daniel cloud book

ZEROHEDGE – The Market For Lemons, The Market For Bullshit, And The Great Cascading Credence Crash Of 2016

By Daniel Cloud, Ph.D.

“The cost of dishonesty, therefore, is not only the amount by which the purchaser is cheated; the cost must also include the loss incurred from driving legitimate business out of existence.”
       George Akerlof, The Market for Lemons

People have begun to worry that we’re experiencing a crisis of confidence in our traditionally most prestigious institutions - in our political parties, and central banks, and great newspapers, and universities, and even in accredited experts.

Views that would have been regarded as extreme in the past also seem much more common now. The entire political spectrum, all around the world, seems to be in the middle of collapsing into a collection of smaller, more radical groups. Some of them advocate violence.

The problem doesn’t seem to be unique to this particular historical moment. There are other times in recent history – the 1930’s, perhaps, or the 1960’s – when the public seemed equally unhappy with existing institutional points of view. Like the present, they were periods of relatively rapid change in organizational and communications technology.

The underlying problem is, I think, a very strange one. But it’s a risk faced by any society that both undergoes rapid technological change, and contains organized interest groups. (Formal or informal.) Something really bad is happening to all our bullshit. In fact, I’ve begun to worry that there’s actually a sort of crash or cascading failure going on in the bullshit market. If there is, I think it’s driven, as previous bullshit crashes were, by changing technology.

This may seem like an odd thing to worry about. But it’s actually a very natural worry, if you have any interest at all in recent American philosophy and/or the economics of informational externalities.

Bullshit Defined

Harry Frankfurt’s On Bullshit i has, for a long time, been the single best-selling title in Princeton University’s Press’s philosophy list. The book sells well partly because people think the title is somehow cute, or funny, but Frankfurt himself doesn’t really seem to think that bullshit is a laughing matter at all. (Take a look at his 2007 YouTube video2, if you want to see if he’s serious about the subject.)

He argues that lying and bullshit are distinct forms of dishonesty. The liar is trying to present something false as true. But the bullshitter doesn’t actually care whether what he’s saying is true or false, relevant or irrelevant. He represents himself as concerned with the truth, but in fact his only concern is presenting a certain appearance or creating some particular impression in his audience. Frankfurt thinks that this is a much more subtle and powerful strategy, and therefore a much more dangerous one.

The bullshitter is competing with those around him to seem a certain way, or he’s competing with them to avoid seeming a certain way. Or perhaps he wants to make someone else seem some way, or make some proposal seem some way, seem noble or contemptible, dangerous or safe. Or he wants to fit in, or stand out, or be admired, or pitied, or feared, or promoted. The truths he speaks in the course of his effort to achieve these things may be completely irrelevant to the point he’s supposedly trying to make. But unlike the liar, the bullshit artist doesn’t actually have to say anything false to mislead. He might, but he also might not, he might just talk about a lot of irrelevant true stuff. (Machiavelli tells us that a Prince should almost never lie…)

This is a way of deceiving that’s much safer for the deceiver than outright lying. A lie can be destroyed by a single incongruous truth. It’s much harder for a single fact to pierce the veil of bullshit, because it’s more difficult for a single fact to dispositively establish that some set of considerations is irrelevant, or that their importance is being exaggerated. Humans are instinctively angry at the liar, but the bullshit artist slides right past our evolved defenses. Frankfurt thinks this is a much more powerful and subtle strategy than lying, and therefore a more dangerous one.

In fact, it seems to me that one of the ways we can tell that someone is basically a bullshit artist is that it never really happens to the person that they argued for something, and then, to their surprise and dismay, found out that they were wrong about the facts and had to permanently change their views. That just isn’t a thing, in their world. The bullshitter’s very rare and grudging public mea culpa is always only tactical. When your argument isn’t actually based on the trueness of certain facts in the first place, no pattern of facts can possibly dislodge you from it in any lasting way. As Frankfurt says, the bullshit artist has a kind of freedom and a kind of safety that the liar can only dream of.

Is Bullshit Necessary, or Inevitable?

Presumably the idea of a crash in the bullshit market wouldn’t actually worry Frankfurt himself very much. In his most recent statements on the topic (in his recent Vimeo video iii) he seems convinced that bullshit is unnecessary, that a world without bullshit would be a better one. But he hasn’t always seemed so sure; in the earlier YouTube video, he was still wondering whether bullshit might perhaps be of some use to society.

(The contrast between the two videos I’ve mentioned is interesting, in itself, as a sign of where we’re all headed, of how things are developing at the moment. The 2007 YouTube video has clunky production values and a crystal-clear message. But the much more recent one on Vimeo… Well, let’s just say that the producers seem to have been worried that in 2016, a man sitting in a chair telling the truth simply isn’t enough.)

Is bullshit, defined as Frankfurt’s defined it, something that we can ever really expect to be completely free of? Personally I doubt it. For one thing, some of it strikes me as genuinely useful. The policeman directing traffic in his spiffy uniform is doing his very best to present a somewhat false appearance of gleaming perfection, because a ragged naked man presenting the same truths about where it would be convenient for cars to go would be ignored. He may even wear a hat designed to make him look taller and more imposing than he actually is. He isn’t trying to look tall because he’s vain. Yes, the whole thing is an act, but in this case it’s a necessary act. Because of the nature of the social role that’s been delegated to him, because we all want him to send a certain clear, authoritative and unambiguous signal iv, we excuse and approve of these conventional, socially necessary, legitimate forms of bullshit.

No doubt the line between these things and the more egregious or harmful forms of bullshit is a very complex and deceptive one, with one form often disguised as the other. (Perhaps this particular policeman actually is a little vain. Maybe his hat is custom-made, and is a little taller than a regular policeman’s hat. Or maybe he takes bribes to let some cars through the intersection more quickly.)

Anyway, empirically, there don’t seem to be any large complex human societies without any bullshit. To completely get rid of it, you’d have to read everyone’s mind at all times, which seems undesirable. So I can’t quite agree with Frankfurt’s more recent opinion that we’d all be better off without any bullshit at all. It seems to me that human society would collapse into a collection of small warring tribes. (Just as traffic at the intersection might grind to a halt without the spiffy policeman.) As far as I can tell, that’s how we lived before we invented bullshit. No chimpanzee is a bullshit artist – or any other kind of artist.

Like it or not, we have it now, and I find it impossible to imagine a practical plan for completely eliminating it. If we really can’t get rid of it, then I can’t agree that the relevant question is what life would be like without it. That seems utopian. Bullshit exists; it’s doing something in our society. It has effects on us. The real question, I think, is whether there can be better or worse effects. Is some bullshit more damaging than the rest? Are fairly standard forms of timeworn bullshit perhaps a bit like the suite of benign microbes that live in our guts? Is existing, harmless bullshit protecting us from novel, possibly dangerous bullshit? (As the analogies of the 1930’s and the Reformation might suggest…) Can anything really go wrong with the market for bullshit? Are there any public dangers associated with this large-scale, apparently rather consequential social phenomenon, do we need to manage it somehow?

Bullshit and Informational Externalities

As for the economics of informational externalities… Frankfurt’s philosophical clarification of the meaning of the ordinary English word “bullshit” strikes me as capable of driving an economic model because he suggests that we’re most likely to come up with bullshit when it’s difficult for us to speak the truth. For example, when we’re expected to have a strong opinion about a matter on which we have no expertise. From an economic point of view, this is a theory about how people cope with the potential costs of information gathering.

We all constantly encounter subjects we know very little about. Most conversations about politics are like this. Discussions between people who know rather little about the particular problems they’re discussing, problems they personally won’t be expected to directly do anything about. It could hardly be otherwise in a democracy, since everyone’s asked to vote on whole political programs containing prescriptions for dealing with various different societal problems.

The reward for carefully ascertaining and then impartially telling the unadorned and directly relevant truth in many of these ordinary, inconsequential conversations is small. There might be public benefits. But public knowledge of the truth is a public good. We, personally, will only receive one seven billionth of those benefits, while the entire cost of carefully gathering the information and presenting to people who may not be all that interested in it will fall on us. The temptations to slack off and pursue other social goals which these situations present may be resisted by a few, but those are rare and sometimes unpopular individuals.

Perhaps we all have a threshold. When we know less than x about some subject, we all struggle against a temptation to employ bullshit in discussing it, to just agree with the people around us to be agreeable, or use the incident as an excuse to point out how stupid the hated out-group is, or try to come up with a funny or enraging fairy-tale about what the truth must be, or to complain plaintively about how nobody really cares, or something like that. Making up bullshit is easier than finding the truth about every abstruse subject, so wherever ease or mere courtesy are the most practically relevant considerations, we can expect almost everyone to face a temptation to repeat or invent bullshit. In a sort of conversational version of Gresham’s law, bullshit should drive out honesty wherever there are no consequences for the individual.

But the true bullshit artist produces bullshit egregiously, even in contexts where it’s not conventional or acceptable. He represents himself as sincerely concerned with the truth in situations where he really should be, but he’s not. He isn’t just occasionally tempted to make careless and insincere pronouncements on unimportant-seeming subjects he knows nothing about. He’s turned doing that into his thing, into a complex art form. He persistently insists that his bullshit is reality, and that the actual truth is just a bunch of bullshit.

He may even get angry when this assertion is questioned. Often the anger is sincere; he thinks it’s unfair for you to question his facts, because his argument was never based on facts, the facts were just added to support an existing point of view. They’re basically decorations, so by attacking them you’re not really invalidating his conversation goal, as far as he’s concerned. You’re just getting in the way. Like an idiot, like some fool who thinks the conversational contest is about what the facts are. Not, as he believes it to be, about whose bullshit will prevail in the eyes of the audience. Presumably he has no idea that the questioner is doing anything that’s different from what he himself is doing…

It seems to me that in some sense this person is a polar opposite or mirror image of Hayek’s “man on the spot” v or Kenneth Arrow’s benevolent specialist vi, In both these cases, the expert creates positive informational externalities for society by knowing all about some obscure thing, and sharing the information in various ways. Either through the price system, for Hayek, or by broadcasting the information, by publishing it in a journal, for Arrow. I also like to tell a story vii  that involves a kind of person, the entrepreneur, who generates positive informational externalities for society by personally taking the risk of performing an experiment that may fail, of starting a firm and possibly going bankrupt.

But the bullshit artist doesn’t perform any experiments, and he doesn’t know all about some obscure thing. Or if he does, he doesn’t actually just stick to telling the plain unadorned truth about that thing, or about how those experiments came out.  He’s surrendered completely to the natural human urge to have a strong opinion on every subject, even ones he’s not in a very good position to discover the truth about. He hasn’t bothered to take the risks he’d need to take, or go to the trouble he’d need to go to, do the hard work he’d need to do, to engage in the self-criticism and he’d have to engage in, to find out the truth about them. Because he doesn’t really care that much about what’s true.

Since bullshit is free from the constraints of honesty, it can be perfectly designed to attract attention and elicit belief. (Whereas the actual full truth is usually abstruse and implausible.) From the point of view of cultural evolution, it’s a parasitic mimic, like a cuckoo. Like a cuckoo chick, it has to be more dazzling than the real thing in order to displace it.

Nevertheless, the bullshit artist may generate either positive or negative informational externalities, because even he will speak the truth if it suits his ulterior purpose.

The Market for Lemons

But before I say anything more about all that, I need to quickly describe George Akerlof’s model of the used car market viii That will put me in a much better position to explain why I’m now starting to worry about cascading failure in the “bullshit market”.

Akerlof was interested in the potential of informational asymmetries, in general, to produce market failure. (So it’s easy to see why his model might be relevant to the market for bullshit, which by its very nature exists entirely within the precarious and shifting world of asymmetries in information.) The basic idea behind his model is quite simple. Suppose that, when buying a new car, people have an imperfect ability to determine whether the car is a lemon. (For the sake of the example, either quality control is very bad, or else little information on safety, reliability, etc. is available in advance of purchases, or the people simply have imperfect judgment. The model is from a time when it was more plausible that not much information about car quality might be available.) But once they’ve owned a car for a little while, they begin to have a pretty clear idea of its quality.

People who have a car that they now know is worth more than the prevailing market price for a used car will keep their car off the market. But people who have a car that they now know is worth less than the prevailing market price for a used car would be happy to sell theirs for the prevailing market price. So the used car buyer will have to choose his car from a pool of used cars the very best of which are worth a shade less than the prevailing market price, and the worst of which are worth much less than the prevailing market price.

In the case of completely asymmetric information – if the seller always knows just exactly how bad the lemon is, but the buyer can’t ever tell the difference between it and any other car – the average buyer will end up with a car drawn from the middle of this distribution. But that means the average person will get a car that’s worth a lot less than he paid for it. Once this becomes generally known, it’s hard to see why the buyers wouldn’t refuse to buy used cars for any price higher than this average value.

If the price is adjusted down to this new level, however, everyone with a car that’s worth more than the new price will withdraw their car from the market. So the average quality of the cars available at that price will be even lower. Once this becomes generally known, it’s hard to see why the buyers wouldn’t refuse to buy cars for any price higher than the new, lower, average value.

Once the price has been adjusted down to the new new level, however, everyone with a car that’s worth more than the new new price will withdraw their car from the market…

By a cascading series of steps like that, the used car market can fail, as a result of the informational asymmetry between buyer and seller. Although at each step there were some sellers willing to sell cars for only a little more than they were worth, and some buyers genuinely willing to pay slightly over fair value to avoid the expense of buying a new car, in the end the equilibrium is zero transactions. 

If some institution or institutions existed to help the buyer determine the actual value of the used car more precisely, or if the people themselves developed a method of detecting lemons, they could meet and transact. So getting rid of the informational asymmetry would remove the market failure. But Akerlof worried that the rating agency would be unreliable, that whoever provided the public information about car quality would be tempted to issue bullshit instead, to use the resulting power to muddy the water in some self-serving way…

The Market For Bullshit

Okay, so now we’re back to bullshit, though now we’re coming at it from a slightly different angle. But what exactly is the analogy I’m pushing here actually supposed to be? What actually makes the market for bullshit a “market” in the first place? Is that supposed to be some kind of metaphor?

I don’t think it is just a metaphor. At the same time, the phrase is slightly misleading, in precisely the same way as the phrase “the market for lemons”. Of course, the market for bullshit is parasitic on the market for sincere attempts to tell the truth. Why? Because bullshit derives most of its value from the fact that not everyone can always tell the difference between these two things. Strictly speaking, the market for bullshit is no more separable from the market for putative public truths in general than Akerlof’s “market for lemons”, for used cars not really worth the price they’re being offered for, is from the market for used cars in general. It’s one segment of the market for putative truths, in the same way the market for lemons is one segment of the market for used cars. The segment, in both cases, includes all and only those items that are worth less than they’re presented as being worth. (Or at least, in the case of bullshit, where the seller hasn’t exercised nearly enough diligence to really know that they’re worth as much as he’s presenting them as being worth.)

Every issuance of egregious bullshit that’s at all consequential is, in fact, an exchange, involving at least two parties. There are people who produce egregious bullshit, often for a living, and there are people who buy it, and hold onto it until and unless they see through it. The producers are paid by the consumers, not with a permanent transfer of the scarce commodity, credence, but with a conditional loan that can be recalled at will. The unique and distinctive transaction in this market is the temporary exchange of egregious bullshit for credence.  Sooner or later, this credence may be repossessed by the credulous person, when the bullshit becomes discredited in his eyes. (When and if the bullshit artist’s ulterior motives become too readily apparent, or crucial facts turn out to be too obviously false, or the emotional impact simply fades.)

So really it’s a commodity market, because while some truths remain true forever, bullshit gets used up over time, like gasoline, or sugar, meaning new bullshit must constantly be produced.

The objective of each established vendor of bullshit is to get the customer to constantly roll over his credence to a new story from the same source, instead of repossessing it and looking for another vendor. But if the perceived credibility of the pool of existing vendors, in aggregate, declines, for some reason, new vendors with equally low quality bullshit who were shut out of the market before will become able to enter and compete.

Every time a prestigious institution or a prestigious public official lowers a standard somehow to compete in the market for putative pieces of public information, whether in an internal or an external struggle, every time we see egregious bullshit from an unexpected source, some players outside the Establishment lose their tinfoil hats. Every time a prestigious news source uses an invidious headline or elides a crucial fact, other, less trusted sources of information suddenly seem more credible. Disenchanted television viewers move from the news networks to the Daily Show, opining that there’s no difference except the entertainment value. But once they have, they’re just as likely to wander on over to the Onion, even though they might never have thought of that as an alternative to CNN or the Washington Post before the move.

That means this market has an odd and dangerous feature, one that makes it similar to the market for lemons. As exchange value – price, in the case of used cars, and credence, in the case of bullshit - goes down, average quality should also get worse.

(Not that the Onion itself isn’t good. It’s just that in a world where the Onion is as reliable as hard news sources, consensus reality does not exist.)

The admission of new, marginal sources to the pool of semi-credible public information is one obvious reason for this decline in quality. But there’s another problem, one that can, I think, drive human societies into surprisingly dark places. To be really interesting, the new bullshit must be fresh, which means it must somehow differ from existing, less exotic bullshit. But the low-hanging fruit has already been taken. The most salient and crucial truths will already be employed, in some existing item or tradition of bullshit, and can’t be repeated in any interesting and engaging way. Each additional marginal piece of bullshit must be either less directly relevant, or more contaminated with falsehood, or both, to succeed in being unique. To compete for the attention and credence of a fixed number of humans, it should also be gaudier than its predecessors. It should be more extreme, more bizarre or more shocking or more pleasing or moving or nobler or more wrathful or terrifying or self-mutilating or funnier, in order to still be noticeable in the more crowded field. Existing sources of public information, however credible, may also have to participate in this race to the bottom, if they’re going to retain viewers or readers. So the average quality of their output is likely to decline along with everyone else’s. That makes the information asymmetry a lot worse, because now even trusted sources may be forced to peddle egregious and exotic bullshit. Akerlof’s model of the market for lemons suggests that it should be possible, in theory, for this intensification of the informational asymmetry to cause cascading failure all by itself.

Unfortunately, this market also has another strange feature, one that makes it even more fragile. Removing tinfoil hats affects volume as well as quality. In the face of increased competition, existing issuers also have to try even harder to catch the public’s increasingly fragmented attention, and are likely to increase the volume of putative information they put out. So as “price” (average number of people convinced and mean duration of the conviction produced by the typical piece of bullshit) goes down, the aggregate quantity of bullshit being produced should actually increase in response. The price elasticity of the bullshit supply curve is negative.

But that means that the quantity increases if the quality declines. And we already knew that the quality declines if the quantity increases. So if the quality declines, the quantity increases. And if the quantity increases, then the quality declines. But if the quality declines, the quantity should increase again. And if the quantity increases again, the quality should decline again… Which is cascading failure, in the same kind of jerky series of successive steps down that Akerlof described for the used car market.

If the public can’t tell the difference between good and bad sources of information, if they suddenly or gradually lose that ability somehow, the market for public information becomes vulnerable to this sort of failure. Because the average source may then in fact become much worse, much less honest, than they’re used to supposing. Is forced to do that, in order to compete, by the public’s very confusion. And things can continue to cascade down from there. So the equilibrium outcome can be zero transactions. Zero credence being lent. Nobody really believing anything anyone says in public.

Even though there are some sources of information that are still almost as valuable as they claim to be, and some consumers of information who would still benefit from lending credence to them, the informational asymmetry would, in a world like that, make it impossible for these people to find each other, so nobody would end up lending much credence to anything said in public. In that world, the public would take rumors, and lies, and conspiracy theories just as seriously as official pronouncements from formerly credible sources.

The First Consequence of the Technological Shock: Too Much Information

Now that we have this supposed analogy on the table, what’s the exogenous technological shock supposed to be? Why might the combined market for bullshit and sincere attempts to tell the truth in public be crashing, again, right at this moment? What is it about all our tweeting, and Facebooking, and Googling, and emailing, and chatting, and constantly talking on the phone, and instant messaging, and posting of ominous videos on Vimeo, and tinderizing, and dressing up as plush toys, and organizing two-day conferences about Derrida’s influence on the Ninja Turtles action figures, and writing things for Zero Hedge, that could possibly cause a similar problem?

Obviously, an enormous amount of new, very low-quality information has become publicly available to everyone. (Along with a very large but still smaller amount of new, very high-quality information, the problem being that we haven’t yet really collectively learned how to tell the difference in the new environment.) It seems to me that the consequence is that the persuasive value of the average piece of bullshit is collapsing. This is happening because the supply is increasing greatly, while fewer people attach less lasting credence to each piece. This affects our faith in existing institutions partly because they’re what’s available for people to lose faith in, because you can only lose the illusions you already had.

As the increasing public supply of bullshit becomes more and more discredited, it drags the credibility of all sources of public information down – especially since some of the new bullshit is coming from the same institutions the more credible information already comes from.

Information can be endlessly, costlessly replicated, so simply making some information more salient and more available counts as an increase in the supply of that particular information. As every part of every legacy institution becomes better and better at making itself transparent, the overall picture of the institution as a whole that we can get from outside becomes much more detailed. But this explosion of available details confuses the brand, because we no longer only see the greatest achievements and most serious messages. We still see those, but now we see everything else as well, and the average thing we see is less impressive.

Each member of the Fed’s board always had their own opinions, but now technology has put them in a position to constantly tell us all about them, and us in a position to dig down into all the inevitable disagreements and uncertainties. Seeing the complexities that were always there more clearly makes the message much harder to interpret, and decreases its authority. In something like the same way seeing what’s actually been under the uniform of the traffic cop all along might diminish his authority in our eyes.

The Fed, in particular, is and really has to be in the business of fooling everyone, at least if they’re going to go on being Keynesians rather than straight neo-classical rational choice theorists, because Keynesian monetary stimulus relies on the creation of illusions for its effectiveness. Every producer is supposed to be under the illusion that it’s only the price of their own product that’s going up, in response to the stimulus, while the prices of their inputs are going to remain unchanged. That’s what makes them increase production – the illusion that doing so has become more profitable. If nobody was fooled, if everyone realized that all prices would eventually go up in response to the monetary stimulus, they would simply adjust their own prices, immediately, without increasing production at all. 

So the Keynesian central banker is supposed to be a kind of magician, who manipulates the public into doing what he sees as the right thing by creating illusions, using a printing press. But a magician can’t really show you everything he’s doing to fool you, as he’s doing the trick, and still expect you to be fooled by it. That would be a good way of teaching you to do the trick yourself. But as a way of doing a magic trick that’s supposed to actually deceive the audience and make them take some ill-considered action, it makes exactly no sense at all.

The odd thing is that the prestigious institution often still seems to suppose that the front of the house still represents it to the public, that we basically all get our information about it from the occasional very formal and uninformative news conference for the old media by the head chef. But now all the diners can also see everything going on in the kitchen, which naturally gives them a completely different perspective on what sort of place the restaurant is. The chef’s formal description has turned into an empty ritual, a place food critics go to show off their own particular brands of bullshit in front of an audience.

The contrast with the new, more complex and transparent background makes any traditional form of bullshit that might be conventional in communicating with the old media at press conferences seem more antiquated and unreasonable. So traditional ways of preserving public credibility can now actually have the effect of diminishing it, under the new technological circumstances. Refusing to comment in public on matters you’ve already shared your opinion about in less formal settings, that sort of thing. The problem is that the contrast between official pronouncements and actual beliefs is now just too obvious, too visible, too sharp. Even though the actors were never actually trying all that hard to conceal the contrast in the past. They just relied, unconsciously, on the whole picture being a little more murky, to outsiders, than it presently is. Clarified, it seems to convey a certain amount of contempt for the audience’s ability to reason, to connect the dots in the dot plots… (It’s as if we cleaned up the Mona Lisa a little, and it turned out she’d been giving us the finger all along.)

From the outside, we now see a confusing multiverse of different Harvards, with no consistent story coming from anywhere about which ones matter most, or which one is the real Harvard. The university itself may not have changed very much, it was always a big complicated place, but the partial panopticon it lives in has become much more elaborate. We outsiders all can see much more about more different parts of it, if we choose to. That makes it potentially much more confusing to the outside world, which now can’t tell whether they should think of it as primarily consisting of the parts they like, or the ones they find unappealing.

Complex human complex societies are always built around limiting the information people have to know about each other to a manageable level. In a group of more than a few thousand people, what there actually is to be known exceeds our individual capacity for assimilating and dealing with the knowledge. We aren’t gods, or angels. We’re just people. Now that necessary blurring has been interfered with, by the new technology, and we can’t help staring at what was always underneath the blur. At what an angel would see, at what, in some cases, only an angel could fully accept.

So just the new technologies, all by themselves, are capable of making the credibility, plausibility, and comprehensibility of the average piece of public information from existing institutions decline, as far as the observer is concerned, even if those institutions don’t change at all. Even organizations which aren’t even occasionally in the business of producing any kind of bullshit (if there are any) can’t avoid having their credibility affected by this technologically driven tendency towards a confusing kind of transparency.

A Second Consequence of the Technological Shock: Coming Up With New, More Extreme Forms of Bullshit

But it’s also true that most large institutions contain many groups of people doing various different things. Inevitably, for a variety of reasons, some of those groups are more focused on publicly stating the exact truth as they understand it than others. Some people have searched diligently for genuinely important truths for a long time, with great skill. Occasionally they succeed in finding one. The advent of new organizational technology – computers and the things they’ve led to – helps these people. But there are only so many who can and will do the lonely, difficult, sometimes boring work, and actually finding significant new truths is very hard.

Coming up with new forms of bullshit, and organizing new communities of bullshit artists around them, seems to be much easier. Entrepreneurial people associated with existing political parties, newspapers, interest groups, universities, or other prestigious institutions have considerable organizational advantages in the struggle to keep up with the depreciating value of bullshit, and may be responsible for a large fraction of the increased supply. New organized interest groups must grow up around existing institutions like vines, whenever organization and communication get easier and cheaper. Naturally each has its own preferred line of bullshit.

In fact, the existence of organized interest groups, sources of economic and political rents, and other subsidies for particular signals means that the tendency for the credibility of public speech to decline under some technological circumstances can be accelerated in surprising ways by the social results of competition for access to the subsidies. Their existence can lead to a competition for unfakeable displays of commitment to the cause ix. Over time, this can result in behavior that seems quite strange to outsiders, as each would-be beneficiary tries to outdo the most recent effort of some rival. The result of this ratchet is a world where people often seem to decide what to think and do by asking themselves what would be most implausible belief and the most counterproductive behavior. As both organization and communication have become easier and cheaper with the new technologies, our ability to mount impressive and highly visible displays of this kind has improved as well.

Perhaps the most extreme example of all this, at the moment, is the group of zealots in Raqqa. They’ve been very successful in attracting both followers and contributions in this very way, by undertaking insanely counterproductive, disgusting, and shocking displays of takfiri commitment. But the phenomenon is a far more widespread one, because this is, in fact, a basic human impulse, something our ancestors have been doing for a very long time in a huge variety of different ways, some splendid and some horrifying. The specific content of the subsidized signal – whether it’s flower arrangement, some particular form of social justice, or suicide bombing – matters enormously, but the competition to display some very refined and demanding or very arbitrary or very twisted conception of virtue or capability is always the same.

This tendency to produce exaggerated forms of bullshit, as an evolved part of human nature, is, I suspect, at least partly a tool for achieving what Max Weberx called “closure”, a way for an in-group to acquire permanent ownership of a source of economic rents. People already immersed in the local brand of bullshit already know exactly what to say to please their audience. Often that includes some extremely odd things, some things the community has allowed itself to become concerned with, over time, by some progressive process of cultural evolution that seemed perfectly reasonable to them at each little step. By these gradual processes, the group can arrive at a set of preferences that would strike any outsider as strange and exotic in somewhat the same way some very unusual breeds of dog or cat or goldfish do. These exotic and arbitrary preferences act as a semi-permeable barrier to entry. You only get in to the subsidized group if you drink the cool-aid, if you become really good at exhibiting the exotic preferences in acceptable ways. Which limits access to the source of rent to friends and willing henchmen.

This sort of competition for access to a subsidy can force competing bullshit artists to come up with more and more extreme, impressive, and (to the uninitiated) unpalatable versions of the particular forms of bullshit that are customary in their moral community. As the competition for prestige becomes more intense, what counts as an impressive signal of commitment to the subsidized set of beliefs can become much more extreme, leading in the end to forms of priest-craft that may seem very strange to any uninitiated person. Technological change, new ways of organizing and communicating, can greatly enhance the effectiveness of this sort of competitive display, as it has for the zealots in Raqqa. So as the exogenous technological shock hits, the exotic in-group behavior may become even more extreme.

At the same time, a general increase in transparency has the effect of making all these weird little social worlds much more visible from the outside, contributing to the public sense that the other people whose social behavior they’re observing clearly for the first time have all gone completely nuts. In a world that’s apparently gone crazy, even crazy analyses may seem credible.

All of these same processes can take place inside of existing institutions as well, as new organized interest groups with their own new forms of bullshit spring up under the newly favorable technological circumstances like mushrooms after a rain. Sometimes this can apparently be quite paralyzing. Various political parties in different places around the world have already visibly begun to experience interesting new forms of internal fragmentation and competition. Certainly there are fascinating things happening inside both large American political parties.

A Third Consequence of the Technological Shock: More Rapid Turnover of Egregious Bullshit

For both of these reasons, the passive one and the active one, the initial effect of the new technology should be a decline in the average perceived credibility of existing institutions’ output of putative pieces of public information, along with an increase in its perceived quantity. A Democrat is now more likely to publicly say or write that the DNC, and a Republican that the RNC, is terrible. And we’re also more likely to hear about it. Having heard these things, we’re now less likely to accept anything either party says. If even they say they’re terrible…

(Presumably the initial impact of any large technological change is always partly just disorganization, because at the beginning the society is bound to be set up all wrong, given the possibilities inherent in the new technology. The pattern is as old as Ugarit. Invent the first alphabetic writing system and the use of gold as money… and watch your whole civilization collapse, as it tries to cope with the social results. Once you notice it, this pattern appears in history again and again. Improvement may only come much later, if at all, as a result of some sort of eventual Darwinian winnowing process.)

At the same time, as Daniel Dennett has pointed out recently with respect to public falsehood in general x, xi, we’ve recently become collectively much better both at detecting all kinds of dishonesty, and at informing each other that we all know everyone else has also detected it.

In the Politics, Aristotle points out that in the end, the public tends to have sound judgment about what’s really a great work of art, even though individually many of its members may lack perfect taste. Each person still may be able to spot some particular flaw, so all together they constitute a reliable filter. The sound evaluations reinforce each other, while each idiosyncratic error of judgment is likely to be different. So over very long periods of time, the public standard of taste is more reliable and refined than that of any one individual.

The same thing applies to public bullshit. Over time, at least outside of subsidized in-groups, all but the very finest examples of bullshit are eventually detected and persuasively rejected by someone in the crowd. Sooner or later, someone successfully points out that the Emperor isn’t wearing any clothes. The motive or gimmick becomes obvious to everyone, and the dishonesty becomes transparent.

The Internet has dramatically amplified this oracular collective capability, because more eyeballs are now seeing each potential piece of bullshit with greater clarity, sooner. The people behind the eyeballs now find it much easier to communicate their skepticism to each other. So we reject dishonesty much more quickly and with better accuracy. Common “knowledge” of both truths and untruths, making it known to all that everyone knows that everyone supposedly knows something, has, as Dennett points out, become both much easier to produce, and much easier to destroy.

Bullshit Inflation and Market Failure

With a vastly increased supply, lower average quality, and much less public willingness to hold on to each piece, the value of the average putative item of public information seems to be crashing now in more or less the same way the value of a unit of currency crashes during a hyperinflation. In that case, the problem is also that the supply of something – money – explodes just as public willingness to hold onto it for very long is collapsing. The credibility of each individual piece of bullshit, the number of people it will persuade for how many hours in total, is, I suspect, now in steep decline. What’s pretty easy to see is that bullshit just simply doesn’t stick for very long any more, that a semi-bullshit explanation that’s believed by the public may now only settle them down or rile them up for a few days or a few weeks, not for months or years as it once might have.

What’s a little harder to observe, unless you habitually wander into a lot of places people in your own little social world don’t go much, is the fact that that this more rapid churning is happening in parallel in more and more different and divergent arenas. So during the much shorter half-life of each piece of bullshit it probably convinces many fewer people at any one time. As its value collapses and its quality declines, more and more must be issued to accomplish the same persuasive tasks.

In the end, no amount of bullshit may be enough. It may become impossible for anyone to persuade very much of the public of anything, even the truth. Akerlof’s model of the used car market suggests that in an extreme scenario, the market for public information, for putative attempts to tell the truth in public, as a whole might eventually fail under the new pressure.

The problem with this kind of crash in the bullshit market would be that it would have the unfortunate effect of making genuinely reliable sources of public information no more credible than any entrepreneur with a completely novel and untested form of bullshit. A simple, clear, and emotionally appealing plan, concocted without reference to its actual possibility or efficacy. When nobody is the least little bit credible, anybody at all is just as credible as anyone else. That can be a surprisingly bad outcome for the whole society - if “anybody at all” happens to include Adolf Hitler.

Keeping civilization going is hard, not easy. This is the fundamental fact we seem most inclined to forget. Human history shows that there are more potential recipes for societal disaster, more ways of not having the things we have now, than paths to societal success. Agonizing failure is genuinely possible. History is full of failed experiments. So a frantic bullshit free-for-all of the kind Germany had in 1920’s and the 1930’s seems like a rather frightening outcome. But a possible one. Or look what happened when the printing press was invented. Suddenly everyone was an authority on scripture. It was fun… at first. But the path from Erasmus to the Battle of White Mountain is surprisingly straight.

At the same time, there was a lot of bullshit around in the 1920’s, and the 1950’s – all the horrible bullshit associated with segregation and numerous other unjust deprivations of basic human rights – that we’re all much better off without. In the very long term, getting rid of bullshit is usually a very good thing. There are probably some similar pieces of horrible bullshit in our world, things our descendants will wish we could have rejected sooner. The problem is basically just that the transition from there to here involved all kinds of untoward and surprising events. Good news in the long term can sometimes be surprisingly bad news in the short or medium term.

We assume that seeing far more of each other’s lives than we’ve ever seen before will leave our social and political system pretty much undisturbed. Because on some level we think we’re still living in the television age. But actually the particular design of the partial panopticon we all live in, which only allows certain acts of certain people to be seen by certain other people some of the time, is central to society’s functioning on a day-to-day basis. We aren’t used to having this much extreme bullshit directed towards us this persistently. We aren’t used to actually seeing a man’s head sawed off with a serrated knife. As part of a sort of gruesome political advertisement for an expensive form of madness, directed at least partly at those few scattered people who might be driven over the edge by it, and commit similar acts.

We aren’t used to knowing this much about what the people who run the New York Times and the Wall Street Journal are actually talking about, with each other, behind the scenes. We aren’t used to having the magician describe every trick in detail for us, as he’s actually doing it.

Eventually we’ll learn ways to shut most of the information out again, to stop watching Charlie Rose and Jihadi recruitment videos, but in the meantime the sheer quantity and volume and the increasingly uncertain quality are extremely disorganizing. Sooner or later, public revulsion may set in, and the market may fail completely.

The specific sort of fragility I’m imagining in the market for public information is a vulnerability to cascading failure, which makes the full magnitude of a possible event very difficult to predict in advance. Presumably bullshit crises are like earthquakes. There must be many, many tiny little cascading failures in local bullshit markets all the time, a few medium sized ones every once in a while, and very very rarely, some really huge ones that affect everyone.

Hopefully this one will be one of the smaller ones, or will be relatively benign, even if it is big. But the Reformation, or the eventual effects of the introduction of radio, movies, telephones, and the mass party early in the twentieth century, can give us some idea of how bad the short-term effects of a really serious bullshit crash can potentially be.

Some appreciation of the potential risks associated with this kind of rapid change in communications and organizational technology, on the part of our political leaders, might perhaps make them less eager to continue to try to put out fires with gasoline, as they’re presently doing.

What Is To Be Done?

Is there anything we can do about all this? In the end, I’m afraid, as in past cases, it’s really mostly going to be up to us. As citizens, we have to learn how to recognize lemons. We have to learn to tell the difference between sincere though possibly mistaken public speech, or the policeman’s hat, customary and acceptable forms of public pretense, and genuinely egregious bullshit. As these things appear in new forms in the new technological environment. And to learn how to tune a lot of the bullshit out. If we can. Eventually the public learns how to navigate under the new technological circumstances. Spinoza writes the Theological-Political Treatise, and order is restored in the market for public information.

(Unless they don't, and it isn’t. Germany society in the 1920’s and ‘30’s doesn’t really seem to have ever endogenously solved its bullshit problem. And they were incredibly sophisticated people. So it’s possible to fail, even if you’re very smart. Nevertheless, we can hope.)

Just as Akerlof’s used car market can really only function well if buyers eventually learn to detect lemons, to function in the new world, we all have to become less willing to have our attention grabbed and our emotions inflamed by some bullshit artist with a novel song and dance. Human societies are structured as they are precisely because we don’t and can’t have perfect information about everything and everyone. Moral exhortations to live as if we did are utopian, in a way that should be easier to see now that the people in Raqqa have also become all riled up about what they perceive as the manifold injustices of our global society. Thinking globally implies a will to impose your conception of the good on the whole of humanity. But we don’t need seven billion distinct and incompatible utopian conceptions of the global good being unilaterally imposed on the whole world all at the same time. What we actually want is seven billion people all doing their best to see through that kind of reckless bullshit, on the basis of what they know about their own smaller worlds. Doing their best to not be beguiled or distracted by bullshit artists with simple, morally satisfying solutions for all the world’s most photogenic problems.

I’m afraid the bad new is that we the people are more or less on our own, in this particular struggle. The New York Times and the Wall Street Journal can’t really help us, or advise us, now, because it’s precisely whether to go on trusting them that we have to decide. There are things they could do to retain or regain our trust, but we shouldn’t hold our breath, because they apparently have yet to perceive any need for reform.

No, it’s sort of going to have to be up to us to learn to filter out this latest wave of bullshit, and figure out which sources to trust in the new technological environment, just as we’ve eventually done in all the previous crises. The stakes are high. This may be your single most important job, as a citizen. Figuring out which publicly available bullshit is egregious, and of that what part is potentially harmful, and what harmless, or even socially necessary. What makes the whole thing much more complicated is the fact that there’s probably a lot of the existing egregious bullshit that we need to try to keep, for the sake of continuity if nothing else.  And because it takes up space that we don’t want filled with something worse… Even though it may all seem worthless, in the middle of a crash.

[i]  Frankfurt, H. On Bullshit. Princeton University Press, Princeton, 2005.
[ii] “On bullshit, part I.” https://www.youtube.com/watch?v=W1RO93OS0Sk
[iii] “Bullshit!” https://vimeo.com/167796382
[iv] McAdams, R. The Expressive Power of Law: Theories and Limits. Harvard University Press, Cambridge, MA (2015)
[v] Hayek, F. “The use of knowledge in society.” American Economic Review, XXXV, no. 4 (Sep. 1945) pp. 516-30.
[vi] Arrow, K. “Methodological individualism and social knowledge.” American Economic Review: Papers and Proceedings 84 (1994) 1-8.
[vii] Cloud, D. The Lily. Lassiez Faire Press, Baltimore, MD (2011)
[viii] Akerlof, G. “The market for ‘lemons’: quality uncertainty and the market mechanism.” Quarterly Journal of Economics, vol. 84, no. 3 (Aug. 1970) pp. 488 – 500.
[ix] Berman, E. “Sect, subsidy, and sacrifice: an economist’s view of ultra-orthodox Jews.” NBER Working Paper No. 6715 (Aug. 1998). Currently available at http://www.nber.org/papers/w6715.pdf
[x] Weber, M. The Theory of Social and Economic Organization. The Free Press, New York (1947)
[xi] Dennett, D., and Roy, D. “How digital transparency became a force of nature.” Scientific American, March 2015.
[xii] http://www.scientificamerican.com/article/transparency-how-transparency-...

This appeared in ZeroHedge on July 23, 2016