I wrote about Thomas Schelling’s book in my last post. Here’s an account of a reporter’s lunch with him that is worth a quick read: The Game of Life.
Let me highlight a sentence fragment from that piece: ” . . . his work treats human frailties as something to be analysed and worked with, rather than denounced or denied.” That lies at the crux of a multitude of failures. People don’t fully appreciate the fact that what we have is frail human nature and if we refuse to confront reality, we are likely to make public policies that are wrong-headed and disastrous because they are built upon fairy-tale visions of human nature. Mohandas K Gandhi is the most illustrious example of a person who was seriously deluded about the nature of human beings and that, in my considered opinion, has contributed to a significant degree to the poverty that has dogged India for so long.
Rules can be considered the secret sauce in the recipe for a successful society. The biological equivalent to a rule set is the DNA which encodes genes. Like good genes confer reproductive success and ensure the perpetuation of the species, good rules allow societies to succeed in the great game of economic survival. Two societies with equivalent endowments of natural and human resources can end up with different levels of prosperity if their rule sets are not equally good.
The question naturally arises: why do different societies end up with different rule sets? Who’s in charge of making the rules? And there is a follow-up question. Rules have public good characteristics. That is, they are not physical objects that are rival in consumption. If you use a rule, I too can the same rule without depriving you of the use of the rule. So if you have a good rule set, I can costlessly imitate the set and achieve equally good results. Rules are like secret sauces except for that they are not secret. So the question is why don’t people copy good rules. To explore these two questions, let me begin with addressing a personal matter.
Continue reading “The Tangled Web — Part 5”