Institutional Senescence

by Martin Sustrik250bpm2 min read26th Jun 20207 comments

25

Mechanism DesignWorld OptimizationWorld Modeling
Frontpage

Consider this toy model:

An institution, such as a firm, an association or a state, is formed.

It works well in the beginning. It encounters different problems and solves them the best it can.

At some point though a small problem arises that happens to be a suboptimal Nash equilibrium: Non of the stakeholders can do better by trying to solve it on their own. Such problems are, almost by definition, unsolvable.

Thus the problem persists. It's an annoyance, but it's not a big deal. The institution is still working well and you definitely don't want to get rid of it just because it's not perfect.

As the time goes on, such problems accumulate. They also tend to have unpleasant consequences: If such a problem makes particular medical treatment unavailable, it incentivizes the patients to bribe the doctors and the doctors to break the law and administer the treatment anyway. Now, in addition to malfunctioning medical system, you have a problem with corruption.

After on time the institution accumulates so many suboptimal Nash equilibria that it barely works at all.

The traditional solution to this problem is internal strife, civil war or revolution. It eventually destroys the institution and, if everything goes well, replaces it with a different one where at least the most blatant problems are fixed.

War or revoulution is not a desirable outcome though: In addition to the human suffering, it also tends to replace the people in power. But the people in power don't like to be replaced and so they will try to prevent it.

One manoevre they can use is to introduce planned institutional death: Every now and then the institution would be dismantled and created anew, without having to resort to a war or revolution.

Here's an example: The credit system tends to be one big suboptimal Nash equilibrium in itself. Compound interest grows the size of the debt like crazy and unless there's a way to limit the harm it'll destroy people and business and eventually the entire economy. Even lenders would be hurt, but none of them has a reason to mitigate the problem. They could, in theory, forgive the debt for the sake of keeping the economy afloat, but that would put them in disadvantage to other lenders.

And so the king or the religious authority decides to have jubilee years. Every fifty years, all debts are forgiven. The institution of money lending dies and is rises anew from the ashes. (David Graeber asserts that the practice was, in fact, not specific to Israel, but common at the time among the ancient societies in the Middle East.)

One can also think of the democratic system of regular elections as a kind of planned institutional death. Every four years, the government, with all the accumulated dysfunction, is thrown out and a new one is instituted. But the government example also makes the problem with planned death obvious. Government is replaced, but the people on non-political positions, various administrators and small-scale decision makers, remain. At least some inadequate Nash equilibria can therefore survive the change of the government. And those would accumulate over the time and eventually lead to the system collapse. We are between a rock and a hard place here: We want to destroy the institution to break the equilibria, but at the same time we want to preserve the institutional knowledge. We don't want to get all the way back to the trees after all. We don't want to get back to the middle ages either.

Last example that comes to mind is IETF, the institution that standardizes how Internet works. The real work, the development of standards, is done in working groups, which have a clear charter that defines what they are supposed to achieve and more importantly, how long would it take. The working group exists for, say, four months, and then dies. Sure, there are IETF institutions other than the working groups and those can survive for longer. But these are mostly doing the support jobs. Organizing meetings, publishing the new standards and so on. The real stuff happens in the working groups.

All in all, I am not at all sure that planned institutional death is a solution to all suboptimal equilibria problems, but the fact that evolution uses it, that it fights dysfunctions, such as cancer, by discarding the bulk of the cells every now and then and preserving only the germline, makes it at least worth of consideration.

25