One of the images that I use to help people think about why others make the decisions that they do, and what influences their own decisions, is that of the Incentives Map – that is, a picture or model of the incentives that people face and which will encourage them to act in certain ways, and discourage other actions.
One way to think of it is as a three-dimensional landscape, with hills, valleys, cliffs, rocky terrain, etc. If a person wants to reach a destination, and they have to do so via this landscape, then they will tend to take the path of least resistance. For example, they will tend to avoid having to cross deserts, or climb hills, if the option of rafting down a moderately-flowing river is open to them.
The Incentives Map is shaped by both the objective conditions of the incentives open to a person, the subjective criteria and internal rules which shape their behaviour, and the options and abilities that they have for pursuing these incentives. So, for example, the option of getting rich quickly by borrowing money, investing that money in assets, and then refusing to pay creditors and siphoning the money into one’s own private (and secret!) accounts would be unthinkable to a person with a well-developed Christian moral sensibility – so that we could imagine these requirements to be impassable cliffs blocking this particular route. However, the same actions would appear in the Incentive Map of someone such as the recently departed Australian white-shoe shuffler, the infectiously optimistic and silver-tongued Alan Bond, as rivers flowing smoothly and merrily to his destination.
It’s not a perfect analogy or device, I’m still getting my own head around it and will replace it with a simpler and more effective device if I can think of one. But this description should convey the general idea.
But I was reminded of the overall importance to people’s decisions of the incentive structures that they face by Grace Collier’s article, ‘A Word in your Shell-Like, PM’, which appeared in The Weekend Australian for June 6-7. Collier is always essential reading, shedding light on the relationships between unions, businesses and the Labor Party that almost all of the powerful in this country – including in the media – would rather were kept in the dark, and what needs to be done to change these incentive structures so that they work in, rather than against, the public interest.
Collier also draws attention to the curious, and alarming, inability of the Coalition parties to highlight both these relationships and the unattractive consequences of them for ordinary Australians, and to capitalise on the revelations by using them to belt their political opponents mercilessly.
I encourage you to read her column in its entirety, but here are the excerpts relevant for our discussion:
Think, for a moment, about your signature. What does it look like? Imagine scrawling it on a piece of paper. Now, imagine that you are the boss of a super union. Your signature is stunningly valuable, worth millions a year to a business owner, because it can slash their wages bill by that amount. What would you do with that revenue-raising ability?
Imagine, because of your valuable, profit-enhancing signature, people form businesses line up at your door to be “friends” with you, wanting to take your to events, ply you with favours and hand over their money, in cash or into whatever bank account you nominate.
Imagine the money you get from these “friends” is income tax-exempt and totally under your control. You can pretend the money comes from union members and that your union represents far more people than it actually does. You can puff yourself up and strut the media stage, purporting to have power you don’t actually have.
You can do with the money as you wish; you can start a business. If you do, providing the union (on paper) owns the business, it will be income tax-exempt too. People from employer groups might like to partner with you, help you expand your tax-exempt business, in return for a cut. Imagine the lifestyle you could have with these extraordinary advantages.
Now, imagine you are also in charge of a team of people, and although these people are not allowed to sign documents on behalf of the union, they have more legislative privilege than the police. Your staff, if they want to, can barge into any business they please, without warrants, inspect and take copies of records and call work to a halt, for any old reason they like.
Why would you have them do this? Well, perhaps one of your businesses might be being paid by one of your business “friends” to harass or spy on one of their competitors. Or perhaps you want a new “friend”, so you send your team in, just to soften up the business person, so you can come in afterwards as the good guy and offer a mutually beneficial “relationship”.
Imagine you and your team can do all this with impunity, completely above the law, accountable to no one.
Imagine you own the Australian Labor Party; you get to decide who the political candidates are – they are just like racehorses to you. (If one falls, just shoot it in the head; there are plenty more when [sic] it came from). Imagine you even get to choose who the ALP prime minister will be. Imagine your power; no one will fight you because when they take you on, they are taking on the government or the government-in-waiting.
Imagine sacking the prime minister and putting someone else in his place. Imagine your friends in high places, in the media, on the Left and the Right, in the big end of town and in politics, on all sides. If you can imagine all of the above, you can almost begin to know how if feels to be the boss of one of Australia’s super unions. Would you always use this power for good or would the temptation be too much?
Perhaps you think me to have an overactive imagination. Everything described above already has been seen in or politics or commission evidence. The boss of a super union can do all that, not because of skill or talent or because they ride the legitimate power of ordinary members, but simply because Australian laws have created legal privileges and their personal signature has been made a highly valuable and liquid commodity. There are plenty of business people prepared to pay top dollar for that commodity and plenty of business groups happy to facilitate that transaction in return for a cut.
Collier also mentions the coalition prime minister’s lack of attention to this golden opportunity to actually Do Something Useful:
The Coalition team is beyond frustrated with the lack of media attention on the commission and all it is uncovering but, mostly, we will talk about only what the Prime Minister and his crew talk about.
If they talk about tampons, house prices and other such drivel, then we will too. Further, the Coalition team cannot expect us to try to tear down the most powerful and vengeful people in our society while it just sits back and watch [again, sic – the Oz’s editorial quality is appalling, almost as abysmal as that of the AFR].
Collier’s last sentence lights on another aspect of the Incentives Map: when people have things easy, they will tend to fight like hellcats to keep things that way, and if it means fighting dirty then so be it. The tendency is strongest where the conditions are easiest, mostly because these easy conditions tend to attract the bullies and the thugs, and repel those with a well-developed moral sensibility.
While I was preparing this entry, I happened to read an interview with Bao Tong, a former Chinese politician, now dissident, who was an associate of Zhao Ziyang and who, like him, was tried, convicted and put under house arrest by the Chinese Communist Party around the time of the Tiananmen Square demonstrations and massacre in June 1989. I thought these passages were relevant to the discussion of Incentives Maps:
Bao Tong: If I were in the current system, I’d be corrupt too. Do you believe me? Believe me.
NYRB: Why is the current system so corrupt? Are there too many interest groups?
Bao Tong: No, it’s that too many things are off-limits. If you’re in that system, they’ll say, oh, your son should be a CEO. If you say, no, he shouldn’t, then they say, how can he not? If your son can’t be one then ours can’t be one either. Then they’d push you out of the boat. So if you’re in the boat, you’re corrupt. Everyone has a villa and they give you one. One in Beijing, one in Hangzhou, one in Suzhou, one in Shanghai. You say you don’t want it. What? But even the provincial leaders have villas, how can you not? It’s legal, take it. So if I can say I’m not corrupt it’s because I was an official in the 1980s when it was different. There wasn’t so much money and privileges.
My paraphrase of Bao Tong is that the incentive structure facing members of the Chinese Communist Party not only encourages corruption, as does that facing Australian Trades Unionists, but actually requires it. Because it’s not possible to get anywhere in the system without allowing oneself to be compromised and take advantage of what’s on offer. ‘The brightest candle casts the longest shadows’, etc.