The Bureaucrat’s Bezzle
The great Canadian economist John Kenneth Galbraith coined the term “bezzle” to describe a particular type of discrepancy between the perception of value and actual value of a portfolio of assets.
“Alone among the various forms of larceny [embezzlement] has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in—or more precisely not in—the country’s business and banks.
“…
“This inventory—it should perhaps be called the bezzle—amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times, people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances, the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression, all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.”
Money isn’t the only thing that stores value. Institutions develop reputational capital over time. We respect them because they have produced a track record of improving the quality of our lives, acting selflessly to advance the public interest. They evolve and represent a set of principles for thought and action. As it builds, this cumulative credibility savings account enables them to exert influence more easily. By their nature, they tend to organize themselves bureaucratically in the administration of their programs. It is the natural way to convert the resources they consume to public goods.
The longer they persist and the greater the list of their accomplishments, the more we take for granted the continued benefit of their existence.
This confidence belies an inherent fragility. Their capital is a tempting target for those who would seek to deploy it for private or personal benefit. The strength of these organizations depends on the benevolence of those who control them and of the ability of their internal bureaucracies to resist compromise of the institution’s core principles.
There is a natural entropy in bureaucracy that parallels what we see in nature. Without a constant drive to simplify and modernize, efficiency will stay the same or fall. Frictions accumulate, dragging the institution’s ability to adapt to its environment.
What’s worse is when internal or external actors hijack the credibility of the organization for their own advancement. This manifests in the form of diminished public trust.
This is the bureaucrat’s bezzle.
This Gallup article highlights the shrinking account of institutions over time. Surveyed individuals espousing a “great deal/quite a lot” of confidence in the church or organized religion fell from 65% in 1973 to 31% in 2022; in the Supreme Court from 45% to 25%; in Congress from 42% to 7%; in the Presidency from 52% (in 1975) to 23%; in public schools from 58% to 28%; in newspapers from 39% to 16%; in television news from 46% (in 1983) to 11%; in the medical system from 80% (in 1975) to 38%; and in banks from 60% (in 1979) to 27%. Critically, science remains high at 64%, with similar strength in small business at 68%; the military at 64%; and the police at 45%.
The Reagan National Defense Survey is more negative for the military, showing a decline from 70% “trust and confidence” to 48% between 2018 and 2022. This is a blistering decline for an organization that consumes roughly 3.5% of national GDP.
All of these institutions are bureaucratic (or explicitly political) in their management of resources and power.
Universities have begun to slide from an exalted perch, dropping from 57% to 48% in just three years between 2015 and 2018 per one study and from 69% to 55% in another between 2020 and 2022. Universities are a good case study.
What is the purpose of a university? It is the pursuit and dissemination of knowledge. Research and education are why we have these institutions. We are better as a people for their existence because of this twin mandate. They have obtained over time an exalted position for their achievements in probing and testing the truth in open debate.
How then to explain this from an opinion piece in the Boston Globe?
“No small part in this disenchantment is the impression that universities are repressing differences of opinion, like the inquisitions and purges of centuries past. It has been stoked by viral videos of professors being mobbed, cursed, heckled into silence, and sometimes assaulted, and it is vindicated by some alarming numbers. According to the Foundation for Individual Rights and Expression, between 2014 and 2022 there were 877 attempts to punish scholars for expression that is, or in public contexts would be, protected by the First Amendment. Sixty percent resulted in actual sanctions, including 114 incidents of censorship and 156 firings (44 of them tenured professors) — more than during the McCarthy era. Worse, for every scholar who is punished, many more self-censor, knowing they could be next. It’s no better for the students, a majority of whom say that the campus climate prevents them from saying things they believe.”
People with one point of view are censoring people with differing points of view, conferring on this act the legitimacy of the university’s embezzled brand. The brand suffers. The movement thrives.
If a group stole money from the university’s funding to spend it on advancing their cause, it would be an explicit crime. When they rob the university of some of its reputation to use it to wrap their arguments with legitimacy, it is no less of a theft.
One of the great benefits of debate is that it does not presuppose infallibility. People make mistakes for all kinds of reasons. The knowledge we have evolves over time. New facts come to light. Truth is a process. There is no such thing as “the science” but there is a scientific method. The virtual criminalization of debate with the threatened sanction of social and financial ostracization is antithetical to the pursuit of knowledge. When it is done so in a university setting (or, worse, with the apparent imprimatur of the university bureaucracy), the act acquires an authenticity that magnifies its impact.
The internecine battle for control that surfaced at Stanford Law School is a good example of how some would use the influence of one of the top institutions in its field to exaggerate the impact of their agenda and of them as individuals. A federal judge, invited to speak by a student group, was greeted by an organized campaign to prevent him from make his remarks, with one middling official speaking in the defense of censorship.
“At the event, Judge Duncan was relentlessly heckled and traded barbs with students. He tried to power through his prepared remarks but was unable to speak more than a few words without interruption. He called for the help of an administrator to restore order.
“Tirien Steinbach, the associate dean for diversity, equity and inclusion, stepped to the podium and began six minutes of remarks that would be recorded on video.
“She said that, to many people in the room, Judge Duncan’s work had “caused harm.” She asked him, “Is the juice worth the squeeze?” That is, was the decision by Judge Duncan to speak worth the division it was causing students?
“Her remarks became a signature moment online, condemned for giving tacit approval to the “heckler’s veto.” The Foundation for Individual Rights and Expression said that Ms. Steinbach had said the quiet part out loud, to chilling effect.”
Why invite the judge to speak at all or permit the extension of the invitation if it wasn’t to exploit the opportunity to grandstand and swagger?
This bureaucrat and the students who blocked the judge seized the moment to advance their agenda. It wasn’t the policy of the school. They articulated an ideology, a doctrine of control. The bureaucrat had her performative moment on the national stage, intended or not. Perhaps she thought that her role was to mediate conflict. Even if that were true, there are limits to acceptable behavior if the university is to promote the freedom of expression necessary to the advancement of knowledge. Promoting the false equivalency of the hecklers with the speech they assumed the judge would deliver was itself a powerful statement. Either she was naïve and well-intentioned or she appropriated the reputational capital of the law school to promulgate her own views. Whatever the reason, the situation smacks of bureaucratic rot.
To her credit, the Dean of the law school attempted to fight back.
‘Finally, on March 22, the dean, Jenny S. Martinez, released a lawyerly 10-page memo that rebuked the activists.
‘Some students might feel that some points should not be up for argument and therefore that they should not bear the responsibility of arguing them,” she wrote. But, she continued, that “is incompatible with the training that must be delivered in a law school.”
‘She added, “I believe that the commitment to diversity, equity and inclusion actually means that we must protect free expression of all views.”’
Here, the Dean’s rebuke was an attempt to preserve Stanford’s institutional capital. This currency depreciated, if not devalued, when two conservative judges announced their intention not to hire rom Stanford Law School. Actions have consequences.
If this theory of monetization of institutional capital is correct, then the way to test it would be to make falsifiable predictions. The institutions that enjoy relatively robust approval ratings will be the next dominos to fall, including science, small business, the military, and the police. For example, the politicization of science will damage its credibility. This may be happening already.
Time will tell.