Against metrics: how measuring performance by numbers backfires

by Jerry Muller

More and more companies, government agencies, educational institutions and philanthropic organisations are today in the grip of a new phenomenon. I’ve termed it ‘metric fixation’. The key components of metric fixation are the belief that it is possible – and desirable – to replace professional judgment (acquired through personal experience and talent) with numerical indicators of comparative performance based upon standardised data (metrics); and that the best way to motivate people within these organisations is by attaching rewards and penalties to their measured performance. 

The rewards can be monetary, in the form of pay for performance, say, or reputational, in the form of college rankings, hospital ratings, surgical report cards and so on. But the most dramatic negative effect of metric fixation is its propensity to incentivise gaming: that is, encouraging professionals to maximise the metrics in ways that are at odds with the larger purpose of the organisation. If the rate of major crimes in a district becomes the metric according to which police officers are promoted, then some officers will respond by simply not recording crimes or downgrading them from major offences to misdemeanours. Or take the case of surgeons. When the metrics of success and failure are made public – affecting their reputation and income – some surgeons will improve their metric scores by refusing to operate on patients with more complex problems, whose surgical outcomes are more likely to be negative. Who suffers? The patients who don’t get operated upon.

When reward is tied to measured performance, metric fixation invites just this sort of gaming. But metric fixation also leads to a variety of more subtle unintended negative consequences. These include goal displacement, which comes in many varieties: when performance is judged by a few measures, and the stakes are high (keeping one’s job, getting a pay rise or raising the stock price at the time that stock options are vested), people focus on satisfying those measures – often at the expense of other, more important organisational goals that are not measured. The best-known example is ‘teaching to the test’, a widespread phenomenon that has distorted primary and secondary education in the United States since the adoption of the No Child Left Behind Act of 2001.

Short-termism is another negative. Measured performance encourages what the US sociologist Robert K Merton in 1936 called ‘the imperious immediacy of interests … where the actor’s paramount concern with the foreseen immediate consequences excludes consideration of further or other consequences’. In short, advancing short-term goals at the expense of long-range considerations. This problem is endemic to publicly traded corporations that sacrifice long-term research and development, and the development of their staff, to the perceived imperatives of the quarterly report.

To the debit side of the ledger must also be added the transactional costs of metrics: the expenditure of employee time by those tasked with compiling and processing the metrics in the first place – not to mention the time required to actually read them. As the heterodox management consultants Yves Morieux and Peter Tollman note in Six Simple Rules (2014), employees end up working longer and harder at activities that add little to the real productiveness of their organisation, while sapping their enthusiasm. In an attempt to staunch the flow of faulty metrics through gaming, cheating and goal diversion, organisations often institute a cascade of rules, even as complying with them further slows down the institution’s functioning and diminishes its efficiency.

Contrary to commonsense belief, attempts to measure productivity through performance metrics discourage initiative, innovation and risk-taking. The intelligence analysts who ultimately located Osama bin Laden worked on the problem for years. If measured at any point, the productivity of those analysts would have been zero. Month after month, their failure rate was 100 per cent, until they achieved success. From the perspective of the superiors, allowing the analysts to work on the project for years involved a high degree of risk: the investment in time might not pan out. Yet really great achievements often depend on such risks.

The source of the trouble is that when people are judged by performance metrics they are incentivised to do what the metrics measure, and what the metrics measure will be some established goal. But that impedes innovation, which means doing something not yet established, indeed that hasn’t even been tried out. Innovation involves experimentation. And experimentation includes the possibility, perhaps probability, of failure. At the same time, rewarding individuals for measured performance diminishes a sense of common purpose, as well as the social relationships that motivate co-operation and effectiveness. Instead, such rewards promote competition.

Compelling people in an organisation to focus their efforts on a narrow range of measurable features degrades the experience of work. Subject to performance metrics, people are forced to focus on limited goals, imposed by others who might not understand the work that they do. Mental stimulation is dulled when people don’t decide the problems to be solved or how to solve them, and there is no excitement of venturing into the unknown because the unknown is beyond the measureable. The entrepreneurial element of human nature is stifled by metric fixation.

Organisations in thrall to metrics end up motivating those members of staff with greater initiative to move out of the mainstream, where the culture of accountable performance prevails. Teachers move out of public schools to private and charter schools. Engineers move out of large corporations to boutique firms. Enterprising government employees become consultants. There is a healthy element to this, of course. But surely the large-scale organisations of our society are the poorer for driving out staff most likely to innovate and initiate. The more that work becomes a matter of filling in the boxes by which performance is to be measured and rewarded, the more it will repel those who think outside the box.

Economists such as Dale Jorgenson of Harvard University, who specialise in measuring economic productivity, report that in recent years the only increase in total-factor productivity in the US economy has been in the information technology-producing industries. The question that ought to be asked next, then, is to what extent the culture of metrics – with its costs in employee time, morale and initiative, and its promotion of short-termism – has itself contributed to economic stagnation?Aeon counter – do not remove

Jerry Z. Muller is the author of many books, including The Tyranny of Metrics. His writing has appeared in the New York Times, the Wall Street Journal, the Times Literary Supplement, and Foreign Affairs, among other publications. He is professor of history at the Catholic University of America in Washington, D.C., and lives in Silver Spring, Maryland.


This article was originally published at Aeon and has been republished under Creative Commons.

Eric Posner & Glen Weyl on Radical Markets: Uprooting Capitalism and Democracy for a Just Society

Radical MarketsMany blame today’s economic inequality, stagnation, and political instability on the free market. The solution is to rein in the market, right? Radical Markets turns this thinking—and pretty much all conventional thinking about markets, both for and against—on its head. The book reveals bold new ways to organize markets for the good of everyone. It shows how the emancipatory force of genuinely open, free, and competitive markets can reawaken the dormant nineteenth-century spirit of liberal reform and lead to greater equality, prosperity, and cooperation. Only by radically expanding the scope of markets can we reduce inequality, restore robust economic growth, and resolve political conflicts. But to do that, we must replace our most sacred institutions with truly free and open competition—Radical Markets shows how. Read on for an interview between the two authors. 

Eric: I’ve never thought of myself as a radical, yet our book is called Radical Markets. Is this a marketing gimmick or are the ideas really radical?

Glen: Our proposals seem pretty radical to me. In our scheme, private property turns into a kind of an auction, so there would be a price on most property all the time and the benefits would flow equally to all citizens, eliminating most inequality of wealth.  The conventional system of democracy—one-person-one-vote and judicial protection of most minority rights—would turn into a market-based system of trading voice credits and using them to buy votes. The current immigration bureaucracy would be radically decentralized, as ordinary people would take over sponsorship of migrant workers. There are certainly ideas more radical than these, but not many that you hear discussed seriously by our academic colleagues.

Eric: Yet, unlike true radicals, we urge a go-slow approach. Test things out, we say. Things could go wrong, we warn. And then we claim to be in favor of markets. That doesn’t sound like Saint-Simon or Marx. Sure, enough our book is #1 on Amazon in the category of libertarianism, though neither of us think of ourselves as libertarians.

Glen: True revolutions occur in slow motion; they begin with ideas. Democracy is a revolutionary idea in a world of kingdoms; it did not happen overnight. Unions began as working men’s associations and only gradually gained power and state sanction. Even Saint-Simon inspired small-scale utopian communities. Revolutions that move rapidly to take over a whole society, like the French or Russian, usually quickly determine they didn’t have their plans fleshed out and end in chaos or greater tyranny than the system they replaced. We have radical, even revolutionary, aims, but we want the changes we propose to stick and that will only happen if they are fully developed, their weaknesses exposed by experimentation.

Eric. I’m still not sure. I like the title because I’m a sucker for word play. The root of the word radical is, well, root. Being radical means getting to the root of things. I think we do that. A radical in math is the root of a number, and several of the ideas in the book have their origin in quadratic equations. And then there is the idea of radical as left-wing. Here, I’m not so sure. In fact, one of our goals is to appeal to people with different political views.

Glen: Well, radical doesn’t necessarily mean left wing, though I guess it depends how you define it.  In fact, The Economist defines its ideology as the “radical center.” To me, that sense of radical is more about favoring fundamental changes to the social order rather than, say, putting the government in charge of everything or redistributing wealth. In that sense, I think we are very much radicals

Eric: We even appeal to Adam Smith and Milton Friedman. What could be less radical than that?

Glen: Adam Smith has an unfair reputation as a “conservative” these days only because his ideas were so successful. He put the finishing touches, intellectually at least, on the unthinking feudalism of the day. In fact, Smith helped found the first major political movement to identify itself as “Radical,” the Philosophical Radicals who are our inspiration. Not surprisingly, ideas that were radical in the eighteenth century can be reactionary in the twentieth, when Friedman wrote. But we give Friedman credit for seeing that central planning and a certain kind of bureaucratic mindset leads to a dead end.

Eric: And for market thinking: Friedman was right to emphasize the value of competition and exchange—essential features of market system—but, like many economists, took our system of property rights and politics for granted, as if thinking on these topics had stopped centuries ago. One way you can tell that you are being radical in an intellectual sense—the sense I care about—is that you find yourself being criticized by people with different political views. If you’re radical enough, people will get angry. We’ve already seen a bit of this. Immigrant advocates and alt-right types don’t agree on much, but they seem to be scandalized by our foreign worker proposal. I’ll be curious to see how people react to our other proposals.

Eric A. Posner is the Kirkland and Ellis Distinguished Service Professor at the University of Chicago Law School. His many books include Climate Change Justice. He lives in Chicago. E. Glen Weyl is principal researcher at Microsoft and visiting senior research scholar in economics and law at Yale University. He lives in Boston.

Matthias Doepke & Fabrizio Zilibotti: The economics of motherhood

EconomicsIn times of heightened economic anxiety, for many American families the celebration of Mother’s Day this weekend will provide a welcome respite from the stress of everyday life. At least for this one day, love and the close bond between mothers and their children take center stage, and worries about money, careers, and other economic concerns are put on hold. Indeed, one reason that there is a special celebration for mothers is precisely that motherhood lacks the formal recognition that the market economy bestows on other activities: mothers do not draw official salaries, acquire fancy job titles, or advance within a corporate hierarchy. Instead, motherhood is an unpaid “labor of love,” and hence a phenomenon where the laws of economics seemingly do not apply.

Yet on closer inspection, even motherhood does have an undeniable economic dimension. To start, there is the economic impact of the celebration of Mother’s Day itself. Florists, greeting card companies, and restaurants serving brunch will do brisk business, and many consider the holiday at risk of becoming overly commercialized.

But the economic roots of motherhood go much deeper than that. Economic forces helped shape the role of motherhood in society, and are in large part responsible for two major transformations in how Western society conceives of the meaning and importance of motherhood.

The first of these transformations started with the Industrial Revolution, and continued throughout the nineteenth and early twentieth centuries. Mothers always had a special role in nurturing children, particularly so for the infants who needed to be breastfed. However, in earlier times the separation between the roles of mothers and fathers was less sharp than later on. Work and home life played out in the same place, say, the family’s farm or artisanal workshop, and children grew up in close proximity to both parents and other family members. Children also started to work from a young age, so that especially boys soon spent more time with their fathers than their mothers.

The Industrial Revolution sharpened the division between mothers’ and fathers’ roles in the family. The introduction of factories and the rise of commuting that followed the spread of railways and streetcars separated the work and home spheres. While men were pushed into the role of exclusive economic provider, women were expected to focus on the home. In addition, as the industrial economy created demand for workers who could read and write, providing children with a proper education became an important aim for most families, and the responsibility for this fell squarely on the mothers. The result was what historians term the “Cult of Domesticity,” a new value system that emphasized the role of women as mothers and educators and discouraged working outside the home.

While motherhood was idolized, mothers were also pushed out of the labor force. In addition to the new cultural norms against working mothers, outright discrimination such as the “marriage bars” that excluded married women from many professions also contributed to defining women more exclusively through their role as mothers. By the early twentieth century, it had become rare for married women with children to be working. It was in this era of idealized motherhood but also strictly separated roles for women and men that the current incarnation of the Mother’s Day holiday in the United States was created.

The second economic transformation of motherhood started with World War II and is still ongoing today. During the war, millions of mothers joined the labor force to support the war effort while the men were fighting overseas. The women of this “Rosie the Riveter” generation demonstrated that women’s contributions do not have to be limited to the home, and many of them found enjoyment and fulfillment in being in the labor force and gaining more independence.

After the war, the traditional division of labor was reestablished to some extent. But over time, more and more women decided to continue working even after marrying and having children, and by today most women, and most mothers, are in the labor force.

In large part, this transformation in the labor market was driven by technological change. Over time, the economy shifted from agriculture and manufacturing to services, eroding men’s traditional advantage in work that rewarded physical strength. Technological change also transformed the household: modern household appliances and market alternatives to home-produced goods such as day care centers and restaurants have reduced the time required to run the household and freed up time for work.

Today, motherhood is no longer defined exclusively through caring for children, but much more so through the “having it all” challenge of combining careers and family life. Nevertheless, the impact of the older role models and cultural norms can still be felt. Notably, time use data show that women continue to bear a disproportionate share of child care work and household chores.

Hence, despite the transformed meaning of motherhood in society, there are still good reasons for a special celebration of mothers. In addition to buying flowers and chocolates, men could do even better by expressing their gratitude through putting in equal time in child care and household chores, and not just on holidays.

By familiarizing themselves with the dishwasher, diapers, and their children’s clothing needs, men could prove to be truly ahead of their time. Economic trends will continue to shape the meaning of motherhood, and fatherhood, for the next generation. Women now graduate in much larger numbers from college than men do, and in today’s knowledge economy that gives them an advantage. Women will soon be the main earners in a large fraction of families. Over time, cultural norms will adjust to this change. The current model of mothers doing most of the household work in exchange for a once-a-year celebration will gradually fade into memory, which is something to look forward to this Mother’s Day.

Matthias Doepke is professor of economics at Northwestern University. He lives in Evanston, Illinois. Fabrizio Zilibotti is the Tuntex Professor of International and Development Economics at Yale University. He lives in New Haven, Connecticut. Their new book, Love, Money, and Parenting: How Economics Explains the Way We Raise Our Kids is forthcoming from Princeton University Press in February 2019. 

W. Kip Viscusi on Pricing Lives: Guideposts for a Safer Society

ViscusiLike it or not, sometimes we need to put a monetary value on people’s lives. In the past, government agencies used the financial “cost of death” to monetize the mortality risks of regulatory policies, but this method vastly undervalued life. Pricing Lives tells the story of how the government came to adopt an altogether different approach—the value of a statistical life, or VSL—and persuasively shows how its more widespread use could create a safer and more equitable society for everyone. In this book, Kip Viscusi provides a comprehensive look at all aspects of economic and policy efforts to price lives. Pricing Lives proposes sensible economic guideposts to foster more protective policies and greater levels of safety in the United States and throughout the world.

What do you mean by “pricing lives,” and where does this occur?

What we mean by pricing lives depends on the context. For the government’s risk and environmental regulation policies, the challenge is to determine how much we are willing to spend to prevent each expected fatality. The principal measure used to set this price is known as the value of a statistical life (VSL), or the amount society is willing to pay to prevent the risk of each statistical death. Companies also set an implicit price on life every time they make products that are not risk-free. Sometimes companies have assigned numerical amounts to the value of the fatalities that are prevented, though how they have done so is seriously flawed and has greatly undervalued life. There is also a role for pricing lives after fatalities have occurred. Regulatory agencies set the penalties that firms must pay for regulatory violations that led to the fatalities. The courts also set a price on lives in wrongful death cases in terms of the amount of compensation that must be paid to the decedent’s family after the death.

Why should there be any limit at all on what the government spends to save lives?

So long as resources are limited, we cannot make an unbounded commitment to a risk-free society. The practical issue is where to set these limits. In the 1980s, I was asked to settle a dispute between OMB and OSHA over the proposed hazard communication regulation. OMB had rejected the proposal, concluding that the costs exceeded the benefits. In my analysis of this debate, I introduced the VSL concept to government agencies. Doing so made the calculation of the benefits of risk regulations ten times more valuable than they were under the previous cost of death approach. It also led to the issuance of a regulation that previously had been rejected because it was viewed as being too costly. Although some government agencies were slow to adopt the higher VSL numbers, this approach is now the norm in government agencies. The VSL is the most important single number used in the evaluation of government regulatory policies.

Where can we get these values of a statistical life numbers?

The most reliable evidence is based on U.S. labor studies of the extra pay workers get for extra risk.  Suppose, for example, that a worker was paid $900 extra per year to face a risk of 1/10,000. Then, for a group of 10,000 workers, they would be paid $9 million (10,000 × $900) for the one expected death to their group. My current estimates of the VSL in the U.S. place this value at $10 million. Once people understand that the VSL greatly exceeds people’s earnings, the criticism that the approach is immoral generally diminishes. Instead, people wonder how people can value their lives by more than what they make. The reason for this surprisingly large value is that they are not buying out of the prospect of certain death. Instead, the VSL only pertains to very small risks of death that are much less costly to prevent.

What do other countries do? Does this U.S. labor market evidence have any pertinence to them?

Many other countries have also adopted the VSL approach, usually based on studies in which people are asked in interviews how much they are willing to pay for safety. Unfortunately, the VSL estimates that are used outside of the U.S. are very low—far lower than is warranted based on the income levels relative to the U.S. Even countries such as the United Kingdom and Australia greatly undervalue lives, with far greater disparities observed for many low-income countries. In this book, I present an approach for transferring the U.S. estimates to other countries, along with appropriate adjustments for income level differences. The estimates I provide for a wide range of countries will greatly increase the value placed on safety throughout the world.

Are there other factors, like age, that can affect the VSL?

What matters is people’s own willingness to pay to reduce risk. Unlike purported economic measures, such as the cost of death approach, people can still have a high VSL even if they are retired. As it turns out, the VSL rises over people’s lifetime, and then does decline somewhat, but it does not plummet with age. The VSL for those age 65 and over is very similar to that of people in their early 20s. There was a public outcry against the Environmental Protection Agency when it attempted an age adjustment that put “seniors on sale, 37% off.” Unfortunately, this age adjustment was not based on any U.S. labor market evidence but on a more speculative interview study from the United Kingdom. Typically, government policies have impacts across the entire population so that in most instances, relying on an average VSL is all that is needed. 

This whole idea of pricing lives sounds similar what businesses do when they decide how much to spend on product safety improvements. Do they get it right?

Unfortunately, companies historically have underpriced lives as well, as they have focused on how much they have to pay in court after a fatality rather than on how much it is worth to consumers to reduce the risk of death. Companies fell prey to the same cost of death approach that government agencies used to use. Jurors have expressed alarm after reviewing these corporate practices, sometimes levying punitive damages of $100 million or more against companies that have valued lives in this way. The result has been that most companies have abandoned such risk analyses altogether and now keep such deliberations secret, for fear of liability. In my book, I propose that companies adopt the VSL in their product safety decisions and that they be given legal protections to encourage responsible corporate risk analyses.

How is it that setting a finite price on life can provide “guideposts for a safer society?”

A properly set VSL raises rather than reduces the amounts that government agencies throughout the world assign to the prevention of fatality risks. Adoption of this approach for corporate risk decisions likewise would lead to safer products. In this book, I also advocate that the VSL be used to set penalties for regulatory violations leading to fatalities. Doing so would lead to an enormous increase in penalties by, for example, boosting penalties for job safety violations by a factor of 1,000. The courts similarly can use the VSL in both assessing product safety and setting damages in situations where deterring risky behavior is the concern. My proposed expansion of the application of the VSL will provide greater incentives for safety in all these contexts. What is particularly striking is that the single VSL number can serve multiple purposes and set the price on life in so many different situations.

W. Kip Viscusi is the University Distinguished Professor of Law, Economics, and Management at Vanderbilt University. His many books include Economics of Regulation and Antitrust and Fatal Tradeoffs: Public and Private Responsibilities for Risk.

Paul Tucker on Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State

TuckerCentral bankers have emerged from the financial crisis as the third great pillar of unelected power alongside the judiciary and the military. They pull the regulatory and financial levers of our economic well-being, yet unlike democratically elected leaders, their power does not come directly from the people. Unelected Power lays out the principles needed to ensure that central bankers, technocrats, regulators, and other agents of the administrative state remain stewards of the common good and do not become overmighty citizens. Like it or not, unelected power has become a hallmark of modern government. This critically important book shows how to harness it to the people’s purposes.

What is the regulatory state?

It’s a term that has come to be used to describe a host of government bodies that regulate particular economic sectors or the public more generally to protect, say, investors, the environment, consumers, workers, and so on. In a rudimentary form it has existed for a long time, going back to the 19th century and beyond. Going wider, Americans sometimes refer to the administrative state, meaning the evolution of government beyond a world of legislators and courts to one in which the executive branch makes policy and is divided up into departments, agencies, bureaus, commissions, and so on.

What are Independent agencies, and why do they matter?

They are government organizations that are not under the day-to-day control of elected politicians, whether in the executive branch or the legislature. Obvious examples today are the central banks, such as the Federal Reserve, European Central Bank, and the Bank of England, but also various regulators insulated from ongoing political control. By no means all agencies in the administrative state are independent. On both sides of the Atlantic, many are under the control of cabinet ministers or subject to annual budget approvals from the legislature, which makes them sensitive to politicians’ sentiments and whims. Independent agencies are distinctive in that politicians can control them only by amending or repealing legislation.

That sounds problematic in a democracy. Is it?

That’s the point of the book. The way I’ve just described them it could be a hell of a problem. Imagine an independent agency that had lots of powers but only the vaguest purpose and objective. Who would be able to tell whether it had succeeded in its mission if it set its own goal posts?! That’s at odds with some of our deepest values: just as “no taxation without representation” was a rallying cry a couple of centuries’ ago, we might just as well demand “no regulation without representation.”

Are central banks a particular problem?

They have become the poster boys and girls of today’s unelected power. Compared with what happened after the Great Depression in the 1930s, when it was politicians who did the heavy lifting, this time it has been central banks that have led the way in reviving the economy and redesigning the financial system. They have used their balance sheets on a truly gigantic scale to influence credit conditions in lots of markets, and have been given lots of new regulatory powers. They are more powerful than ever before, ranking with the judiciary and military as a third core pillar of unelected power.

Do people object to all this?

Yes, but in rather different ways in different countries. In the US, since the New Deal there have been critics who object that regulatory agencies violate the values associated with the separation of powers or even the Constitution itself. In France, not long ago the parliament passed legislation to put more structure around such agencies. In the UK, there is episodic antagonism to government by ‘experts.’

And on central bank independence, there have been challenges in the German constitutional court and attempts to pass reforming legislation in the US Congress.

So what is the solution?

Our democracies need norms for whether and how to delegate to independent agencies that measure up to the deep political values of our democratic, liberal republics: the various values of democracy, rule of law, constitutionalism. My book proposes and defends just such a set of Principles for Delegation, as I call them. They come in two broad parts: criteria for whether to delegate, and precepts for how to delegate.

Criteria for whether to delegate: I argue that a policy function should not be delegated to a truly independent agency unless (1) society has settled preferences; (2) the objective is capable of being framed in a reasonably clear way; (3) delegation would materially mitigate a problem of credible commitment; and (4) the policymaker would not have to make big choices on society’s values or the distribution of its resources.

Precepts for how to delegate: (1) the agency’s purposes, objectives and powers should be clear and set by elected legislators; (2) its decision-making procedures should be set largely by legislators and should accord with the values of the rule of law; (3) the agency itself should publish the operating principles that will guide its exercise of discretion within the delegated domain; (4) there should be transparency sufficient to permit accountability to the legislature for the agency’s stewardship of the regime and, separately, for politicians’ framing of the regime; and (5) it should be clear what (if anything) will happen, procedurally and/or substantively, when the edges of the regime are reached but the agency could do more to avert or contain a crisis. 

Perhaps the biggest thing is that elected legislators should set a monitorable objective. Independent agencies really can improve the credibility of commitments made by government, but only if we know what we want them to do and can track whether or not they are doing it.

Would those Principles affect anything much?

Yes. Here are just three examples.

They would challenge the acceptability of judges completely having completely overhauled the principles of competition policy a few decades ago. The legislation was vague and the views of economists had moved on, so the courts had room and reason to act. But, given our democratic values, this should have been work for elected politicians.

They suggest that role of some financial-market regulators in preserving a stable financial system needs either to be better insulated from politics (such as the SEC in the US) or subject to much clearer objectives (UK).

And they would restrict the roles and activities of central banks rather more than we have seen in recent years.  

Is any of this realistic in actual democratic states?

Well, that’s the point of the book. There are no deep constitutional blockages, so it’s a question of whether we want to be governed in a way that’s consistent with our values. I’m hoping that people who see merit in my Principles for Delegation (or something like them) will cite many more examples than I can (or even know about), generating the kind of debate that is badly needed about how state power is allocated.

Anyway, surely something has to be done to bring the role of experts in government in line with our democratic commitments.

Why did you write the book?

I spent a good part of my central banking career helping to design regulatory and monetary regimes, none more important than the expansion of the Bank of England’s powers after the Great Financial Crisis. We resisted some powers, wanted others constrained, and had strong views on how the different responsibilities should be assigned to distinct committees so as to disperse power and focus incentives. I wanted to try to write down the values and considerations lying behind that. When I moved to Harvard in late-2013, I had the opportunity to do so.

Paul Tucker is a fellow at the Harvard Kennedy School and chair of the Systemic Risk Council. For more than thirty years, he was a central banker and regulator at the Bank of England and the Bank for International Settlements. He lives in London.

Dr. John C. Hulsman: The Ten Commandments of Political Risk

Disturb us, Lord, when we are too well pleased with ourselves
When our dreams have come true because we have dreamed too little
When we arrive safely because we sailed too close to the shore.

Disturb us, Lord, to dare more boldly, to venture on wider seas
Where storms will show your mastery
Where losing sight of land, we shall find the stars.

—Excerpts from Sir Francis Drake’s prayer, 1577 (apocryphal)

HulsmanThe great goal, the Everest of my book, has been to identify the historical elements that comprise the rules of the road for mastering political risk analysis and to holistically put our ten commandments to use in explaining the baffling world we presently live in. Having discovered these commandments—and illuminated them through the use of historical story-telling, deriving them from real-world policy situations throughout the ages—we can get to the Holy Grail of actual understanding.

Here at the end of our story, through the use of this unique heuristic method, we have delineated the long and neglected history of political risk analysis, linking this important tale to the broader efforts of both business and political leaders to master risk in general. Confident in what geopolitical risk analysis has been, is, and can be, it is clear that the Delphic dream of soothsaying—in a limited way, over limited issues, for a limited period of time—can be partially fulfilled.

  • “We are the risk.” As the history surrounding Sejanus and the decline and fall of the Roman Empire makes clear (alongside the corroborating tale of present-day Europe’s decadent decline), geopolitical analysts have a terrible time looking in the mirror and seeing that the society they are part of can itself be the major geopolitical risk problem.


  • Gaming out “lunatics.” Far too often geopolitical risk analysts let those with very different belief systems off the hook by lazily assuming that they must be crazy, rather than looking for the method to their madness. As the story of “The Old Man of the Mountain” and the Third Crusade (with inter-chapters on both Charles Manson and ISIS) makes clear, there is almost always an internal logic to any seemingly mad geopolitical interlocutor that can be followed and assessed.


  • Gaming out “chess players.” Amidst the daily tumult of a constant barrage of information, it is easy to lose sight of the intellectual needle in the haystack: the assessment of “chess players,” those geopolitical decision-makers who have stable, rational, coherent, long-term strategies in place to further their geopolitical goals. As reviewing the history of Niccolo Machiavelli and Pope Julius II (with an inter-chapter on George Washington and Alexander Hamilton) illuminates, finding these rare geostrategic birds is well worth the effort, as once they are identified (which is difficult), their future actions can rather easily be predicted.


  • Recognizing game changers. As the stirring story of John Adams in the sultry summer of 1776 makes clear, seeing the bigger picture—discerning how specific contemporaneous events fit into the larger historical pattern—is a mighty tool in political risk analysis. Separating the wheat from the chaff and intellectually drilling down on what really matters and its historical meaning (as we see both Adams and inter-chapter hero Winston Churchill doing in very different historical contexts) allows the political risk analyst as well as the foreign policy practitioner to see the world as it actually is.


  • Balance is the key to foreign policy. Having discovered the secrets of one major driver of geopolitics—be it macroeconomics, geopolitics, or cultural power—far too often analysts quickly forget that there are others and that it is the mix that explains everything. The twin stories of a beleaguered Venetian Republic and a seemingly all-conquering Napoleon in 1797 allow a dual critique of both an economics-only and overly militaristic policies and the doom to which both one-sided initiatives inevitably lead.


  • If you are digging yourself an intellectual hole in foreign policy analysis—stop. The “losing gambler in Vegas” syndrome affects both policy-makers and analysts. As the legendary Robert E. Lee found to his supreme peril at Gettysburg (and also “the best and the brightest” of the Kennedy and Johnson administrations as they met their nemesis in Indochina), pushing ahead with an already failed policy in a desperate effort to recoup past losses leads to calamity.


  • Know your country’s place in the world. The singular case of the late Victorian titan Lord Salisbury—who bravely and correctly righted Britain’s foreign policy to fit the paradox of its relatively declining but still dominant place in the world of the 1890s—highlights this vital requirement for both policy-makers and analysts alike. Only by fearlessly and correctly assessing your country’s true place in the world (as the inter-chapter on the Genro of Japan makes clear happened across the globe from Salisbury a generation earlier) can you pursue successful political risk analysis.


  • Do not put all your eggs in one strategic basket. Distantly related to the “losing gambler in Vegas” syndrome, the “promised land fallacy” besets decision-makers and analysts who ruinously rely on one overall strategy to magically attempt to alter their country’s overall geopolitical position in the world. In the case of Wilhelmine Germany, Admiral Von Tirpitz’s disastrous plan to challenge British naval might (echoing the inter-chapter on Soviet leader Nikita Khrushchev’s equally ruinous “Wars of National Liberation” gambit) helped lead to the Great War and Germany’s destruction.


  • Know the nature of the world you are living in. The trials and tribulations of Beatle George Harrison (with the inter-chapter focusing on the diametrically opposed case of the fall of Brian Jones and the rise of the Rolling Stones) and the stunning, lightning-quick dismemberment of his band dramatically underline that successful systems can collapse in the blink of an eye if their underlying power realities change, failing to any longer reflect the systemic power facts on the ground that created such a system in the first place. Policy-makers as well as political risk analysts must know both the nature of the global system they are living in (is it characterized by one great power, two, or many?) as well as if that system is durable, fragile, or evolving.


  • Prepare for the “butterfly effect.” The telling present-day case of Deng Xiaoping and the colossal success he made of both Chinese foreign and economic policy must not obscure the reality that East Asia today sits on a powder keg, a single random event away from 1914; just one drunken Chinese sea captain could quite plausibly upset the strategic equilibrium in Asia. The best policy-makers and political risk analysts (as the inter-chapter example of Harold Macmillan also makes clear) see the weaknesses in even the most successful foreign policies, having resilient initiatives at the ready to stave off seemingly unexpected disasters.


In traveling far from home, as Sir Francis Drake bid us to do in the swashbuckling, mesmerizing prayer that opens this article and To Dare More Boldly, our journey through history has been bountifully rewarded. For yes, within limits, the future can be foretold through the use of political risk analysis. Truly venturing far from our intellectual shore, in daring more boldly, we have come to see the stars. 

Dr. John C. Hulsman is the president and cofounder of John C. Hulsman Enterprises, a successful global political risk consulting firm. For three years, Hulsman was the Senior Columnist for City AM, the newspaper of the city of London. Hulsman is a Life Member of the Council on Foreign Relations, the preeminent foreign policy organization. The author of all or part of 14 books, Hulsman has given over 1520 interviews, written over 650 articles, prepared over 1290 briefings, and delivered more than 510 speeches on foreign policy around the world. His most recent work is To Dare More Boldly: The Audacious Story of Political Risk.

Rachel Sherman: How New York’s wealthy parents try to raise ‘unentitled’ kids

This article was originally published at Aeon and has been republished under Creative Commons.

ShermanWealthy parents seem to have it made when it comes to raising their children. They can offer their kids the healthiest foods, the most attentive caregivers, the best teachers and the most enriching experiences, from international vacations to unpaid internships in competitive fields.

Yet these parents have a problem: how to give their kids these advantages while also setting limits. Almost all of the 50 affluent parents in and around New York City that I interviewed for my book Uneasy Street: The Anxieties of Affluence (2017), expressed fears that children would be ‘entitled’ – a dirty word that meant, variously, lazy, materialistic, greedy, rude, selfish and self-satisfied. Instead, they strove to keep their children ‘grounded’ and ‘normal’. Of course, no parent wishes to raise spoiled children; but for those who face relatively few material limits, this possibility is distinctly heightened.

This struggle highlights two challenges that elite parents face in this particular historical moment: the stigma of wealth, and a competitive environment. For most of the 20th century, the United States had a quasi-aristocratic upper class, mainly white, Anglo-Saxon Protestant (WASP) families from old money, usually listed in the Social Register. Comfortable with their inherited advantages, and secure in their economic position, they openly viewed themselves as part of a better class of people. By sending their kids to elite schools and marrying them off to the children of families in the same community, they sought to reproduce their privilege.

But in the past few decades this homogenous ‘leisure class’ has declined, and the category of the ‘working wealthy’, especially in finance, has exploded. The ranks of high-earners have also partially diversified, opening up to people besides WASP men. This shift has led to a more competitive environment, especially in the realm of college admissions.

At the same time, a more egalitarian discourse has taken hold in the public sphere. As the sociologist Shamus Khan at Columbia University in New York argues in his book Privilege (2012), it is no longer legitimate for rich people to assume that they deserve their social position based simply on who they are. Instead, they must frame themselves as deserving on the basis of merit, particularly through hard work. At the same time, popular-culture images proliferate of wealthy people as greedy, lazy, shallow, materialistic or otherwise morally compromised.

Both competition and moral challenge have intensified since the 2008 economic crisis. Jobs for young people, even those with college educations, have become scarcer. The crisis has also made extreme inequality more visible, and exposed those at the top to harsher public critique.

In this climate, it is hard to feel that being wealthy is compatible with being morally worthy, and the wealthy themselves are well aware of the problem. The parents I talked with struggle over how to raise kids who deserve their privilege, encouraging them to become hard workers and disciplined consumers. They often talked about keeping kids ‘normal’, using language that invoked broad ‘middle-class’ American values. At the same time, they wanted to make sure that their children could prevail in increasingly competitive education and labour markets. This dilemma led to a profound tension between limiting and fostering privilege.

Parents’ educational decisions were especially marked by this conflict. Many supported the idea of public school in principle, but were anxious about large classes, lack of sports and arts programmes, and college prospects. Yet they worried that placing kids in elite private schools would distort their understanding of the world, exposing them only to extremely wealthy, ‘entitled’ peers. Justin, a finance entrepreneur, was conflicted about choosing private, saying: ‘I want the kids to be normal. I don’t want them to just be coddled, and be at a country club.’ Kevin, another wealthy father, preferred public school, wanting his young son not to live in an ‘elitist’ ‘narrow world’ in which ‘you only know a certain kind of people. Who are all complaining about their designers and their nannies.’

The question of paid work also brought up this quandary. All the parents I talked with wanted their kids to have a strong work ethic, with some worrying that their children would not be self-sufficient without it. But even those who could support their kids forever didn’t want to. Scott, for example, whose family wealth exceeds $50 million, was ‘terrified’ his kids would grow up to be ‘lazy jerks’. Parents also wanted to ensure children were not materialistic hyper-consumers. One father said of his son: ‘I want him to know limits.’ Parents tied consumption to the work ethic by requiring kids to do household chores. One mother with assets in the tens of millions had recently started requiring her six-year-old to do his own laundry in exchange for his activities and other privileges.

This mother, and many other parents of younger children, said they would insist that their kids work for pay during high school and college, in order to learn ‘the value of a dollar’. Commitment to children’s employment wavered, however, if parents saw having a job as incompatible with other ways of cultivating their capacities. Kate, who had grown up middle-class, said, of her own ‘crappy jobs’ growing up: ‘There’s some value to recognising this is what you have to do, and you get a paycheck, and that’s the money you have, and you budget it.’ But her partner Nadine, who had inherited wealth, contrasted her daughter’s possibly ‘researching harbour seals in Alaska’ to working for pay in a diner. She said: ‘Yes, you want them to learn the value of work, and getting paid for it, and all that stuff. And I don’t want my kids to be entitled. I don’t want them to be, like, silver spoon. But I also feel like life affords a lot of really exciting opportunities.’

The best way to help kids understand constraints, of course, is to impose them. But, despite feeling conflicted, these parents did not limit what their kids consumed in any significant way. Even parents who resisted private school tended to end up there. The limits they placed on consumption were marginal, constituting what the sociologist Allison Pugh in Longing and Belonging (2009) called ‘symbolic deprivation’. Facing competitive college admissions, none of the high-school-age kids of parents in my sample worked for pay; parents were more likely to describe their homework as their ‘job’.

Instead of limiting their privilege, parents tried to regulate children’s feelings about it. They wanted kids to appreciate their private education, comfortable homes, designer clothes, and (in some cases) their business-class or private travel. They emphasised that these privileges were ‘special’ or ‘a treat’. As Allison said, of her family’s two annual vacations: ‘You don’t want your kids to take these kinds of things for granted. … [They should know] most people don’t live this way. And that this is not the norm, and that you should feel this is special, and this is a treat.’

By the same token, they tried to find ways to help kids understand the ‘real world’ – to make sure they ‘understand the way everyone else lives’, in the words of one millionaire mother. Another mother fostered her son’s friendship with a middle-class family who lived in a modest apartment, because, she said: ‘I want to keep our feet in something that’s a little more normal’ than his private-school community.

Ideally, then, kids will be ‘normal’: hard workers and prudent consumers, who don’t see themselves as better than others. But at the same time, they will understand that they’re not normal, appreciating their privilege, without ever showing off. Egalitarian dispositions thereby legitimate unequal distributions, allowing children – and parents – to enjoy and reproduce their advantages without being morally compromised. These days, it seems, the rich can be entitled as long as they do not act or feel ‘entitled’. They can take it, as long as they don’t take it for granted.Aeon counter – do not remove

Rachel Sherman is associate professor of sociology at the New School for Social Research and Eugene Lang College. She is the author of Class Acts: Service and Inequality in Luxury Hotels. Sherman lives in New York

Leah Boustan: What hundreds of thousands of census records can teach us about the Great Black Migration

In honor of Black History Month, we’re running a special blog series entitled, “Exploring the Black Experience.” Learn more about the Great Black Migration with this post by Leah Boustan, author of Competition in the Promised Land

BoustanIn 1920, Kernell and Royal Pleasant, two brothers aged 13 and 11, lived with their parents and younger sister Jennie in Assumption Parish, the heart of Louisiana’s sugarcane region, 80 miles west of New Orleans. The boys’ father, Thomas Pleasant, was a carpenter who reported working “by the job.” Even this middling profession placed Thomas one rung above their neighbors, most of whom were farm laborers in the sugarcane fields.

By 1940, Kernell and Royal’s lives had diverged. Kernell, the eldest brother, still lived in the same ward where he had been as a boy, following his father’s footsteps into carpentry and earning only $200 a year. Royal, although younger by two years, had moved up to Chicago, joining the millions of other southern black men and women who moved to northern cities during the twentieth century. By 1940, Royal was a college graduate and worked as a filing clerk in a municipal government office. He earned more than twice as much as his older brother, reporting $480 of annual earnings.

Although separated by region, educational status, and earnings, one feature drew the Pleasant brothers together: both Royal and Kernell lived in all-black neighborhoods in 1940. Back in Louisiana, Kernell’s closest neighbors were all still laborers in sugarcane fields. Up in Chicago, Royal, his wife Louise, and their lodger William lived down the street from railroad porters, barbers, and laborers at the stockyards. Most of their neighbors were fellow migrants, hailing from Mississippi, Alabama, Georgia, and Tennessee.

Royal Pleasant was only one of the four million black southerners who moved North from 1940 to 1970. The Census rolls that document the Pleasant brothers’ lives offer one small glimpse into this mass movement. As it turns out, Royal’s success in the North was a highly typical migrant story.

Using newly-digitized Census records, I was able to trace nearly 250,000 black men who were living in their childhood households in 1920 to their adult location in the 1940 Census. Many of these records contained sets of brothers, one or more of whom had moved to the North. Just as Royal was earning more than double his brother’s pay, I found that the average black man who moved North or West during this early wave of the Great Black Migration earned more than twice as much as his brother(s) who remained in the South.

The bar chart shows earnings estimates of the economic return to moving to the North for both black and white migrants. The blue bars compare earnings between migrants and non-migrants in the full population, and the green bars depict the results of a similar analysis for sets of matched brothers. In both cases, I find that black migrants earned twice as much as their southern counterparts, and white migrants earning around 50 percent more (the bars are presented in log terms; 80 log points is the equivalent of around 130 percent higher earnings). Half of the nominal return to migration can be attributed to higher cost of living in northern cities, but the other half represents a real increase in purchasing power.

The goal of examining brother pairs, rather than simply comparing all migrants to all men who remained in the South, is to account for potential selection in who chooses to move. If migrants were drawn from well-off households, a portion of the estimated return to migration would reflect this positive selection. If, instead, men from poorer households were more likely to move to the North, the estimated return to migration might be too low. The similarity of the estimates suggests that southern migrants were not especially selected, either positively or negatively, a pattern that is consistent with a large mass migration.

The 1940 Census was the first to include questions about individual income levels; earlier censuses only asked about occupation. As it turns out, most of the return to migrating to the North was driven by shifts from lower-paid rural occupations into higher-paid industrial or white collar positions. It was rare for migrants to remain in the same line of work as their brothers in the South. (There are always a few exceptions; the Allison brothers, David and Winston, both worked as waiters in restaurants, but David made twice as much in Chicago as Winston did in Birmingham, Alabama).

My ability to compare men who participated in the Great Black Migration to their brothers who stayed home is only possible because of large-scale digitization projects of the historical Census records. The manuscripts were transcribed by more than 25,000 volunteers organized by FamilySearch, the genealogical arm the Church of Jesus Christ of Latter-day Saints.  Data files were then made available to researchers through a partnership between and the Minnesota Population Center. The digitized 1940 Census files include 134 million persons and 70 variables.

From the 1940 Census, we can see only one snapshot of how Royal fared in his new life in Chicago and how Kernell managed back home. As new Census waves are released to the public (72 years after the surveys were taken), we will be able to follow these men and their many counterparts forward in time. Did Kernell ever join his brother in the North? Did Royal return to Louisiana, or one of the South’s burgeoning metropolitan areas, when it became time to retire? And how did the lives of their children (if any, as neither brother yet had children in the 1940 Census) unfold in their disparate settings?

On the last question, a new paper (link here) by Trent Alexander and co-authors uses restricted-access data from the Census Bureau to follow young children living in migrant and non-migrant families in 1940 to their adult outcomes in the 2000 Census. The children of migrants enjoy modest income gains even 60 or more years after their parents first moved to the North. Just as the parental generation was able to double their income by moving North, their children continue to enjoy a 10 percent earnings boost. The Great Black Migration is not only an essential chapter in black history but is still a vital part of black economic fortunes today.

Leah Platt Boustan is professor of economics at Princeton University, and a research associate at the National Bureau of Economic Research. She is the author of Competition in the Promised Land: Black Migrants in Northern Cities and Labor Markets.


Exploring the Black Experience through Economics

For hundreds of years, the American and global economies have been built on the backs of Black people. In each era, new forms of marginalization—enslavement, segregation, exclusion—have been devised to limit Black economic success. Still, Black dreams and Black resilience have created space for Black people’s hard-won economic gains. As workers, scholars, migrants, and emissaries of empire, Black people have shaped the American and global economies in crucial ways.

From industrial migration to economic colonization, and from unfunded neighborhoods to elite business schools, these four books from PUP’s catalog highlight different aspects of Black Americans’ experiences at the center, the margins, and the cutting edge of the formal economy.

From 1940 to 1970, nearly four million black migrants left the American rural South to settle in the industrial cities of the North and West. Competition in the Promised Land provides a comprehensive account of the long-lasting effects of the influx of black workers on labor markets and urban space in receiving areas.

Employing historical census data and state-of-the-art econometric methods, Competition in the Promised Land revises our understanding of the Great Black Migration and its role in the transformation of American society.

In 1901, the Tuskegee Institute, founded by Booker T. Washington, sent an expedition to the German colony of Togo in West Africa, with the purpose of transforming the region into a cotton economy similar to that of the post-Reconstruction American South. Alabama in Africa explores the politics of labor, sexuality, and race behind this endeavor, and the economic, political, and intellectual links connecting Germany, Africa, and the southern United States. The cross-fertilization of histories and practices led to the emergence of a global South, reproduced social inequities on both sides of the Atlantic, and pushed the American South and the German Empire to the forefront of modern colonialism.

Tracking the intertwined histories of Europe, Africa, and the Americas at the turn of the century, Alabama in Africa shows how the politics and economics of the segregated American South significantly reshaped other areas of the world.

Baltimore was once a vibrant manufacturing town, but today, with factory closings and steady job loss since the 1970s, it is home to some of the most impoverished neighborhoods in America. The Hero’s Fight provides an intimate look at the effects of deindustrialization on the lives of Baltimore’s urban poor, and sheds critical light on the unintended consequences of welfare policy on our most vulnerable communities.

Blending compelling portraits with in-depth scholarly analysis, The Hero’s Fight explores how the welfare state contributes to the perpetuation of urban poverty in America.

For nearly three decades, English has been the lingua franca of cross-border organizations, yet studies on corporate language strategies and their importance for globalization have been scarce. In The Language of Global Success, Tsedal Neeley provides an in-depth look at a single organization—the high-tech giant Rakuten—in the five years following its English lingua franca mandate. Neeley’s behind-the-scenes account explores how language shapes the ways in which employees who work in global organizations communicate and negotiate linguistic and cultural differences.

Examining the strategic use of language by one international corporation, The Language of Global Success uncovers how all organizations might integrate language effectively to tap into the promise of globalization.

Scott Page: Why hiring the ‘best’ people produces the least creative results

This article was originally published at Aeon and has been republished under Creative Commons.

PageWhile in graduate school in mathematics at the University of Wisconsin-Madison, I took a logic course from David Griffeath. The class was fun. Griffeath brought a playfulness and openness to problems. Much to my delight, about a decade later, I ran into him at a conference on traffic models. During a presentation on computational models of traffic jams, his hand went up. I wondered what Griffeath – a mathematical logician – would have to say about traffic jams. He did not disappoint. Without even a hint of excitement in his voice, he said: ‘If you are modelling a traffic jam, you should just keep track of the non-cars.’ 

The collective response followed the familiar pattern when someone drops an unexpected, but once stated, obvious idea: a puzzled silence, giving way to a roomful of nodding heads and smiles. Nothing else needed to be said.

Griffeath had made a brilliant observation. During a traffic jam, most of the spaces on the road are filled with cars. Modelling each car takes up an enormous amount of memory. Keeping track of the empty spaces instead would use less memory – in fact almost none. Furthermore, the dynamics of the non-cars might be more amenable to analysis.

Versions of this story occur routinely at academic conferences, in research laboratories or policy meetings, within design groups, and in strategic brainstorming sessions. They share three characteristics. First, the problems are complex: they concern high-dimensional contexts that are difficult to explain, engineer, evolve or predict. Second, the breakthrough ideas do not arise by magic, nor are they constructed anew from whole cloth. They take an existing idea, insight, trick or rule, and apply it in a novel way, or they combine ideas – like Apple’s breakthrough repurposing of the touchscreen technology. In Griffeath’s case, he applied a concept from information theory: minimum description length. Fewer words are required to say ‘No-L’ than to list ‘ABCDEFGHIJKMNOPQRSTUVWXYZ’. I should add that these new ideas typically produce modest gains. But, collectively, they can have large effects. Progress occurs as much through sequences of small steps as through giant leaps.

Third, these ideas are birthed in group settings. One person presents her perspective on a problem, describes an approach to finding a solution or identifies a sticking point, and a second person makes a suggestion or knows a workaround. The late computer scientist John Holland commonly asked: ‘Have you thought about this as a Markov process, with a set of states and transition between those states?’ That query would force the presenter to define states. That simple act would often lead to an insight. 

The burgeoning of teams – most academic research is now done in teams, as is most investing and even most songwriting (at least for the good songs) – tracks the growing complexity of our world. We used to build roads from A to B. Now we construct transportation infrastructure with environmental, social, economic and political impacts.

The complexity of modern problems often precludes any one person from fully understanding them. Factors contributing to rising obesity levels, for example, include transportation systems and infrastructure, media, convenience foods, changing social norms, human biology and psychological factors. Designing an aircraft carrier, to take another example, requires knowledge of nuclear engineering, naval architecture, metallurgy, hydrodynamics, information systems, military protocols, the exercise of modern warfare and, given the long building time, the ability to predict trends in weapon systems.

The multidimensional or layered character of complex problems also undermines the principle of meritocracy: the idea that the ‘best person’ should be hired. There is no best person. When putting together an oncological research team, a biotech company such as Gilead or Genentech would not construct a multiple-choice test and hire the top scorers, or hire people whose resumes score highest according to some performance criteria. Instead, they would seek diversity. They would build a team of people who bring diverse knowledge bases, tools and analytic skills. That team would more likely than not include mathematicians (though not logicians such as Griffeath). And the mathematicians would likely study dynamical systems and differential equations.

Believers in a meritocracy might grant that teams ought to be diverse but then argue that meritocratic principles should apply within each category. Thus the team should consist of the ‘best’ mathematicians, the ‘best’ oncologists, and the ‘best’ biostatisticians from within the pool.

That position suffers from a similar flaw. Even with a knowledge domain, no test or criteria applied to individuals will produce the best team. Each of these domains possesses such depth and breadth, that no test can exist. Consider the field of neuroscience. Upwards of 50,000 papers were published last year covering various techniques, domains of enquiry and levels of analysis, ranging from molecules and synapses up through networks of neurons. Given that complexity, any attempt to rank a collection of neuroscientists from best to worst, as if they were competitors in the 50-metre butterfly, must fail. What could be true is that given a specific task and the composition of a particular team, one scientist would be more likely to contribute than another. Optimal hiring depends on context. Optimal teams will be diverse.

Evidence for this claim can be seen in the way that papers and patents that combine diverse ideas tend to rank as high-impact. It can also be found in the structure of the so-called random decision forest, a state-of-the-art machine-learning algorithm. Random forests consist of ensembles of decision trees. If classifying pictures, each tree makes a vote: is that a picture of a fox or a dog? A weighted majority rules. Random forests can serve many ends. They can identify bank fraud and diseases, recommend ceiling fans and predict online dating behaviour.

When building a forest, you do not select the best trees as they tend to make similar classifications. You want diversity. Programmers achieve that diversity by training each tree on different data, a technique known as bagging. They also boost the forest ‘cognitively’ by training trees on the hardest cases – those that the current forest gets wrong. This ensures even more diversity and accurate forests.

Yet the fallacy of meritocracy persists. Corporations, non-profits, governments, universities and even preschools test, score and hire the ‘best’. This all but guarantees not creating the best team. Ranking people by common criteria produces homogeneity. And when biases creep in, it results in people who look like those making the decisions. That’s not likely to lead to breakthroughs. As Astro Teller, CEO of X, the ‘moonshoot factory’ at Alphabet, Google’s parent company, has said: ‘Having people who have different mental perspectives is what’s important. If you want to explore things you haven’t explored, having people who look just like you and think just like you is not the best way.’ We must see the forest.Aeon counter – do not remove

Scott E. Page is the Leonid Hurwicz Collegiate Professor of Complex Systems, Political Science, and Economics at the University of Michigan and an external faculty member of the Santa Fe Institute. The recipient of a Guggenheim Fellowship and a member of the American Academy of Arts and Sciences, he is the author of The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy. He has been a featured speaker at Davos as well as at organizations such as Google, Bloomberg, BlackRock, Boeing, and NASA.

Tim Rogan: What’s Wrong with the Critique of Capitalism Now

RoganWhat’s wrong with capitalism? Answers to that question today focus on material inequality. Led by economists and conducted in utilitarian terms, the critique of capitalism in the twenty-first century is primarily concerned with disparities in income and wealth. It was not always so. In The Moral Economists, Tim Rogan reconstructs another critical tradition, developed across the twentieth century in Britain, in which material deprivation was less important than moral or spiritual desolation. Examining the moral cornerstones of a twentieth-century critique of capitalism, The Moral Economists explains why this critique fell into disuse, and how it might be reformulated for the twenty-first century. Read on to learn more about these moral economists and their critiques of capitalism.

You begin by asking, ‘What’s wrong with capitalism?’ Shouldn’t we start by acknowledging capitalism’s great benefits?

Yes, absolutely. This was a plan for the reform of capitalism, not a prayer for its collapse or a pitch for its overthrow. These moral economists sought in some sense to save capitalism from certain of its enthusiasts—that has always been the project of the socialist tradition out of which these writers emerged. But our question about capitalism—as about every aspect of our social system, every means by which we reconcile individual preferences to arrive at collective decisions—should always be ‘What’s wrong with this?;’ ‘How can we improve this?;’ ‘What could we do better?’ And precisely how we ask those questions, the terms in which we conduct those debates, matters. My argument in this book is that our way of asking the question ‘What’s wrong with capitalism?’ has become too narrow, too focused on material inequality, insufficiently interested in some of the deeper problems of liberty and solidarity which the statistics recording disparities of wealth and income conceal.

Was this critique of capitalism also a critique of economics, and if so what do these critics add to the usual complaints against economics—about unrealistic assumptions, otherworldly models, indifference to historical developments such as financial crises, etc?

Yes, the moral economists were critical of economics. But although their criticisms might sound like variations on the familiar charge that economists make unreal assumptions about the capacities and proclivities of individual human beings, the moral economists’ challenge to mainstream economics was different. The most influential innovators in economics since the Second World War have been behavioral scientists pointing out that our capacity to make utilitarian calculations is not as high as economists once took it to be. Part of what the success of this series of innovations is that the ideal of reducing every decision to a calculation of utility retains its allure, even as we come to realize how fallible our real-time calculations are. Behavioral economists have found our capacity to think like rational utilitarian agents wanting. But when did the capacity to think like a rational utilitarian agent become the measure of our humanity? This is the question moral economists have been asking since the 1920s. Initiated by historians determined to open up means of thinking outside economic orthodoxy, since joined by mathematically-trained economists concerned to get a more realistic handle on the relationship between individual values and social choice, the moral economists’ enterprise promises a far more profound reconstitution of political economy than behavioral economics has ever contemplated.

Doesn’t the profile of these writers—dead, male, English, or Anglophile, writing about a variety of capitalism long since superseded—limit their contemporary relevance?

No. Their main concern was to discover and render articulate forms of social solidarity which the dominant economic discourse concealed. They found these on the outskirts of ‘Red Vienna’, on railroads under construction in post-war Yugoslavia, but most of all in the north of England. They believed that these inarticulate solidarities were what really held the country together—the secret ingredients of the English constitution. Though they belonged to a tradition of social thought in Britain that was skeptical towards Empire and supportive of the push for self-determination in India and elsewhere, they raised the prospect that the same dynamics had developed in countries to which British institutions had been exported—explaining the relative cohesion of Indian and Ghanaian democracies, for instance. More broadly E. P. Thompson in particular argued that factoring these incipient solidarities into constitutional thinking generated a more nuanced understanding of the rule of law than nineteenth-century liberalism entailed: in Thompson’s hand the rule of law became a more tensile creed, more capable of accommodating the personal particularities of the law’s subjects, more adept at mitigating the rigors of rational system to effect justice in specific cases. The profiles of the late-twentieth century commentators who continue the critical tradition Tawney, Polanyi and Thompson developed—especially Amartya Sen—underscore that tradition’s wider relevance.

Aren’t these writers simply nostalgists wishing we could return to a simpler way of life?

No. Tawney especially is often seen as remembering a time of social cohesion before the Reformation and before the advent of international trade and wishing for its return. This perception misunderstands his purpose.

Religion and the Rise of Capitalism draws sharp contrasts between two distinct iterations of European society – the late medieval and the modern. But this was a means of dramatizing a disparity between different societies developing in contemporary England—the society he encountered working at Toynbee Hall in London’s East End, where social atomization left people demoralized beyond relief, on the one hand; the society he encountered when he moved to Manchester to teach in provincial towns in Lancashire and Staffordshire, where life under capitalism was different, where the displacement of older solidarities was offset by the generation of new forms of cohesion, where many people were poor but where the social fabric was still intact.

The demoralized East End was the product of laissez faire capitalism—of the attempt to organize society on the basis that each individual was self-sufficient, profit-minded, unaffected by other human sentiments. The political crisis into which Britain was pitched in the late Edwardian period underlined how untenable this settlement was: without a sense of what more than the appetite for wealth motivated people, there could be no ‘background of mutual understanding’ against which to resolve disputes. At the same time the answer was not simply stronger government, a bigger state. The latent solidarities Tawney discovered in the north of England carried new possibilities: the facility of market exchange and the security of an effective state could be supplemented by informal solidarities making everyday life more human than the impersonal mechanisms of market and government allowed.

Polanyi and Thompson brought their historical settings forward into the nineteenth century, making their writings feel more contemporary. But they were both engaged in much the same exercise as Tawney—using history to dramatize disparities between different possibilities developing within contemporary society. They too had come into contact with forms of solidarity indicating that there was more than calculations of utility and the logic of state power at work in fostering social order.  Polanyi and then especially Thompson advanced their common project significantly when he found a new terminology with which to describe these incipient solidarities. Tawney had talked of ‘tradition’ and ‘convention’ and ‘custom,’ and Polanyi had followed Tawney in this—refusing to associate himself with Ferdinand Tonnies concept of Gemeinschaft and Henry Maine’s system of ‘status’ when pressed to, but offering no cogent concept through which to reckon with these forms of solidarity himself. Thompson’s concept of the ‘moral economy’ made the kinds of solidarities upon which they had all focused more compelling.

Does subscribing to a moral critique of capitalism mean buying into one of the prescriptive belief systems out of which that critique materialized? Do you need to believe in God or Karl Marx in order to advance a moral critique of capitalism without embarrassment?

No. Part of the reason that this critique of capitalism went out of commission was because the belief systems which underpinned it—which, more specifically, provided the conceptions of what a person is which falsified reductive concepts of ‘economic man’—went into decline. Neither Tawney nor Thompson was able to adapt to the attenuation of Christian belief and Marxian conviction respectively from which their iterations of the critique had drawn strength. Polanyi’s case was different: he was able to move beyond both God and Marx, envisaging a basis upon which a moral critique of capitalism could be sustained without relying on either belief system. That basis was furnished by the writings of Adam Smith, which adumbrated an account of political economy which never doubted but that economic transactions are embedded in moral worlds.

This was a very different understanding of Adam Smith’s significance to that with which most people to whom that name means something now have been inculcated. But it is an account of Adam Smith’s significance which grows increasingly recognizable to us now—thanks to the work of Donald Winch, Emma Rothschild and Istvan Hont, among others, facilitated by the end of Cold War hostilities and the renewal of interest in alternatives to state- or market-based principles of social order.

In other words there are ways of re-integrating economics into the wider moral matrices of human society without reverting to a Christian or Marxian belief system. There is nothing extreme or zealous about insisting that the moral significance of economic transactions be recognized. What was zealous and extreme was the determination to divorce economics from broader moral considerations. This moral critique of capitalism represented a recognition that the time for such extremity and zeal had passed. As the critique fell into disuse in the 1970s and 1980s, some of that zeal returned, and the last two decades now look to have been a period of especially pronounced ‘economism.’ The relevance of these writings now, then, is that they help us to put the last two decades and the last two centuries in perspective, revealing just how risky the experiment has been, urging us to settle back in now to a more sustainable pattern of economic thought.

You find that this moral critique of capitalism fell into disuse in the 1970s and 1980s. Bernie Sanders declared in April 2016 that instituting a ‘truly moral economy’ is ‘no longer beyond us.’ Was he right?

Yes and no. Sanders’ made this declaration at the Vatican, contemplating the great papal encyclicals of Rerum Novarum and Centesimus Annus. The discrepancies between what Sanders said and what Popes Leo XIII and Pope John Paul II before him said about capitalism is instructive. The encyclicals have always focussed on the ignominy of approaching a person as a bundle of economic appetites, on the apostasy of abstracting everything else that makes us human out of our economic thinking. Sanders sought to accede to that tradition of social thought—a tradition long since expanded to encompass perspectives at variance with Catholic theology, to include accounts of what a person is which originate outside the Christian tradition. But Sanders’s speech issued no challenge to the reduction of persons to economic actors. In designating material inequality the ‘great issue of our time,’ Sanders reinforced that reductive tendency: the implication is that all we care about is the satisfaction of our material needs, as if redistribution alone would solve all our problems.

The suggestion in Sanders speech was that his specific stance in the utilitarian debate over how best to organise the economy has now taken on moral force. There is an ‘individualist’ position which favors free enterprise and tolerates inequality as incidental to the enlargement of aggregate utility, and there is a ‘collectivist’ stance which enlists the state to limit freedom to ensure that inequality does not grow too wide, seeing inequality as inimical to the maximizing of aggregate utility. The ‘collectivists’ are claiming the moral high ground. But all they are really proposing is a different means to the agreed end of maximizing overall prosperity. The basis for their ‘moral’ claims seems to be that they have more people on their side—a development which would make Nietzsche smile, and should give all of us pause. There are similar overtones to the rallying of progressive forces around Jeremy Corbyn in the UK.

The kind of ‘moral economy’ Sanders had in mind—a big government geared towards maximizing utility—is not what these moral economists would have regarded as a ‘truly moral economy’. The kinds of checks upon economic license they had in mind were more spontaneous and informal—emanating out of everyday interactions, materializing as strictures against certain kinds of commercial practice in common law, inarticulate notions of what is done and what is not done, general conceptions of fairness, broad-based vigilance against excess of power. This kind of moral economy has never been beyond us. The solidarities out of which it arises were never eradicated, and are constantly regenerating.

Tim Rogan is a fellow of St. Catharine’s College, Cambridge, where he teaches history. He is the author of The Moral Economists: R. H. Tawney, Karl Polanyi, E. P. Thompson, and the Critique of Capitalism.

Jerry Z. Muller on The Tyranny of Metrics

Today, organizations of all kinds are ruled by the belief that the path to success is quantifying human performance, publicizing the results, and dividing up the rewards based on the numbers. But in our zeal to instill the evaluation process with scientific rigor, we’ve gone from measuring performance to fixating on measuring itself. The result is a tyranny of metrics that threatens the quality of our lives and most important institutions. In this timely and powerful book, Jerry Muller uncovers the damage our obsession with metrics is causing—and shows how we can begin to fix the problem. Complete with a checklist of when and how to use metrics, The Tyranny of Metrics is an essential corrective to a rarely questioned trend that increasingly affects us all.

What’s the main idea?

We increasingly live in a culture of metric fixation: the belief in so many organizations that scientific management means replacing judgment based upon experience and talent with standardized measures of performance, and then rewarding or punishing individuals and organizations based upon those measures. The buzzwords of metric fixation are all around us: “metrics,” “accountability,” “assessment,” and “transparency.” Though often characterized as “best practice,” metric fixation is in fact often counterproductive, with costs to individual satisfaction with work, organizational effectiveness, and economic growth.

The Tyranny of Metrics treats metric fixation as the organizational equivalent of The Emperor’s New Clothes. It helps explain why metric fixation has become so popular, why it is so often counterproductive, and why some people have an interest in pushing it. It is a book that analyzes and critiques a dominant fashion in contemporary organizational culture, with an eye to making life in organizations more satisfying and productive.

Can you give a few examples of the “tyranny of metrics?”

Sure. In medicine, you have the phenomenon of “surgical report cards” that purport to show the success rates of surgeons who perform a particular procedure, such as cardiac operations. The scores are publicly reported. In an effort to raise their scores, surgeons were found to avoid operating on patients whose complicated circumstances made a successful operation less likely. So, the surgeons raised their scores. But some cardiac patients who might have benefited from an operation failed to get one—and died as a result. That’s what we call “creaming”—only dealing with cases most likely to be successful.

Then there is the phenomenon of goal diversion. A great deal of K-12 education has been distorted by the emphasis that teachers are forced to place on preparing students for standardized tests of English and math, where the results of the tests influence teacher retention or school closings. Teachers are instructed to focus class time on the elements of the subject that are tested (such as reading short prose passages), while ignoring those elements that are not (such as novels). Subjects that are not tested—including civics, art, and history—receive little attention.

Or, to take an example from the world of business. In 2011 the Wells Fargo bank set high quotas for its employees to sign up customers who were interested in one of its products (say, a deposit account) for additional services, such as overdraft coverage or credit cards. For the bank’s employees, failure to reach the quota meant working additional hours without pay and the threat of termination. The result: to reach their quotas, thousands of bankers resorted to low-level fraud, with disastrous effects for the bank. It was forced to pay a fortune in fines, and its stock price dropped.

Why is the book called The Tyranny of Metrics?

Because it helps explain and articulate the sense of frustration and oppression that people in a wide range of organizations feel at the diversion of their time and energy to performance measurement that is wasteful and counterproductive.

What sort of organizations does the book deal with?

There are chapters devoted to colleges and universities, K-12 education, medicine and health care, business and finance, non-profits and philanthropic organizations, policing, and the military. The goal is not to be definitive about any of these realms, but to explore instances in which metrics of measured performance have been functional or dysfunctional, and then to draw useful generalizations about the use and misuse of metrics.

What sort of a book is it? Does it belong to any particular discipline or political ideology?

It’s a work of synthesis, drawing on a wide range of studies and analyses from psychology, sociology, economics, political science, philosophy, organizational behavior, history, and other fields. But it’s written in jargon-free prose, that doesn’t require prior knowledge of any of these fields. Princeton University Press has it classified under “Business,” “Public Policy,” and “Current Affairs.” That’s accurate enough, but it only begins to suggest the ubiquity of the cultural pattern that the book depicts, analyzes, and critiques. The book makes use of conservative, liberal, Marxist, and anarchist authors—some of whom have surprising areas of analytic convergence.

What’s the geographic scope of the book?

In the first instance, the United States. There is also a lot of attention to Great Britain, which in many respects was at the leading edge of metric fixation in the government’s treatment of higher education (from the “Teaching Quality Assessment” through the “Research Excellence Framework”), health care (the NHS) and policing, under the rubric of “New Public Management.” From the US and Great Britain, metric fixation—often carried by consultants touting “best practice”—has spread to Continental Europe, the Anglosphere, Asia, and especially China (where the quest for measured performance and university rankings is having a particularly pernicious effect on science and higher education).

Is the book simply a manifesto against performance measurement?

By no means. Drawing on a wide range of case studies from education to medicine to the military, the book shows how measured performance can be developed and used in positive ways.

Who do you hope will read the book?

Everyone who works in an organization, manages an organization, or supervises an organization, whether in the for-profit, non-profit, or government sector. Or anyone who wants to understand this dominant organizational culture and its intrinsic weaknesses.

Jerry Z. Muller is the author of many books, including Adam Smith in His Time and Ours and Capitalism and the Jews. His writing has appeared in the New York Times, the Wall Street Journal, the Times Literary Supplement, and Foreign Affairs, among other publications. He is professor of history at the Catholic University of America in Washington, D.C., and lives in Silver Spring, Maryland.