Knowledge And Decisions

The prices paid for things which modify or nullify the precedential element of decision making is a tangible indicator of the value of nonprecedential processes. The extra costs involved in options markets, and the foregone earnings on more liquid assets are fairly obvious costs. In the case of an automobile, the unwillingness to be bound by past decisions as to direction and velocity is reflected in the cost of brake systems and steering systems. A less tangible but no less real cost is paid by those who forego or curtail social interaction with the opposite sex in cultures where this becomes precedential. Another way of looking at all these things is that the huge costs paid to get out of precedents implies an even higher cost of being bound by these precedents.

Informal relationships are not mere minor interstitial supplements to the major institutions of society. These informal relationships not only include important decision-making processes, such as the family, but also produce much of the background social capital without which the other major institutions of society could not function nearly as effectively as they do. Language has already been mentioned as an informally produced system. Morality is another major item of background social capital, without which the cost of operating everything from credit cards to courts of law would be far more expensive — perhaps prohibitively so. The same could be said for hygiene, civility, and other informally transmitted characteristics without which many (or all) formal organizations would incur huge costs of operation, if they could operate at all.

Informal relationships or decision-making processes are not categorically superior to more formal relationships or processes. Lovers do get married. People not only rent, but lease and buy. Astronauts go up in rockets with neither brakes nor steering wheels. Clearly there must be some offsetting benefits in more structured relationships and precedential decisions — or rather, benefits peculiar to such relationships, which may in any given instance be greater than, equal to, or less than, the benefits of informal decision-making processes.

STRUCTURED ORGANIZATIONS

Among the many variables impinging on one’s happiness and well-being, some require relatively frequent adjustments while others do not, and some derive much of their value precisely from their constancy. Obviously, formal organizations would not exist if informal relationships met all human needs.

The apportionment of decision making as between informal and formal processes involves a trade-off of flexibility for security. A’s flexibility is B’s uncertainty as to what A will do. The cost to B of this uncertainty cannot be measured in terms of A’s most likely prospective action nor in terms of A’s retrospectively observed action. The cost of uncertainty to B is the cost of preparing for a range of possibilities of A’s behavior. Depending upon the cost of these precautions to B and the value of flexibility to A, it may be possible for both sides to become better off by signing a contract awarding money to A for agreeing in advance to follow a given course (or restricted range of courses) of conduct. In short, a more rigidified process may be made preferable to both sides. Total risk can be reduced in some cases by rigidity, just as it is reduced in other cases by flexibility.

In many cases a much broader kind of rigid agreement may be in order. Society itself may need to guarantee that certain relationships will remain rigid and inviolate in all but the most extraordinary circumstances. Much socially beneficial prospective action will not take place, or will not take place to the same extent, without rigid guarantees. The heavy investment of emotion, time, and resources necessary to raise a child would be less likely in a society where the child might at any moment, for any capricious reason, be taken away and never seen again. Such behavior is rejected not only for its retrospective injustice but also for its prospective effect on parental behavior. Not only will the state forebear from such behavior; it will use severe sanctions against private individuals who do such things (kidnappers). This rigid legal framework of parent-child relationships provides the protective setting within which the most flexible kinds of parent-child social relationships may develop. Formal and informal processes are not mutually exclusive but mutually supporting.