I recently finished reading Systems of Survival. Written by Jane Jacobs, who is best known for her 1961 masterpiece The Death and Life of Great American Cities, it’s a meditation on what she calls the “moral syndromes” that drive human societies. Jacobs uses the term “syndrome” not in the medical sense, but in the more generic sense of “things that go together.”
There are two basic strategies for survival: taking and trading. That is, we can forcibly take what we need from other people, or we can trade what we have (including our labor) for things we need. Jacobs argues that each of the two strategies for survival has a corresponding “moral syndrome”—a cluster of related values that define virtuous behavior for people who survive in that fashion. Those who live by taking tend to observe what Jacobs call the “guardian syndrome,” which values loyalty and obedience and shuns trading. Those who live by trading observe what Jacobs calls the “commerce syndrome,” which values inventiveness and hard work and shuns force. Jacobs makes a list of 15 characteristics of each syndrome, which you can see here.
Jacobs argues that society needs both syndromes because it needs both a government and a private sector. The values of the guardian syndrome—loyalty, obedience, and respect for hierarchy—are best suited for those who hold power over others. On the other hand, the values of the commercial syndrome—be innovative and industrious, deal with others honestly and peacefully—are essential for wealth creation in the private sector.
The key insight of the book is that problems arise when the two syndromes are mixed. Divided loyalty in government can lead to corruption and civil war, so the guardian syndrome prohibits trading, because it can produce divided loyalty. We prohibit government officials from trading cash for favors because we want our government to be exclusively loyal to the interests of the general public as reflected by our laws and elected officials.
Once I started thinking about he world this way, I saw examples all around me. Consider this appalling story about how a private prison company lobbied for harsher immigration laws that would expand the population of prisoners and thereby improve the prison company’s bottom line. Delegating a coercive government functions like operating a prison to a private company is dangerous because the prison company has divided loyalty. The people in charge of a prison ought to be completely devoted to serving the public and the rule of law. But a private company also has an obligation to generate profits for shareholders, which can lead them to cut corners in ways that damage the rights of others. In this case, the profit motive drove a prison company to lobby for laws that would swell the prison population, harming both immigrants and taxpayers.
Jacobs calls combinations of the two syndromes—and the institutions that operate on such hybrid moral systems—”monstrous hybrids.” Freddie Mac and Fannie Mae were a famous example of a monstrous hybrid. They were for-profit companies that had a special relationship with the federal government that caused the market to assume (correctly, as it turned out) that their debts were implicitly guaranteed by taxpayers. The companies’ desire to make money for their shareholders pushed them to expand rapidly and make what turned out to be reckless bets. And their status as private companies made it difficult for elected officials to exercise the kind of oversight that ordinary government agencies receive.
The Soviet Union created numerous monstrous hybrids when the state tried to take over the activities of the private sector. Production decisions in government-owned factories had more to do with political patronage (part of the guardian syndrome) than economic efficiency, and the result was economic stagnation.
The modern United States has a few examples of governments trying to perform commercial activities, but increasingly we suffer from the opposite problem: formally private institutions given special legal privileges by the state. We’ve already mentioned Fannie, Freddie and the private prison industry. Other examples include the military contractors that are doing a growing share of our overseas warmaking, private companies like Wal Mart that benefit from eminent domain abuse, and “too big to fail” banks. These institutions enjoy government-granted privileges without the accountability provided by democratic oversight, transparency, and the rule of law. This is a recipe for abuse.
Political debates tend to pit partisans of the two syndromes against each other: government activism vs. the free market. But the truth is we need both kinds of institutions. North Korea is a good approximation of a society driven entirely by the guardian syndrome. And despite what Murray Rothbard said, a purely commercial society would be too weak to defend itself from internal and external predators. So society needs both syndromes, and the essence of good public policy is keeping the two syndromes as separate from each other as possible.