My neighbor, James G. March, wrote a little book entitled The Ambiguities of Experience*. March is emeritus professor in the departments of business, political science, and sociology at Stanford University. He says intelligence, for an individual or for an organization, includes the ability to adapt to the environment. March says making changes based on past experience (whether one’s own or someone else’s stories) are most successful when made within a stable cultural and institutional context, where the same cause reliably generates the same outcome. In the larger world, there are many causes that change all the time, so predictions, theories, and other elements of learning based on past experience are unreliable at best, and sometimes even counterproductive. I understand March’s point. Experience showed that alcohol is harmful, but prohibition didn’t cure alcoholism; it generated organized crime.
March says organizational learning is difficult, particularly within a “complex system.” That’s a system with many actors interacting by nonlinear rules—those things like the weather, freeway traffic, a large corporation, and the stock market. Complex systems often operate at the edge of chaos, making prediction of individual events difficult. We know the stock market will have ups and downs, but how much up or down on what day? Folk stories attributed to learning from experience say “The rich get richer;” or “It takes money to make money,” but March suggests the economic world is not that simple.
You can sometimes understand the emergent behavior of a complex system (how bees swarm) but prediction of detailed events is what March calls ambiguous or what I regard as practically impossible.
We apply regulations to establish our sense of justice, to limit the shifts of our economy and our governance, and to provide stability within the complex system that is society. Regulations restrict the freedoms of the actors. That’s why we have traffic rules, banking rules, pure food rules, murder rules, and unwritten customs of greeting, neighborliness, and conduct of business. Regulation (exercising control) is the difference between an orderly society and a violent wilderness. Because of the ambiguities described by March, society struggles to determine exactly how much regulation is best—or even adequate. For example, the U.S. suffers about 33,000 traffic deaths per year, but enforces speed limits and DUI rules only sporadically.
Like other organizations, a society can rarely learn from experience, because it can’t sort causes from effects. Does banking regulation cause economic stagnation or does it prevent collapses? Do police protect the citizens or oppress the underprivileged? Does unfettered free enterprise create prosperity or impose poverty? These arguments polarize our society because politicians claim confirmations for opposing beliefs in inherently ambiguous situations. March recognizes that stories are often told and believed for reasons other than their validity. Well, do stories denying climate change come to mind?
Society often ignores the purpose of a regulation, and overlooks the impact. For example, the purpose of taxation is to provide funds for government, but tax law is largely misdirected to provide advantages for particular parties. The impact is books filled with incoherent rules that bewilder the average citizen.
A new regulation is an adaptation to the expected future. In the complexity of society, the result of a new regulation is ambiguous (not reliably predictable). However, I suggest we should not avoid controls by denying the existence of problems, such as pollution. I admit that my suggestion is itself a denial of someone else’s beliefs.
*Cornell University Press, 2010.