“Corporations are evil” and we know this because they are always doing malicious things that are only later exposed. This often involves exploiting the complexity of transactions and the inability or unwillingness of consumers to wade through the thicket by surreptitiously ripping people off. For example, unauthorized charges inserted into phone bills, in a practice known as “cramming”, cost Americans $2 billion dollars a year, according to this article.
When something like this is discovered, the automatic reaction is to assume that the malice was intentional. They were sticking those charges in there to squeeze money out of consumers. And its basic economics that if they can secretly insert charges and make money they will. On the other hand, such a theory would appear to require you to accept they hypothesis that “corporations are evil” or at least they are cold-hearted profit maximizers.
But you can believe that corporations are not intentionally malicious and still assume that whenever there is a cold-hearted way to steal money they will do it. Because many malicious practices are not actively designed, rather they creep in and they are passively allowed to persist.
For example, those charges could have been legitimate under an outdated policy and when the policy was changed they forgot to remove them. Or some bumbling technician could have accidentally inserted them. Modern transactions are so complicated that random “mutations” are going to appear without any malicious intent and indeed without anyone noticing. This is a far more likely explanation than someone purposefully sticking them in there, especially if you doubt that “corporations are evil.”
Indeed, to have a conscious policy of ripping off unsuspecting customers requires instructing somebody to do that, and leaving a paper trail. Even a truly evil corporation understands that this is the wrong way to do it. The right way to do it is to structure the organization in a way that facilitates malice creep.
You don’t have to instruct anybody to allow mutant ripoffs to appear. They appear on their own, no paper trail required. All you need to do is to give weak incentives to the officers you have charged with making sure that you are not ripping anybody off. Nobody in your organization will have any knowledge of all the ways you are cheating your clients, not even you. By design.
There is an art to the design of an organization that cultivates malice creep. Because at the same time you have to stop “virtue creep” in its tracks. You don’t want unintended credits to randomly get inserted into the phone bill. What you need is a one-sided monitoring program. You wait around for lots of mutations to appear, you know that some are virtuous and some are malicious. Now getting rid of the virtuous ones and keep the malicious ones is easily done, just announce that its time to do some “cost-cutting.” Form an ad hoc task force to go through and find ways to restructure billing in ways that save the company money. They’ll just look at the credits and ignore the charges.
In terms of the long-run bottom line, Darwinism and Lamarckism are almost indistinguishable, but Occam’s razor favors Darwin. I would argue by the same principles that most of the malicious practices of organizations emerge by cultivated accident rather than by design.
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November 28, 2011 at 12:22 am
twicker
Fascinating post – thanks for a thoughtful piece.
Of course, it’s just as I’m about to go to bed, so less thanks for keeping me awake and thinking. 🙂
November 28, 2011 at 9:45 am
Luke
Jeff,
Has Lamarckism become conflated with “intelligent design” in economics literature? For me, Lamarckism specifically refers to any type of evolutionary process that does not depend exclusively on genetic inheritance.
As you point out, the same rules that allow for innovation and competition also breed cheating. If corporations want a system that allows for innovation then they must be responsible for any malice that creeps up in their business practices. And if they become too good at cheating then they have to be policed if you want to avoid toppling the entire industry and dealing with the associated fallout.
November 28, 2011 at 10:30 am
jeff
i equate lamarckism with gain-driven inheritance. that is, a trait is passed on *because* it improved fitness. and i think of the extreme version where a trait spontaneously appears in the next generation because it would have helped the previous, even though they didnt have it.
in my mind the distinction between lamarckism and darwinism is the following. in darwinism a new trait appears only by accident and a trait is passed on mechanically so that selection effects only make it appear that it is gain-driven. in lamarckism it is assumed to be gain-driven.
November 28, 2011 at 11:28 am
Mort Dubois
But isn’t it funny how there never seems to be a random credit listed on your account? If these charges were an random product of a complex system, one would would expect that the sum would tend to zero, not $2 billion a year. You might want to reconsider your “corporations aren’t evil” stance.
November 28, 2011 at 11:37 am
k
I like the idea, but still having been part of an organization I very nearly cost someone their job by unintentionally claiming he/she did something like this.
I was later approached by someone far higher in hierarchy and told me I was lucky to have only been 1 month into working otherwise I could have been taken to court.
This would suggest that some people who work outside of academia are actually not out to get you for all you’re worth.
The cost of discovering malicious versus virtuous mutations also needs to be considered. If $2 billion is the revenue, what was the cost to getting this? Perhaps ‘malice creep’ is just an unintended outcome of the business, not a real goal. Similarly, compare doing ‘malice creep’ with ‘virtue sweep’, what if the cost of sweeping virtue versus that of creeping malice? Would you want to do business with a company that is eager to get rid of its money?
I would also factor in the causes of such creep; if a regulation is turning out to have an effect detrimental to my company and if the adjustment to that requires some extra charges then the cause of the charges is the regulation not clever incentive design. This might even work out for the consumer. Better to have a functioning company taking an extra $5 than not to have any company at all, more so if there is some benefit from being a long-standing consumer.
November 28, 2011 at 1:16 pm
Anonymous
@Luke and Jeff—strictly speaking, Lamarckism states that *acquired* traits are passed on to the next generation. That’s the main difference with the standard Darwinian theory.
December 3, 2011 at 4:15 am
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