If literally everyone knew, what would be the function of making the claim? How do you end up with a system that wouldn't work without false assertions, and yet allegedly "everyone" knows that the assertions are false?

This is answered in Benquo's last post, take a look at stages 3 and 4 to see how this situation can arise.

https://www.lesswrong.com/posts/fEX7G2N7CtmZQ3eB5/simulacra-and-subjectivity

Can crimes be discussed literally?

by Benquo 2 min read22nd Mar 202022 comments

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Suppose I were to say that the American legal system is a criminal organization. The usual response would be that this is a crazy accusation.

Now, suppose I were to point out that it is standard practice for American lawyers to advise their clients to lie under oath in certain circumstances. I expect that this would still generally be perceived as a heterodox, emotionally overwrought, and perhaps hysterical conspiracy theory.

Then, suppose I were to further clarify that people accepting a plea bargain are expected to affirm under oath that no one made threats or promises to induce them to plead guilty, and that the American criminal justice system is heavily reliant on plea bargains. This might be conceded as literally true, but with the proviso that since everyone does it, I shouldn't use extreme language like "lie" and "fraud."

This isn't about lawyers - some cases in other fields: 

In American medicine it is routine to officially certify that a standard of care was provided, that cannot possibly have been provided (e.g. some policies as to the timing of medication and tests can't be carried out given how many patients each nurse has to care for, but it's less trouble to fudge it as long as something vaguely resembling the officially desired outcome happened). The system relies on widespread willingness to falsify records, and would (temporarily) grind to a halt if people were to simply refuse to lie. But I expect that if I were to straightforwardly summarize this - that the American hospital system is built on lies - I mostly expect this to be evaluated as an attack, rather than a description. But of course if any one person refuses to lie, the proximate consequences may be bad.

Likewise for the psychiatric system.

In Simulacra and Subjectivity, the part that reads "while you cannot acquire a physician’s privileges and social role simply by providing clear evidence of your ability to heal others" was, in an early draft, "physicians are actually nothing but a social class with specific privileges, social roles, and barriers to entry." These are expressions of the same thought, but the draft version is a direct, simple theoretical assertion, while the latter merely provides evidence for the assertion. I had to be coy on purpose in order to distract the reader from a potential fight.

The End User License Agreements we almost all falsely certify that we've read in order to use the updated version of any software we have are of course familiar. And when I worked in the corporate world, I routinely had to affirm in writing that I understood and was following policies that were nowhere in evidence. But of course if I'd personally refused to lie, the proximate consequences would have been counterproductive.

The Silicon Valley startup scene - as attested in Zvi's post, the show Silicon Valley, the New Yorker profile on Y Combinator (my analysis), and plenty of anecdotal evidence - uses business metrics as a theatrical prop to appeal to investors, not an accounting device to make profitable decisions on the object level.

The general argumentative pattern is:

A: X is a fraudulent enterprise.
B: How can you say that?!
A: X relies on asserting Y when we know Y to be false.
B: But X produces benefit Z, and besides, everyone says Y and the system wouldn't work without it, so it's not reasonable to call it fraud.

This wouldn't be as much of a problem if terms like "fraud", "lie," "deception" were unambiguously attack words, with a literal meaning of "ought to be scapegoated as deviant." The problem is that there's simultaneously the definition that the dictionaries claim the word has, with a literal meaning independent of any call to action.

There is a clear conflict between the use of language to punish offenders, and the use of language to describe problems, and there is great need for a language that can describe problems.

For instance, if I wanted to understand how to interpret statistics generated by the medical system, I would need a short, simple way to refer to any significant tendency to generate false reports. If the available simple terms were also attack words, the process would become much more complicated.

Related: Model-building and scapegoating, Blame games, Judgment, Punishment, and the Information-Suppression Field, AGAINST LIE INFLATION, Maybe Lying Doesn't Exist

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