Tuesday, March 17, 2020

What You Pay For

A system can, generally speaking, be Efficient OR Resilient. It cannot be both at once, although it can be neither. American society, again, generally speaking, is optimized for efficiency. The overall idea is for the metaphorical "pie" to be as large as possible; the reasoning behind this being the (disputed) idea that the larger the pie, the better off all of the stakeholders are, regardless of the relative sizes of their individual slices. (It's that last part where the dispute arises.)

And while the implementations of efficiency and resilience may have ethical implications for some (especially where broader social policies are concerned) the positions themselves are functional, rather than ethical concerns. That is to say that a resilient system is no ethically better or worse than an efficient one. There may be ethical concerns with allowing (or forcing) important systems to be neither, but again, that's a separate issue from choosing between the two.

There are a number of factors that go into the choice of making a system either efficient or resilient, and one of these is risk. Because whatever choice is made, part of the opportunity cost of that choice is the risk brought about by forgoing the other. And in this sense, whichever choice is made is generally not a solution. Instead, it is a trade-off.

Which can be a problem, in a society that doesn't care for trade-offs. Although it should be noted that on the scale of an entire society, especially one comprised of more than three-hundred million individuals (who all have their own interests to look after), a distaste for trade-offs is understandable. Historically speaking, the United States has hidden trade-offs by cost shifting. In effect, mainstream America could have its cake and eat it, too, through the simple expedient of taking someone else's cake. That someone else was either simply forgotten about, or cast as some lesser form of humanity that was not entitled to the cake that had been taken from them. But while recent history has seen an end (mostly) to the historical patterns of cost shifting that served in the past, the distaste for trade-offs has remained. And this has lead to the rise of a class of people who understand their occupation to be telling people that actually, a system can be perfectly Efficient and perfectly Resilient simultaneously. Just leave it to them.

This apparently impossible scheme works quite well in reality. Mainly because most systems, and that includes most societies, can simply pick one and go with it, often for very long periods of time. Because while there are risks to optimizing for either position, risks are not the same as inevitabilities, especially over relatively short timeframes.

The United States has been able to optimize for efficiency for quite some time, because it hasn't needed to be particularly resilient. Although one could make the case that it isn't particularly efficient, either; at least not as efficient as it appears to be on the surface. The ability of the United States to borrow vast sums of money at vanishingly low rates of interest has been able to quite effectively disguise the fact that resources haven't kept up with what the level of public goods and services that people and organizations (especially businesses) want. And a willingness to believe that some future burst of prosperity will provide the capital to painlessly repay those loans has been deployed to forestall serious examination or questioning.

But while any given risk may not be inevitable over a short timeframe, some risk will invariably pop up over an arbitrarily long timeframe. And sometimes, that arbitrarily long timeframe comes to pass at the worst time. It's like investing in stocks. Stock investing is best when done with a long time horizon, because over most given periods of time over a certain length, the investment will increase in value. But if that investment falls suddenly the day before one is due to sell, that's a problem.

There are ways to insure against this. To make the investment more resilient. But that directly impacts its efficiency. And if the investment wait until the day after one cashes out to go into a nosedive, that insurance becomes, effectively, deadweight loss.

I'm not sure if current events will make people any more amenable to the potential costs of lowering efficiency to purchase resiliency that they were before. After all, the people who have made it their occupation to convince people that cakes can be both had and eaten are still out there. And the idea of a world that Just Works, and in which neither lack of knowledge, non-participation or simple misfortune can upset the apple cart, like any attractive nuisance, will remain enticing.

No comments: