Information, The Social Contract and American Democracy. (Part II of III)
With the turn of the 21st century, Stiglitz, Spense and Akerloff began to look at the role of asymmetrical relationships in economic markets and uncovered some fascinating perspectives on equilibrium and market health. Their work into markets and information asymmetry are quintessential studies into the relationships and transactional processes that define the modern information age. Just as buyers and sellers respond to the asymmetry in pricing information, citizens and governments in a similar agent-principal relationship react to different ideas and interests in the assessment of moral hazard and adverse selection when building policy agendas. In such a contested political relationship, constructs such as signaling, screening and agenda formation are the transactional mechanisms that shape the relationship between the government and its citizens. They are the secret sauce that operationalize the American Social Contract and serve as the conduits for policy bargaining between the people and the government. At the core of this agent-principal interpretation of the American Social Contract is the assertion that one party in the transaction possess more information than the other party and as such is able to assume a position of superiority when it comes to policy making and agenda formation. As governments are historically known to be collectors of large amounts of information, data and knowledge, even in the 1780’s, it is not a huge stretch to categorize the state as a beneficiary of the information asymmetry with its citizens. With this new presentative, the social contract which has traditionally been identified solely as a rationality problem now can also be discussed as an information problem.
When discussing information asymmetry and the social contract in American Democracy, all roads lead to the Founding Elites. Despite our thoughts of them as the original champions of modern democracy, the Founding Elites were part of an elite class. In that role as the agent to the many, they had many positional and exogenous advantages over the people when it came to decision making and agenda formation. Beginning with America’s fascinating origin story until the ratification of the constitution, the Founding Elite’s exploited their natural asymmetrical information advantage in pursuit of self interest, which was preservation of their elite status. They were able to persuade the people that this wasn’t a bad thing using massive signal overload and a beguiling interpretation of politics tied to convenience and complexity. They were able to convince the people that deferring responsibility to the elites in exchange for economic opportunity would benefit the common good. While such efforts of persuasion was orchestrated as a top down activity, it was ultimately sanctioned by the people via tacit consent. Consent was a two step process of individuals first deferring control to the state followed by having the state assuming control of those political responsibilities. Consent was granted because there were expectations to be met and the Founding Fathers had an exemplary track record of delivering on promises, no matter the odds. As a result, the people have been conditioned to turn to the government for solutions to their problems. In many cases where there is contestation, the people are turning to the agent that would stand to lose power and influence in the new bargaining arrangement. Ironically, control is in the hands of those that would suffer the most from change.
Never more than 40% of the population, the rebels were able to persuade the rest of the colonies with guile and prodigious output of knowledge based artifacts such as articles, pamphlets, books, correspondence and op ed pieces that made it abundantly clear that war was a moral imperative. There was enough truth in their reasoning to rebel that the Founding Elite’s were able to take the colonies to a war most did not want. This process of persuasion is called agenda formation and it is a mechanism that informs which ideas and interest will be ultimately addressed by a political community. For the ideas and interests chosen will bind the few and the many through the policy process. Having greater access to data, information and knowledge the Founding Elite’s were able to give singular importance or saliency to the topics and policies of its choosing. With such a profundity of political artifacts, the Founding Elite’s were able to overwhelm the screening techniques of the people and present their self interested behavior as being of the common good. As such the people were hard pressed to voice objections to such towering figures and their well informed opinion. As a result of such a successful harnessing of asymmetrical information, in the approximately two decades between the signing of the Declaration of Independence and the ratification of the constitution, there was minimal political disruption. With the exception of some outlier activity (Shays Rebellion) there were no significant strikes, boycotts or acts of political violence during some of the hardest economic times on record. Drawing on the perception of elites as protectors of the republic and defenders of individual rights, the persuasion of the Founding Elites was effective. Where there could have been chaos, political stability was preached and political stability was maintained
Like propaganda and mythology the Founding Elites deployed overwhelming political knowledge not for deliberation but for control of the agenda. The optimistic style of political leadership assumed by the Founding Elite’s, was predicated on having an expertise shaped by experience, information and education required to navigate the treacherous political waters of the time. An expertise that rested on resources and experiences not available to most citizens. That expertise which so admirably supported their efforts as colonial rebels was re-deployed when they became American rulers. To win the hearts and minds of the masses, of whom they were distrustful, they executed an adroit shift in controlling power from property to knowledge. A powershift that would invariably help with future westward expansion as well as the immediate economic needs of a country struggling to get on its feet. The Founding Elite’s achieved this sleight of hand by leveraging a high trust/minimal uncertainty equation built up over years of successfully delivering on stated promises. With a combination of experience, stature as experts and a multitude of easily verifiable claims, the Founding Elite’s clearly had the capability and ability to deliver on intentions. Within that context, the Founding Elite’s minimized the prospect of uncertainty and moral hazard. They were able to send a strong signal not just to their intentions but also their ability to deliver on such promises. The potential for dissatisfaction was neutered by the Founding Elite’s ability to manipulate information and extoll expertise.
Signaling theory advanced by Spense consists of the analysis of the various types of signals (Ideas, Interests and Intentions) and the types of situations and context (Crisis) in which they are effectively used to manipulate outcomes and decisions. As a group of prodigious writers and pamphleteers, prior to the establishment of parties (1792) and the ratification of the constitution (1788) the political void was filled with material such as the Federalist Papers, Common Sense, various pamphlets extolling the virtues of Democracy. Collectively possessing amazing powers of persuasion, This large volume of output helped the Founding Elite’s achieve their self interested goals not by sharing information but by establishing themselves as the source of information the masses needed to turn to in order to achieve their own goals. Instead of turning to other disaffected peoples for guidance and a strategy for change, the people were conditioned to turn to the government. That the Founding Father’s delivered on their lofty promises furthered their status as owners of truth and knowledge in their relationship with the people. The Founding Elite’s qualities and capabilities to deliver on promises had already been established hence there was minimal uncertainty of success. There was no incentive to share information with the people. Hence the signals sent by the Founding Elite’s to the people were in many ways a courtesy; they were training materials, propaganda and instruments of stewardship. They were the source material of idea contagion.
The Founding Elite’s further cleaved the social contract into two epistemic pieces: Theory and Practice. By managing two types of knowledge and sources of truth; when used in conjunction the Founding Elite’s could define purpose, intention and outcomes. By using a bifurcated approach, the Founding Elite’s on one hand could, until the Constitution was ratified, point to the theory of the social contract and proclaim their intentions were rational, mutual and with consent. They could argue persuasively they were faithful to the freedoms and rights of democracy. As such theory was the proof and evidence they needed to validate the institutional checks and balances of the constitution. On the other hand the Founding Elite’s could also lean into the experience/practice of the Social Contract and persuade the masses to exchange political engagement for the potential for economic gain based on historical precedent. This willful exchange was built on the premise that politics was too complicated and inconvenient for the average man and it was best left to those that saw government as a vocation. Agenda control minimized the narrative to a binary of choice, which was in keeping with the rational linear thinking of the time. This allowed the Founding Elite and future elites to regulate the ideas and interests that could enter the political relationship between the few and the many.
Theory was the descriptive manner in which the complex and complicated social interactions inherent in political relations were discussed. Built off of prior objectifications, theory shaped the normative ideal of American Democracy and the social contract. While they were prescient observations, the observations of Hobbes, Locke and Montesquieu were also static oversimplifications of dynamic and fluid social relationships. However, such a distillation was easy to process, digest and understand by the masses, and easy to sell by the Founding Elite’s. As such, the theory of the social contract remained the domain of the nationalist rhetoric that helped fuel two centuries of economic growth and relative political stability. It was also, as a universal ideal, the source material for the socio-political short-hand that supported the perception and appearance of freedom as American Democracy. The unassailable truths of American democracy sprung for from the descriptive power of theory. Aligned with contemporary notions of originalism, the few could point to theory and state certain associations with the past as facts and evidence that the social contract at the heart of American Democracy is based on mutual consent, that the actors are rational and the relationship is one of equilibrium. Even if that was not the case. The ability to make such distinctions came with the ability to control the epistemic narrative. Ultimately, theory proved to be the ground truths, the proof for the legal-political rationale and the inevitable institutionalized coercion from a distance. That those arguments became ensconced in the Constitution further normalized that discursive strategy.
In conjunction with theory, the practice and allied experience with the Social Contract became the socio-political rules by which differentiation and standards were deployed to manage the plurality in American Democracy. Modern power relationships ensure that those with social privilege have a point of view of the world that is informed by access to information not afforded to the masses. This asymmetry naturally prevents those in a socially disadvantaged position to have an actionable voice and articulate their set of ideas and agendas to be addressed and serviced by the political relationship. Signal overload allowed the Founding Elite’s to own the minds of the masses and persuade them through guilt, intimidation and pride to surrender political engagement for future economic riches. Because of their prestige and pre-existing control of knowledge and experiences, the Founding Elite’s were able to persuade both urban merchants and rural farmers to exchange the ability to access the political system for economic prosperity. This ability to convince them that a political trade off would improve their economic well being was tethered to the historical defining and ownership of complexity and convenience by elites. Ultimately, by having a monopoly of actionable knowledge, ideas and interests in the hands of the Founding Fathers was used to categorize and control those with agendas and interests different from the ruling elites. Interests could be prioritized and deemed important and or valuable to the collective good.
There was a general reluctance to revolt amongst the colonists, and that hesitancy appeared to carry over into forming a new state. Americans harbored not so much a dislike for politics, as carried a natural resistance to change. Leveraging their well earned prestige and tapping into this collective psychology, Urban merchants were convinced by the Founding Elite to continue to embrace and maintain the existing social structure of patronage. In such a top down hierarchy, politics was a distraction and a complication left to ones better suited to perform the role as agent of the people. With that certainty in mind, there was a strong precedent that the current power elite were the experts to fill that role. The other social group to convince, farmers, were won over by how time consuming government was and again, the Founding Elite’s were ideal surrogates to represent their interests in the newly crafted political arena. At the time, governing WAS a complex mix of socio-economic negotiation and cultural compromise and it WAS time consuming to travel and function as an agent of the people. There was enough truth to sell complexity and convenience to those that wanted to be sold on such things.
Complexity and convenience are both amazing heuristics in that they represent truths that are in many ways unassailable. These truths that define complexity and convenience, are ingrained in the routines and historical habits that are critical components of the heuristics of American Democracy. “Well, its complicated” is often a very hard statement to argue, especially if you dig into a piece of legislation or sit through a C-Span episode. Jargon reaffirms the complexity of it all. As does the language of financial engineering that underpins many government initiatives. Complexity is a very real set of circumstances. A claim of complexity is articulated as a warning from a position of moral and intellectual authority that must be challenged to surmount. As a declaration of intent it taps into a challengers pride, self awareness and base-line intelligence. Its a challenge often deferred. “Its time consuming” carries similar value. In a consumer driven economy in which convenience is a keystone for growth, time is a commodity. Engagement and participation can be inconvenient in that the return on your time may not be clear or is expressed as collective in nature. Your self interest may not be achieved and in the end such a commitment ‘may not be worth it.’
According to Stiglitz, screening is when the “screener” (the agent with less information) while in the process of formulating a decision attempts to gain further insight or knowledge into private information that the other agent possesses. In the political domain screening can be seen as a two part proposition. First is the collection of information as it relates to agenda formation. The other is a gathering of information to support opposition to decisions already made. In both capacities, citizens within the political system have an intended role to function as the affective counterweight to excessive use of concentrated power. As the Founding Elite’s eminently understood, it is easier to ask for forgiveness than permission; as it is harder to displace ideas already in place. While there are mechanisms to voice opinions and speak ones mind in the constitution, there are no binding clauses that expressly include the people in decision making processes. In addition, there are no requirements, beyond participatory elections, to involve the individual in the proactive part of decision making. There is hope and trust that elected officials will consult, though many feel that the popular vote is consent. With this logic, the founding elites overwhelmed the screening process with an unassailable logic that minimized the potential for opposition to their agenda. Impulses to question authority or offer alternative strategies were overwhelmed. Efforts at screening were negated by an overwhelming sense of trust; which was given and reciprocated positively upon.
As such, in the contemporary political calculus, the individual is part of the system yet in many ways, not fully of the system. Participation has been distilled exclusively to voting in elections. Historically, big initiatives like slavery, universal suffrage and voting rights were addressed via compromise and bargaining amongst elites. There was no popular referendum, nor did politicians seek consultation or input from the people. The consent assumed through the election process implied that no additional consultation with the voting public was needed. Without mandates by statute or best practice, such assumptions of representative democracy were institutionalized by the Founding Elite’s and embraced by subsequent generations of policy elites. The Founding Father’s created an asymmetrical political community to protect their self interest and prevent the type of regime change they themselves had perpetuated while simultaneously ensuring the rights of the individual. As a result of that duality, the founding fathers created a unique political calculus, built on an opportunistic interpretation of the social contract that today passes for American Democracy
Looking at the relationship of people and government as a matter of asymmetrical information is to set up an agent principal relationship as a problem that has a solution. Such a structure begs for the next step in our journey to uncover the true meaning of the social contract through experimentation. Just as Stiglitz and co brought computational and statistical depth to their economic problem, the advent of AI as a statistical tool and an algorithmic processes allows for a similar assessment of information asymmetry in the political domain. With certain AI tools we can lean into these thought experiments of information asymmetry, signal strength, screening resilience; test them, validate and build off of them and define the space between theory and practice. Central to this simulation based introspection is the belief in AI as a set of transformative tools and techniques can assist in both facilitating analysis of information asymmetry and being a tool of future government. In such dual purposes we can begin to realize how the individual has theoretically and conceptually been removed from the policy making process. Gives us an opportunity to look at Bottom Up measures Determine how we can bring information symmetry to a process that has been asymmetrical from the get go. With access to more information ever dreamed possible, now we have ways to process that data, information and knowledge. Generate information solutions to information problems.
