http://www.sigov.si/zmar/apublic/jiidt/iib0298.html
http://www.mises.org/studyguide.aspx?action=author&Id=103

Erik Davis:
Three Forms of Spontaneous Order and Their Place within Civil Society

Are you talking about Noelle Neumann’s spiral of silence?

I’m quite skeptical about this theory…Is it really possible even on the Net?

http://crookedtimber.org/2005/07/06/even-breaks/

“Bainbridge’s argument here reminds me a little of this old post of Dan’s, which argues among other things that Hayek’s notion of the market as a knowledge-creating entity sits rather uneasily with more standard economic arguments such as efficient-market theory. But Bainbridge’s argument is somewhat different and points to a different tradeoff. If you want to use markets to make the best predictions possible on the basis of available information, you’ll want to allow insider trading, which is, by definition, trading by those with valuable hidden information. But this means that you’re likely to lose liquidity by driving out ordinary punters who don’t want to be fleeced by those in the know. And without ordinary punters, insider traders have no incentive to transact (the only reason that they would want to transact is to fleece suckers who know less than they do). The only way in which this contradiction can really be resolved is if there’s a supply of suckers out there, who are willing to make bets against people who are better informed than they are. As Bainbridge points out, this is a condition that can be satisfied. But by and large, it’s only satisfied when people have extraneous reasons to make a bet (they enjoy a flutter). Bets that aren’t “fun” or otherwise attractive in some way aren’t likely to attract suckers. Thus, they’ll have low liquidity, and not be very useful as a source of information (this seems to be borne out by the empirics; as the authors of this paper note, “as the wonkishness of the contract rises, however, volume and liquidity falls rapidly.”) Thus, even apart from the objections that Dan and John Q. have raised in past posts, prediction markets aren’t likely to be very useful for a very wide variety of important policy issues.”

Or perhaps now we could break up into the market people and the discourse people and start screaming at each other in polarized… wait…

Being serious now (if I must), we’re at the point where we need to start isolating different types of claims here. There seem to be several models floating about for several different types of interaction here. So lets try and be a little systematic.

We have truth claims about facts in being. “I believe that the earth revolves around the sun.”

We have predictive claims about future facts not yet in being. “I believe that, in the future, the Sun will blow up.”

We have normative claims about non-facts that aren’t in being. “I believe that people shouldn’t put each other on rocket ships and launch them into the sun unless they commit really serious crimes.”

It may well be that different forms of interaction are best at reaching those different goals.

For normative claims, I refer you straight back to Habermas himself. We might say (off I go from the trail again) that there can’t really be said to be any “error” to amplify with regard to a normative claim.

For factual claims, it’s difficult to say. Certainly there’s a well-functioning market for factual claims: think of private researchers in drug companies. At the same time, there’s also a well-functioning deliberative process for factual claims, called academia. A tenured professor doesn’t have any direct economic incentive to produce correct factual claims (what was it Stanley Fish said? He doesn’t have to be right, just interesting?) yet, for the most part, they seem to do so, or at least to advance human knowledge. Despite the absence of any immediate commercial application, we’re still managing to make progress in astronomy & cosmology, math, psychology, etc…

Both industry and academia make factual mistakes on a fairly regular basis — think Vioxx and Coase… and I don’t know that there’s any real way to compare them. Deliberation has the problems pointed out in the original post. Markets have the problems I’ve been pointing out, primarily the incentive to lie.

For predictive claims, I don’t know. At one level, they reduce to factual claims: I believe that XYZ corp. is secretly looting its pension plan, so I short their stock, since the inference from the looting of the pension plan is that their stock price is going to collapse fairly quickly, and the real question is whether they’re really looting the plan.

I’m entirely reluctant to credit the concept of a prediction market for yet another reason: the information that is aggregated is not accessible until it’s no longer useful. One has to wonder, at times, what Hayek was thinking… if I have insider information about, say, the oscars, and I act to make heavy bets on the oscars, then sure, the information gets out (assuming that people know I’m betting, and know that my information is reliable rather than simple whimsy, etc. etc. etc.) in the form of lowered odds etc. But by the time the information gets out, it’s no longer useful to anyone. The odds are flatlined, there’s no more reason to bet, and I’m the only person who can make a killing, all the people who bet against me lose.

So what good does it do the people who bet against me to have the information that I had enter the market after they’ve already taken a position against the information?

Look, let’s say I have two coins. I name them “Habermas” and “Hayek”. I made “predictions” of events merely by flipping them. Sometimes their “predictions” will turn out true, sometimes false. Further, merely by chance, there will be times the coin named “Hayek” turns out right while the coin named “Habermas” is wrong. I can then trumpet the achievements of the shiny new coin (while ignoring the failures).

While this is of course a very oversimplified model, I am afraid it captures more of the dynamic than is comforting.

Only slightly less simple: Asking people to put-up-or-shut-up, to put your money where your mouth is, can notably produce different results on certain occasions than if they can merrily blow smoke.

There’s certainly rich theorizing in finding context where different procedures work best, and how they fail.

But I think it’s absolutely critical to realize that, almost as a tautology, the market produces an answer which is optimized for the demands of the market, which are not necessarily the same as civil society.

This may be a minor quible, but I’m not sure you can conclude that it _often_ goes wrong without knowing how often it works correctly. My suspicion is that it would be much easier to gather examples of group deliberation going wrong than it would be to gather examples of when it works effectively. If it goes badly wrong You say: “But at least it can be said that group deliberation often goes badly wrong.”

This may be a minor quible, but I’m not sure you can conclude that it _often_ goes wrong without knowing how often it works correctly. My suspicion is that it would be much easier to gather examples of group deliberation going wrong than it would be to gather examples of when it works effectively. If it goes badly wrong You say: “But at least it can be said that group deliberation often goes badly wrong.”

This may be a minor quible, but I’m not sure you can conclude that it _often_ goes wrong without knowing how often it works correctly. My suspicion is that it would be much easier to gather examples of group deliberation going wrong than it would be to gather examples of when it works effectively. If it goes badly wrong You say: “But at least it can be said that group deliberation often goes badly wrong.”

This may be a minor quible, but I’m not sure you can conclude that it _often_ goes wrong without knowing how often it works correctly. My suspicion is that it would be much easier to gather examples of group deliberation going wrong than it would be to gather examples of when it works effectively. If it goes badly wrong

For example, I take it that things like parents swapping stories about how to get their kids to behave would be an example of group deliberation — it certainly isn’t a market. If things like that are group deliberation it’s clear that, as an information aggregating technique, it’s used all the time in a wide variety of situations.

Firstly you are comparing two different approaches and trying to conflate the two without care to their background suppositions and political projects. Habermas has to be understood as a critical theorist, he is providing an ideal speech situation that can be used as a yardstick to measure deliberation. As such he is not making essentialist claims about humans, nor is he advocating that such a model could be directly implementable. Rather it is a theoretical ideal type against which concrete instances can be compared, and an ideal to which we should strive (eventhough reflexively knowing that it is unachievable).

Hayek on the other hand is concerned with the distribution of goods and productivity, a rather different project to Habermas. Hayek’s contribution to any form of deliberation is therefore dependent on his claims to a market economy. But clearly, a market is an unequal division of power (if you have *more* money, you have *more* speech), not exactly the most democratic model for political deliberation for society.

It is clear that you are more sympathetic to a rational choice model of human interaction, following Hayek, but this is a diminished form of human behaviour and only can capture a distinct subset of our actions in the world (as Hayek himself acknowleged).

Habermas on the other hand, emphasises a tripartite division of human subjectivity (which he sees as a condition of modernity). These are the instrumental-calculative (geared towards science and business), affective-aesthetic (geared towards art and family) and lastly, communicative (for politics and social life). His concern is the inappropriate spread of a form of rationality from the market and economics into the other spheres (particularly politics/public sphere where it becomes bureaucratic and technocratic).

Hence his ‘norms of democracy’ are aimed to encourage communicative rational-critical behaviour by human actors, debating and deliberating intersubjectively in a form of rationality which encourages political interaction, and therefore political legitimacy for social decision making. From the point of view of instrumental-calculative rationality (i.e. the market) this behaviour looks completely inefficient and ineffectual, but this is because instrumental rationality is geared towards different ends (i.e. efficiency and means/ends). Whereas, rational-critical debate is geared toward political decision-making, interaction and sociality. In effect, our growth as political animals, practising and improving our ability to communicate with each other, treating each other as ends in themselves, rather than means to an end (following Kant).

– David

professor sunstein, whilst we fully appreciate your desire to contextualize von hayek to the concept of aggregation – an approach that dovetails nicely into a discussion about the aggregating power of the internet – it seems to us that you are forcing the square peg that was von hayek into the abyss that is the internet.

one way that von hayek believed the price system worked was not as a result of the aggregation of information, but due to a lack of information. his belief in the efficiency of the price system was based on the assumption that agents have very little information, were unable to make their own assesments, and were forced by their isolation to become price-takers.

(hayek’s basic argument against socialism was that central planners could no more aggregate – and indeed were less likely to be able to aggregate – information better than individual agents.)

if your thesis is that a connected world enables individual agents with information – or changes the ability of agents to aggregate information – you still come back to von hayek’s price system.

as von hayek observed even if individual agents were well-informed and tried to manipulate the price system to their advantage – the result of human nature – the actions of other equally well-informed agents would thwart these attempts and place the parties back at the mercy of the system of prices.

the paradigm of the internet does nothing to change von hayek’s basic assumptions. for each group polarization, for each clement cascade, for each deliberation, there are dozens of others diametrically opposed. taken as a whole, and in the context of human nature, the connected world is very little different than the unconnected world. too much information is the same as too little information and, as von hayek predicted, the result is the same: it’s prices all the way down.

your ideas are, however, very thought provoking! thank you for an excellent series of posts which have generated very many fascinating observations from the erudite community that is the lessig blog.