan”

  1. I think the modern technocratic planner fills the same role as the priest caste did in many pre-industrialized cultures. To justify their status and their resource consumption, they had to create a rational for why they were indispensable. To this end they had to create a cosmology in which ordinary people required the intercession of the priest-caste with the invisible forces of the supernatural. This might have started out with some cynical or deluded conman but over the generations the rational becomes a thing of its own that everyone, including the priest, honestly believe in.

    A lot of the social/political theory of the industrial age has arisen from the need by an emerging elite to create a justification for their dominance. Real power in the industrial world comes from creating and managing industrial production and distribution. The relatively small number of people who actually do the hands on organization for all that production are the core population of our civilization. Controlling these people is as central to power and dominance as controlling agricultural workers was central to power in the preindustrial era.

    All versions of leftism are merely extended rationalization justifying why articulate intellectuals have a moral and practical justification to dominate and control the productive minority. Central to this rationalization is the concept that people who work at a high level of abstraction and with personal distance from a problem, actually have a superior understanding of the problem than people with immediate hands on experience with the problem. If the converse was true, it would be silly to trust some elite with critical decision making and elites would have no rationale for power.

  2. Chateau generals vs front-line leaders…when an organization becomes large & complex enough, there will need to be some people acting to some extent as chateau generals…Jeff Immelt of GE, for example, should *not* be trying to act as the front-line leader of everything ranging from the appliance business to the jet engine business to the financial services business…BUT it is important that (a)the top general has previously had experience as a real front-line leader (so he can have a realistic understanding of the problems & opportunities that they face), and (b)he spend enough time on the front lines to make him relatively un-bullshittable.

    Part of our problem today is that people who have *not* had significant experience as front-line leaders are too often being promoted to high position. The most extreme example of this, of course, is our President..but too often in business, we see people who have good educational credentials plus consulting or other staff experience, with a tiny bit of line management thrown in for the sake of form, getting put in jobs that are over their heads.

  3. From Wikipedia, on “Adhocracy”

    Robert H. Waterman, Jr. defined adhocracy as “any form of organization that cuts across normal bureaucratic lines to capture opportunities, solve problems, and get results”.[2] For Henry Mintzberg, an adhocracy is a complex and dynamic organizational form.[3] It is different from bureaucracy; like Toffler, Mintzberg considers bureaucracy a thing of the past, and adhocracy one of the future.[1] When done well, adhocracy can be very good at problem solving and innovations[1] and thrives in a changing environment[3]. It requires sophisticated and often automated technical systems to develop and thrive.[1]

  4. We are certainly seeing this in healthcare where front line people are pushed aside while “consultants” order them about. Certainly the front line people can become too narrow in vision but the accountants frequently become obsessed with “keys under the lamppost” phenomena. It’s a bit like the PowerPoint obsession in the military. MacNamara got obsessed with body counts because they were measurable, not because they mattered.

  5. In this area, as in so many others, we are dealing with the intellectual inertia of centuries of social structures which enforced conformity, and severely prohibited doing anything in new, non-traditional ways.

    The near universal human cultural belief that there is a traditional way to do everything that needed to be done, that the village elders or clan chiefs or local political/religious authority had the right and duty to decide what was permitted in all areas of life, and esp. in economic matters, if it wasn’t expressly permitted, it was taboo or prohibited.

    The ancient traditional belief that “all was held from thr king”, and any line of business or trade was a gift from the ruler to his favorites, a license which prohibited anyone else from engaging in, and competing with, the connected ones.

    The common belief that everything was subject to controls—religious beliefs, speech, who one married, where one lived, what clothes one wore, what trade or form of work one did, and on and on.

    We are so used to the odd, entirely modern idea that people have rights, are allowed to be different, can think “outside the box”, can believe and say and live the way they want that we seem to forget the enormous cultural weight of the traditions that ruled before all this “do your own thing” stuff came along.

    Economic activity has always been controlled and influenced by political and cultural entities whose primary concerns were not successful and efficient economic organizations, whether large or small, but using economic activity for revenue and increased power to enhance their positions.

    What we are seeing in economics is a variation of the same impulse that attempts to drag traditional, folk medical practices like homeopathy or energy fields into the modern pharmacopia, or the endless variety of arguments to the effect that modern technological society is unnatural or unhealthy. (Most of the climate change, AGW camp has adopted some form of this latter mindset)

    Many of us are surprised and frustrated by the zombie-like refusal of marxist/corporatist/socialist beliefs to die and be buried like the millions of their victims have been over the last century. The same failed ideas keep coming back under a new name, or allegedly justified by some new crisis, as if each and every facet of these theories had not already been tried, and failed in volcanoes of blood and teeasure in societies all over the globe.

    But the idea that there are some wise, magical people who can protect us from a malevolent reality, and prevent the consequences of our mistakes and miscalculations from coming down on our heads, is as ancient as the belief that the pharoah’s intercession brings the flood from the Nile.

    It may very well be that the most critical challenge facing modernity is the persistence of magical thinking in a great part of the population, and the subsequent belief that if we could plead in just the right words to just the right priest/king, he could protect us from all those ishy things that keep disrupting our lives.

    And how could he protect us if he doesn’t control all that needs to be controlled?

  6. OTOH, the ability to use abstractions effectively is essential to the management of any large and/or complex organization. For example, contrast a modern chain store with an old-fashioned small local store, and consider especially the decisions about what items to carry, the restocking decisions, and the logistics process. No matter how good the modern Buyer and the Traffic Manager are about getting out into the field a lot–and this is essential–their decisons will inevitably have to be based in large part on numbers and reports, rather than on things they see with their own eyes or hear with their own ears.

    It strikes me that a key role of higher education, maybe *the* key role, should be to teach people how to use abstractions effectively. Too often, this doesn’t happen; what we get instead are people who *reify* abstractions, confusing the map with the territory. I’ve met people–highly-educated people–for whom the imagined position of a business on the BCG 4-box matrix (cows, dogs, stars, question marks) is much more “real” than the tangible attributes of the actual business.

    There is a partial analogy here with VFR and IFR aircraft flight (visual flight rules / instrument flight rules), but I haven’t fully thought it out yet.

  7. I wonder what happened. The PDF link seems to have gone inactive. I really liked it and now POOF it’s gone?


  8. We live in a different world and society today that has changed so much from the 1930s and 40s. My children could not understand my experiences as a child because so much has changed. I’m reading Crystal Fire now and wonder how many physicists today grew up plowing fields, let alone with horses as Brattain did.

    I’m sure there must be kids working their way through college but it just seems a different world that does not give kids the idea that they can do these things on their own. Tuition is too high, financial aid dominates the college student’s life. How many can work all summer and earn a year’s tuition, as I could in 1956 ? They don’t grow up thinking that they are independent and free of the need for others to support them. God knows they are perfectly capable of thinking they deserve every penny they get but they don’t have that self-made feeling.

    They are dependent on third parties, parents or otherwise, not their own labor. It makes it easier to substitute government for the parent. My partner worked on fishing boats as a deckhand. He joined the Air Force after high school graduation. In the Air Force, he was a lab technician in Tunisia. A medical officer saw his potential and encouraged him to go back to school when he got out. Thirty years later, he contacted that physician, now a professor in a Texas medical school to ask him for a recommendation for his son’s application to medical school. I don’t think his children or my children have had the same sort of experience.

    I know there are still people who have made it on their own but I don’t think college is as big a part of that experience as it once was. It has become much more paternalistic than it once was. I wonder if that affects the ability to see abstractions.

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