Posts Tagged ‘bureaucracy’
“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor”*…
We’ve become a nation of credit and debit card users. As of this year, Pew reports, 42% of Americans don’t use cash for purchases in a typical week (up from 24% in 2015); another 46% use a mix of cash and plastic; only 12% use mostly (or entirely) cash. The Federal Reserve reports, unsuprisingly, that cash remains the dominant mode for the elderly and the poor; debit cards, for lower-to-middle-income households.
NBER unpacks one little-understood consequence of this shift…
Every time a consumer swipes a credit card, the merchant pays an interchange fee—typically around 1.9 percent of the transaction value—most of which funds the rewards that cardholders receive. Because merchants generally charge the same prices regardless of how customers pay, consumers who use cash or debit cards effectively help finance the rewards enjoyed by credit card users. In Who Pays for Payments? (NBER Working Paper 35067), Mark L. Egan, Gregor Matvos, Amit Seru, Lulu Wang, and Vincent Yao use novel merchant-level data from Fiserv—one of the largest US merchant acquirers—to measure how the payment system redistributes resources.
The primary dataset contains establishment-level payment data from 2006 to 2022, including total payment values, transaction counts, and interchange fees paid for different card types…
… The researchers’ analysis using these datasets suggests that interchange fees transfer approximately $30 billion annually from cash and debit card users to credit card users. Cash users lose about 96 basis points of purchasing power, and regulated debit card users lose roughly 47 basis points, while basic and premium credit card users gain approximately 48 and 59 basis points, respectively. Because credit card use rises with income, the system generates an estimated $9.2 billion annual transfer from households earning less than $150,000 to those earning more.
Two forces moderate this redistribution. First, the tendency for cash, debit, and credit card users to shop at different merchants limits the overlap necessary for cross-subsidization. Second, where overlap does occur, such as at large grocery stores and gas stations, interchange fees tend to be lower due to sector discounts and negotiated rates. Together, these forces reduce the transfer by approximately 25 percent relative to the transfer that would occur with homogeneous consumers and merchants.
The researchers also examine the redistributive consequences of two specific developments in the payment system. The first is the Durbin Amendment, which capped interchange fees on debit cards issued by large banks. The authors show that one perhaps unintended consequence of the amendment was that it primarily benefited credit card users through lower retail prices at the expense of regulated debit card users, who lost approximately $9.6 billion in rewards and free checking benefits. This was a net transfer from middle-income to higher-income households. The second development is the rise of premium credit cards, which grew from 15 percent of credit card volume in 2006 to 60 percent by 2022. This has also been a regressive development. While premium cardholders gained about $7.9 billion, debit card users—not cash users—bore the largest dollar losses because they shop most frequently alongside premium card users…
The rich getting richer: “Who Ultimately Pays Credit Card Interchange Fees?” from @nber.org.
Pair with Annie Lowrey on another burden– a “time tax”– that falls disportionately on the neediest: “How American Bureaucracy (Literally) Steals Years From Your Life“:
Washington currently estimates that Americans spend 12 billion hours a year filling out government forms, meaning the average person spends six 8-hour workdays filing their taxes, signing up for Medicaid, renewing their driver’s licenses, and applying for government loans. At prevailing wages, this uncompensated labor is worth $430 billion a year. If Washington were to create a Department of Bureaucracy to take on the paperwork it shunts to citizens, the agency would require 5.9 million employees, making it four times the size of the active-duty military. The DOB’s payroll would be larger than that of every other federal department combined.
The nation’s paperwork regime frustrates every resident, and particularly lower-income residents who use more government programs and interact more frequently with public officials. The political scientist Elizabeth Cohen has done seminal work exploring time as a potent, if obscure, form of political currency. “The devaluation of a person or group’s political time is a structural obstacle to equality,” she writes. Yet we can’t measure time and effort as easily as we measure dollars, and we don’t even try. The 12-billion-hour estimate is an undercount, and an egregious one…
* James Baldwin (see also Terry Pratchett’s “Boots theory“)
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As we second-guess secreted subventions, we might spare a thought for Jean-Baptiste Colbert; he died on this date in 1683. A French statesman who served as First Minister of State under the rule of King Louis XIV from 1661 until his death. His lasting impact on the organization of the country’s politics and markets, known as Colbertism, a form of the mercantilism so popular in the Trump Administration today. Colbert also helped craft the Code Noir, a legal instrument that sanctioned an intentionally brutal system of torture and repression to enforce institutional slavery in the French colonial empire and restrict the enterprise of free Black people.
Though Colbert was more competent and less crony-ish than the crew at “work” in D.C. over the last couple of years, his goal of a healthy economy was frustrated by a King whose spending out-ran (and whose favoritism undermined) Colbert’s efforts. In the longer run, many economists suggest that “Colbertism” has contributed to contributed to a lack of adaptability in French industry and a hostility to technological innovation.
“Do not remove a fence until you know why it was put up in the first place”*…
The last U. S. election was fueled, in some large measure, by dissatisfaction with government bureaucracies. Indeed, public trust in government has been low– among Democrats and Republicans alike– for decades; there is a wide-spread constituency for reform.
The pending answer at the federal level is an Elon Musk and Vivek Ramaswamy-led effort, DOGE, which their comments suggest will be an accelerationist application of “business principles” and slash-and-burn reduction.
But as Kevin Hawickhorst reminds us, there is another way, one that the U.S. has successfully pursued before– one that doesn’t throw the baby out with the bath water…
For the federal bureaucracy, the 1940s through the 1960s are a nostalgic time. The era saw one spectacular achievement after another: from winning World War II, to building the interstate highway system, to landing on the moon. At its high point, trust in the federal government reached almost 80% in the 1950’s, as opposed to only 20% today.
Trust in the federal government has plummeted alongside the federal government’s ability to accomplish anything – which is no coincidence. Although government competence has changed for many reasons, there is one forgotten reason: after the second World War, the government was competent because it taught its managers to be competent.
During World War II, the poor management in the federal government was keenly felt. Although federal management had never been especially good, it reached a boiling point when it began noticeably impeding the war effort. The Bureau of the Budget (now OMB) responded by creating a new management unit tasked with training federal managers.
They termed their newly-developed management approach work simplification, which held that implementation and policy went hand-in-hand, and therefore managers had to be trained to streamline procedure in order to achieve policy goals. Moreover, the Bureau of the Budget felt that this viewpoint could be systematically taught to federal managers of average competence, and developed a training program to do so.
During the war, the civilian agencies were incredibly short staffed due to the draft, so any procedural red tape or poor distribution of work created instant bottlenecks. Many of these bottlenecks directly impacted the war effort, as (for example) with slow approvals for important construction projects. The Bureau of the Budget therefore began an initiative to improve management around 1942.
They conducted user research with several agencies and eventually felt they had a management system that could scale, which they termed Work Simplification. They taught managers Work Simplification at training seminars, and also created guides and pamphlets to distribute across the government. I quote from one of their guides1 that sets out the problem, the audience, and their goal:
Thinking of this sort has been going on in the United States Bureau of the Budget for some time. It has culminated in the decision to make a concerted drive to capture the best available means for exposing and disposing of common management problems, set it forth in clear, simple language, and put it in the hands of those who can use it to best advantage. And who are they? They are the operating managers of government: middle management people and first line supervisors. […]
From the standpoint of the Bureau of the Budget, Work Simplification is a method of attacking the procedural problems of large organizations by equipping first line supervisors with the skill to analyze and improve procedures. It provides a way of tapping the great reservoir of unused practical knowledge represented by this group.
… Their management agenda developed a training program for the managers closest to the ground, rather than (as is common today) focusing on top leadership…
… Although Work Simplification was developed during World War II, it was still the common approach for training federal managers into the 1960s. These were the stodgy managers of the Eisenhower era who oversaw the building of the interstate highway system, or the administration of the GI bill.
This is not how the federal government approaches management today. It would be, obviously, unreasonable to claim that earlier success was entirely due to training managers differently. But it clearly contributed – their methods explicitly aimed to solve issues that today’s processes aggravate.
In particular, the Bureau of the Budget’s work almost remarkably anticipated current conversations on government efficiency. Reformers note that the bureaucracy piles up layers of procedure without ever rethinking them – process charting taught managers to reduce procedural burden. Reformers note that government IT piles up layers of software from different eras, with nobody understanding how it fits together – process charting taught managers the start-to-finish viewpoint. Reformers note that bureaucrats rarely consider what it’s like to actually apply for benefits – once again, a failure that process charting aimed to correct.
Process charting is clearly not a perfect solution to any of these issues. But it is proof that the government can train bureaucrats to tackle these issues head-on!
The overall lessons of Work Simplification are even more important. Work Simplification’s success did not last forever, but it did last for several decades. And it achieved its success because the Bureau of the Budget created free training for low-level managers, while nobody else particularly cared.
So would-be bureaucratic streamliners today – proponents of product management thinking, agile IT development, or what have you – might imitate Eisenhower’s bureaucrats. Above all, they should prove that their proposals are a rational method that can be systematically taught to low-level managers, in order to put their “great reservoir of unused practical knowledge” to use…
How the federal government taught its managers to cut red tape: “Eisenhower’s Bureaucrats,” from @KHawickhorst.
Via Jennifer Pahlka, whose own Recoding America (and her continuing work) are powerful contributions to this critically-important dialogue.
By way of context, a piece from Venkatesh Rao explicitly about “self-help” but very useful in this broader/more systemic context: “How to Fall Off of the Wagon.” (Per the diagram below, from that post, the approach suggested above is “clockwise”; the Musk/Ramaswamy m.o., “counterclockwise”… which will make clarifying sense after you’ve read the short essay. While I can’t attribute the significance that I draw from it [for the issue of reengineering the government bureaucracies that are not serving Americans as they should] to Rao, I’d note that the clockwise direction is green; the counterclockwise, red.)
* G. K. Chesterton, The Thing
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As we fix it instead of throwing it away, we might recall that it was on this date in 1957 that President Dwight D. Eisenhower gave his sixth State of the Union Address to the joint houses of Congress. Eisenhower focused on three themes: a vigilant regard for human liberty, a wise concern for human welfare, and a ceaseless effort for human progress. His speech addressed the threats posed by the Soviet Union (and communism more generally around the world); urged efficient, effective government (as the government’s duty to citizens); and raised the issue of civil rights, calling for the enactment of what later became the Civil Rights Act of 1957.
Senate Majority Leader Lyndon B. Johnson called Eisenhower’s speech “a comprehensive and thoughtful analysis of the problems which confront our people.”
“The chief aim of Interpretation is not instruction, but provocation”*…
The estimable Henry Farrell on James Scott and technology…
The political scientist James Scott died last week. I only knew him through email – an occasional and irregular correspondence, mostly involving unsuccessful attempts to organize discussion at political science conferences around his work. As he suggested in a biographical essay, “Intellectual Diary of an Iconoclast,” which just came out a few months ago, he was semi-detached from his academic discipline.
I’ve wandered away from political science, though I could argue that political science has wandered away from me. I am honored even to be seen as a specialist, and probably as much to be embraced by anthropology and history.
The world was better for his iconoclasm. Scott wrote far more beautifully than political scientists are supposed to write and his ideas and work were too big to fit into any discipline. Although arguments were largely rooted in the past, his book, Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed, has shaped how we think about technology.
Seeing Like a State is important because of how it sets up the problem of modernity. Scott was a critic of the vast impersonal systems – bureaucracies and markets – that modern society depends on. He believed that they prioritized the kind of thinking that comes easily to engineers over the kind that comes readily to peasants and craftsmen, and that we had lost something very important as a result.
In Scott’s account, both governments and long distance markets “see” the world through abstractions – technical standards, systems of categories and the like. A government cannot see its people directly, or what they are doing. What it can see are things like statistics measuring population, the number of people who are employed or unemployed, the percentages of citizens who work in this sector or that, and the like. These measures – in numbers, charts and categories – allow it to set policy.
Such knowledge grants its users enormous power to shape society – but often without the detailed, intimate understanding that would allow them to shape it well. There is a lot of social reality that is described poorly, or not at all, by categories or statistics. Even so, as governments and markets established their power, they not only saw the world in highly limited ways but shaped it so that it conformed better to their purblind understanding, ironing out the idiosyncrasies and apparent inefficiencies that got in the way of their vast projects. The state did not just ‘see’ its society through bureaucratic categories, but tried to remake this society so that it fit better with the government’s preconceptions.
So too for the abstractions and general categories that long distance markets depend on, as the historian William Cronon observed in his great book on nineteenth century Chicago, Nature’s Metropolis (Scott was a fan). As another scholar observed of Chicago’s late twentieth century markets, abstract seeming financial conceptions may be engines, not cameras, making the economy rather than merely reflecting them.
This abstraction of the world’s tangled complexities into simplified categories and standards underpinned vast state projects, and supported enormous gains in market efficiency. We could not live what we now consider to be acceptable lives without it, as Scott somewhat grudgingly acknowledged. It also often precipitated disaster, including Soviet collectivization and China’s Great Famine.
So what does this have to do with modern information technology? Quite straightforwardly: if you read Scott, you will see marked similarities between e.g. the ambitions of 1960s bureaucrats, convinced that they can plan out countries and cities for “abstract citizens” and the visions of Silicon Valley entrepreneurs, convinced that algorithms and objective functions would create a more efficient and more harmonious world.
Scott focuses on officials in developing countries, who were starry-eyed about “planning.” Many of their notions came second-hand from the most striking example of high modernism, the effort of Soviet bureaucrats to use production statistics and linear programming to make the planned economy work. This provides the most obvious connection between what Scott talks about and the algorithmic ambitions of Silicon Valley today. A distinct whiff of “Comrades, Let’s Optimize!” lingers on, for example, in the airy optimism of Facebook executive Andrew Bosworth’s infamous “We connect people. Period” memo.
Both the old ambitions and the new are bets on the universal power of a particular kind of engineering knowledge – what Scott calls techne, the kind of knowledge that can “be expressed precisely and comprehensively in the form of hard-and-fast rules (not rules of thumb), principles, and propositions.” Scott describes the limits of techne in ways that resonate today. The grand failed projects of the mid-to-late twentieth century – vast rationalized cities like Brasilia laid out according to plans that seemed almost to be the squares of a chessboard; efforts to displace peasants and plan agriculture at scale – are close cousins to Facebook’s failed ambitions to build a world of shared connections on algorithmic foundations, and the resulting social media Brezhnevism of today.
Hence, 20th century state planning and 21st century social media evangelism are different flavors of what Scott called “high modernism … a sweeping, rational engineering of all aspects of social life in order to improve the human condition.” High modernism was both a faith and a practice. It turned rich and diffuse social relations into something much thinner, which could be measured and observed.
Against this kind of knowledge, Scott suggested the value of metis – “the kind of knowledge that can be acquired only by long practice at similar but rarely identical tasks, which requires constant adaptation to changing circumstances.” This is the kind of tacit knowledge that peasants come to build about their land and the weather, or that people in less regimented societies accumulate about how to live with others in tolerable peace. Scott – an anarchist – greatly preferred this latter kind of knowledge, and the societies that valued it more, to the kind of world we live in today.
Scott provides intellectual ammunition for those who want to understand what Silicon Valley has in common with past grand efforts to improve the human condition. It’s a fountain of useful comparisons…
[Farrell reviews elaborations on and critiques of Scott’s thought…]
… All this suggests that you could reframe my criticisms of Scott in more positive ways. His contribution is not to provide a systematic framework for getting ourselves out of the hole we have dug ourselves into, but to plant some of the seeds for a different intellectual ecology, in which others will take up his thoughts, use them to argue, also arguing with them and arguing with each other, and hence discover aspects of the world that they would never have seen otherwise. That would be as fine a legacy as any thinker could want…
Eminently worth reading in full: “High Modernism made our world,” from @mastodon.social@henryfarrell in his wonderful newsletter Programmable Mutter.
See also: “The Art of Pretending to Govern,” from @vgr.
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As we see like a state, we might we might recall that it was on this date in 1776 that the Declaration of Independence was actually signed (by all of the signatories except Matthew Thornton from New Hampshire, who inked it on November 4, 1776). After the Continental Congress voted to declare independence on July 2, the final language of the document was approved on July 4– to wit our celebration of the date– and it was printed and distributed on July 4–5.
“Bureaucracy defends the status quo long past the time when the quo has lost its status”*…
… which is one of the reasons that they’re hard to update. Kevin Baker describes a 1998 visit to the IRS Atlanta Service Center and ponders its lessons…
… the first thing you’d notice would be the wires. They ran everywhere, and the building obviously hadn’t been constructed with them in mind. As you walked down a corridor, passing carts full of paper returns and rows of “tingle tables,” you would tread over those wires on a raised metal gangway. Each work area had an off-ramp, where both the wires and people would disembark…
… The desks were covered with dot matrix paper, cartons of files, and Sperry terminals glowing a dull monochromatic glow. These computers were linked to a mainframe in another room. Magnetic tapes from that mainframe, and from mainframes all over the country, would be airlifted to National Airport in Washington DC. From there, they’d be put on trucks to a West Virginia town of about 14,000 people called Martinsburg. There, they’d be loaded into a machine, the first version of which was known colloquially—and not entirely affectionately—as the “Martinsburg Monster.” This computer amounted to something like a national nerve center for the IRS. On it programs called the Individual Master File and the Business Master File processed the country’s tax records. These programs also organized much of the work. If there were a problem at Martinsburg, work across the IRS’s offices spanning the continent could and frequently did shut down.
Despite decades of attempts to kill it, The IRS’s Individual Master File, an almost sixty-year old accumulation of government Assembly Language, lives on. Part of this strange persistence can be pegged squarely on Congress’s well-documented history of starving the IRS for funding. But another part of it is that the Individual Master File has become so completely entangled in the life of the agency that modernizing it resembles delicate surgery more than a straightforward software upgrade. Job descriptions, work processes, collective bargaining agreements, administrative law, and technical infrastructure all coalesce together and interface with it, so that a seemingly technical task requires considerable sociological, historical, legal, and political knowledge.
In 2023, as it was in the 1980s, the IRS is a cyborg bureaucracy, an entangled mass of law, hardware, software, and clerical labor. It was among the first government agencies to embrace automatic data processing and large-scale digital computing. And it used these technologies to organize work, to make decisions, and to understand itself. In important ways, the lines between the digital shadow of the agency—its artificial bureaucracy—and its physical presence became difficult if not impossible to disentangle….
Baker is launching a new Substack, devoted to exploring precisely this kind tangle– and what it might portend…
This series, called Artificial Bureaucracy, is a long-term project looking at the history of government computing in the fifty-year period between 1945-1995. I think this is a timely subject. In the past several years, promoters and critics of artificial intelligence alike have talked up the possibility that decision-making and even governance itself may soon be handed over to sophisticated AI systems. What draws together both the dreams of boosters and the nightmares of critics is a deterministic orientation towards the future of technology, a conception of technology as autonomous and somehow beyond the possibility of control.
These visions mostly ignore the fact that the computerization of governance is a project at least seventy years in the making, and that project has never been determined, in the first instance or the last, primarily by “technological” factors. Like everything in government, the hardware and software systems that make up its artificial bureaucracy were and are subject to negotiation, conflict, administrative inertia, and the individual agency of its users.
Looking at government computing can also tell us something about AI. The historian of computing, Michael Mahoney has argued that studying the history of software is the process of learning how groups of people came to put their worlds in a machine. If this is right—and I think it is—our conceptions of “artificial intelligence” have an unwarranted individualistic bias; the proper way to understand machine intelligence isn’t by analogy to individual human knowledge and decision-making, but to methods of bureaucratic knowledge and action. If it is about anything, the story of AI is the story of bureaucracy. And if the future of governance is AI, then it makes sense to know something about its past…
Is bureaucracy the future of AI? Check it out the first post in Artificial Bureaucracy, from @kevinbaker@mastodon.social.
* Laurence J. Peter
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As we size up systems, we might recall that it was on this date in 1935 that President Franklin D. Roosevelt signed the Social Security Act. A key component of Roosevelt’s New Deal domestic program, the Act created both the Social Security program and insurance against unemployment.
“The functionalist organization, by privileging progress (i.e. time), causes the condition of its own possibility”*…
Meet the new boss, painfully similar to the old boss…
While people in and around the tech industry debate whether algorithms are political at all, social scientists take the politics as a given, asking instead how this politics unfolds: how algorithms concretely govern. What we call “high-tech modernism”—the application of machine learning algorithms to organize our social, economic, and political life—has a dual logic. On the one hand, like traditional bureaucracy, it is an engine of classification, even if it categorizes people and things very differently. On the other, like the market, it provides a means of self-adjusting allocation, though its feedback loops work differently from the price system. Perhaps the most important consequence of high-tech modernism for the contemporary moral political economy is how it weaves hierarchy and data-gathering into the warp and woof of everyday life, replacing visible feedback loops with invisible ones, and suggesting that highly mediated outcomes are in fact the unmediated expression of people’s own true wishes…
From Henry Farrell and Marion Fourcade, a reminder that’s what’s old is new again: “The Moral Economy of High-Tech Modernism,” in an issue of Daedalus, edited by Farrell and Margaret Levi (@margaretlevi).
See also: “The Algorithm Society and Its Discontents” (or here) by Brad DeLong (@delong).
Apposite: “What Greek myths can teach us about the dangers of AI.”
(Image above: source)
* “The functionalist organization, by privileging progress (i.e. time), causes the condition of its own possibility–space itself–to be forgotten: space thus becomes the blind spot in a scientific and political technology. This is the way in which the Concept-city functions: a place of transformations and appropriations, the object of various kinds of interference but also a subject that is constantly enriched by new attributes, it is simultaneously the machinery and the hero of modernity.” – Michel de Certeau
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As we ponder platforms, we might recall that it was on this date in 1955 that the first computer operating system was demonstrated…
Computer pioneer Doug Ross demonstrates the Director tape for MIT’s Whirlwind machine. It’s a new idea: a permanent set of instructions on how the computer should operate.
Six years in the making, MIT’s Whirlwind computer was the first digital computer that could display real-time text and graphics on a video terminal, which was then just a large oscilloscope screen. Whirlwind used 4,500 vacuum tubes to process data…
Another one of its contributions was Director, a set of programming instructions…
“March 8, 1955: The Mother of All Operating Systems“
The first permanent set of instructions for a computer, it was in essence the first operating system. Loaded by paper tape, Director allowed operators to load multiple problems in Whirlwind by taking advantage of newer, faster photoelectric tape reader technology, eliminating the need for manual human intervention in changing tapes on older mechanical tape readers.
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